Whether entertainment tax on sale of cinema tickets would be included to determine

gross receipts for the purpose of section 44 AB

1.A cinema house collects the entertainment tax on the sale of cinema tickets daily and deposits the same every week to Government Treasury. It maintains a separate account-“Entertainment Tax Collection Account”- for the purpose of recording these transactions.

2.The querist has sought the opinion of the Expert Advisory Committee as to whether the entertainment tax thus collected and paid will be included in the ‘gross receipts’ for the purpose of determining the liability of the cinema house to have its accounts audited u/s 44 AB of the Income-tax Act, 1961.

Opinion December 26,1985

1.The Committee notes that in para 3.3 of the “Guidance Note on Tax Audit under Section 44 AB of the Income-tax Act, 1961,” published by the Taxation Committee of the Chartered Accountants of India, it is stated that “If………… the excise duty and/or sales tax recovered are credited separately to Excise Duty or Sales Tax Account and payments to the authorities are debited in th same account, they would not be included in sales”. The Committee is of the view that the same analogy would apply in case of entertainment tax collected by a cinema house to be paid over to the Government.

2.Based on the above, the Committee is of the opinion that where entertainment tax is separately indicated on the tickets and is separately recovered and a separate account for entertainment tax is maintained by a cinema house, the amount in respect thereof will not be included in ‘gross receipts’ for the purpose of determining the liability of the cinema house to have its accounts audited u/s 44 AB of the Income-tax Act, 1961.

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