Entertainment tax by gross collection capacity is a permissible measure when classification remains rational and non-arbitrary.

Entry 62 permits taxes on entertainments, and the Legislature may adopt gross collection capacity per show as the measure of levy without changing the character of the impost. A shift from actual admissions to a composite calculation linked to seating capacity and expected occupancy remains within entertainment taxation. In fiscal classification, wide legislative discretion applies if the grouping rests on an intelligible differentia with a rational relation to the statutory object. The text further notes that theatre classification by type and local area, and the optional composition scheme, did not amount to hostile discrimination or violate Article 14.

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Issues: (i) Whether the levy of entertainment tax on the basis of gross collection capacity per show under sections 4 and 5 of the Andhra Pradesh Entertainments Tax Act, 1939, as amended, was beyond the legislative competence of the State Legislature under Entry 62 of List II of the Seventh Schedule to the Constitution of India; (ii) Whether the impugned provisions offended Article 14 of the Constitution of India by treating unequals as equals in the classification and taxation of cinema theatres.

Issue (i): Whether the levy of entertainment tax on the basis of gross collection capacity per show under sections 4 and 5 of the Andhra Pradesh Entertainments Tax Act, 1939, as amended, was beyond the legislative competence of the State Legislature under Entry 62 of List II of the Seventh Schedule to the Constitution of India.

Analysis: Entry 62 authorises taxes on entertainments, and the subject of the tax is the entertainment itself, while the measure of tax may legitimately be adopted by the Legislature. A levy based on gross collection capacity per show does not alter the character of the impost as an entertainment tax. The change from collection based on actual admissions to a composite measure linked to seating capacity and expected occupancy is only a different mode of computation and remains within the field of entertainment taxation.

Conclusion: The impugned levy was within the legislative competence of the State Legislature and was not ultra vires Entry 62 of List II.

Issue (ii): Whether the impugned provisions offended Article 14 of the Constitution of India by treating unequals as equals in the classification and taxation of cinema theatres.

Analysis: In taxation matters, the Legislature has wide discretion in classification, provided the classification rests on an intelligible differentia having a rational relation to the object of the law. The Act classified theatres by type and by local area, and the mere fact that further sub-classification by precise location or profitability was not made did not make the levy arbitrary. Uniform treatment within each class did not amount to hostile discrimination, and the optional composition scheme under section 5 did not create unconstitutional inequality.

Conclusion: The impugned provisions did not violate Article 14 of the Constitution of India.

Final Conclusion: The constitutional challenges to the amended entertainment tax scheme failed, and the levy was upheld as a valid exercise of taxing power with a permissible classification basis.

Ratio Decidendi: For a tax within a legislative entry, the Legislature may choose any rational measure of levy without changing the nature of the tax, and in fiscal classification the test is whether the grouping is intelligible and reasonably related to the object of the statute.

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