Security deposit under entertainments tax by-laws upheld where computation and cheque payment fell within the statutory framework.

By-laws framed under the Tamil Nadu Local Authorities Entertainments Tax Act operate as subordinate legislation, and a security deposit demand fixed within that statutory framework will stand if it follows the prescribed method of calculation. By-law 6 permits the deposit to be linked to entertainments tax payable on the auditorium's full capacity for seven days, with permanent or semi-permanent theatres liable to a deposit of 75% of that tax or, where authorised, one and a half times that amount. The Madras HC treated the theatres as permanent theatres, noted prior consultation and partial payment, and held that the demand notices and the cheque mode of deposit were valid. No illegality was found in the impugned notices.

---

---

Issues: Whether the impugned demand notices requiring cinema theatres to furnish security deposit under the by-laws framed under the Tamil Nadu Local Authorities Entertainments Tax Act, 2017 were lawful, including the computation of the quantum and the permissible mode of deposit.

Analysis: Sections 33 and 34 of the Tamil Nadu Local Authorities Entertainments Tax Act, 2017 respectively confer rule-making power on the Government and by-law making power on the local authority, and by-laws made under that framework operate as subordinate legislation. By-law 6 prescribes the method for fixing security deposit with reference to the entertainments tax payable on the full capacity of the auditorium for seven days, and for permanent or semi-permanent theatres the deposit may be fixed at 75% of such tax or, in the discretion of the Entertainments Tax Officer, at one and a half times that amount. The theatres were found to be permanent theatres, were liable to pay tax under section 3(2)(a)(i)(A), had already paid part of the demanded amount, and the deposit had been computed after prior communications and consultation. The mode of deposit by cheque, which had been encashed and credited to the municipal fund, was treated as a permitted mode under the by-law.

Conclusion: The security deposit demand and the mode of deposit were upheld and no illegality was found in the impugned notices.

Ratio Decidendi: A security deposit demand fixed within the limits of a valid by-law framed under enabling provisions, and computed on the basis of the tax payable with discretionary enhancement expressly authorised by the by-law, cannot be interfered with unless shown to be illegal or beyond the statutory framework.

---