Regularisation of cinema hall construction under the U.P. Rules barred denial of entertainment tax exemption after composition fee acceptance.

Non-compliance with the prior-permission requirement for cinema hall construction under the U.P. Cinematography Rules, 1951 was treated as cured once the prescribed composition charge was paid and accepted after amendment of rules 39A and 44. The Allahabad HC noted that the entertainment tax promotion scheme benefit could not be denied solely on the ground of absence of prior permission after the irregularity had been regularised. The impugned orders were therefore liable to be quashed, and reconsideration of the exemption claim and consequential refund was warranted.

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Issues: Whether denial of the entertainment tax exemption under the promotion scheme could be sustained merely because prior permission for construction of the cinema hall had not been obtained, despite payment and acceptance of the composition fee under the U.P. Cinematography Rules, 1951.

Analysis: The construction of the cinema hall was initially undertaken without the prior permission contemplated by rule 3(3) of the U.P. Cinematography Rules, 1951. However, the rules were amended by insertion of rule 44 and amendment of rule 39A, providing that non-compliance with rule 3(3) would be deemed cured if the person paid the prescribed composition charge of Rs. 50,000. The composition fee was in fact deposited and accepted by the authorities. Once the irregularity stood regularised in this manner, the denial of the benefit of the promotion scheme solely on the ground of absence of prior permission could not be justified.

Conclusion: The exemption could not be refused merely for want of prior permission where the composition fee had been paid and accepted; the impugned orders were liable to be quashed and the petitioner was entitled to reconsideration of his claim for the tax exemption and consequential refund.

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