Reduced seating capacity accepted for entertainment tax cannot be reopened later on a technical objection.

Where the taxing department had accepted weekly entertainment tax on the basis of a reduced seating capacity recorded in the parties' agreement, a later demand for differential tax on the higher original capacity was not sustainable. The absence of a formal reducing order under the cinemas regulation law was treated as only a technical objection, because the department had already acted on the reduced capacity for assessment and collection over the relevant period. The HC therefore held the belated demand unjustified and quashed it in favour of the assessee.

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Issues: Whether differential entertainment tax could be demanded on the basis of the higher seating capacity despite the assessee's agreement showing reduced seating capacity and the department's acceptance of tax on that basis.

Analysis: The assessee had entered into an agreement under section 5 of the A.P. Entertainments Tax Act, 1939, on the footing that the seating capacity had been reduced from 382 to 324 pursuant to directions issued for closure of the boxes class. The department had accepted weekly tax payments on that basis for the relevant period and had raised no objection until the impugned demand was issued after a long lapse of time. In these circumstances, the absence of a formal order under the A.P. Cinemas (Regulation) Act, 1955, was treated as a technical objection that could not justify reopening the tax basis after the department itself had acted on the reduced capacity.

Conclusion: The demand for differential entertainment tax was unjustified and was quashed in favour of the assessee.

Ratio Decidendi: Where the taxing department has accepted and acted upon a reduced seating capacity for assessment and collection of entertainment tax, a belated demand on a purely technical ground of absence of a formal reducing order is not sustainable.

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