Retrospective tax legislation upheld where the amendment reflected policy change and was not arbitrary or designed to defeat a judgment.

The Supreme Court upheld the retrospective operation of section 1(2) of the Andhra Pradesh Entertainments Tax (Amendment) Act, 1985. It held that the State Legislature had competence to enact taxation laws with retrospective effect, and such retrospectivity is not invalid merely because no separate explanation is given for the change, where it reflects a policy shift and is not otherwise arbitrary or constitutionally impermissible. The Court distinguished the earlier precedent relied on by the High Court because the amendment did not seek to circumvent any judicial decision or defeat a final judgment. The challenge failed and the amending provision was sustained.

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Issues: Whether the retrospective operation of section 1(2) of the Andhra Pradesh Entertainments Tax (Amendment) Act, 1985, for the period 7 September 1984 to 24 October 1984, was unconstitutional for want of explanation or as arbitrary and unreasonable.

Analysis: The State Legislature had competence to enact taxation legislation both prospectively and retrospectively. A retrospective fiscal measure does not become invalid merely because the State does not separately justify the need for retrospectivity, especially where the amendment reflects a change in governmental policy. The Court distinguished the earlier decision relied upon by the High Court on the ground that, unlike that case, no judicial decision was sought to be circumvented and the amendment was not enacted to defeat any final court judgment.

Conclusion: The retrospective operation of section 1(2) was valid and not ultra vires, and the challenge to the amendment failed.

Final Conclusion: The appeal succeeded and the High Court's striking down of the retrospective effect was set aside, with the amending provision upheld.

Ratio Decidendi: Where the legislature is competent to enact a tax, it may validly impose the levy retrospectively, and such retrospectivity is not invalid merely because no separate explanation is given, unless the measure is otherwise shown to be arbitrary or constitutionally impermissible.

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