TaxTMI 
TaxTMI 
1993 (5) TMI 157
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...., C.A. Nos. 5722 of 1985, C.A. Nos. 4798 of 1989, C.A. Nos. 1858 of 1992 decided on May 10, 1993 A.K. Ganguly, Senior Advocate, M.B. Shetye, A. Subha Rao, B. Kanta Rao, T.V.S.N. Chari, Ms. Bharathi Reddy and Ms. Promila, Advocates with him, for the apperaing parties. -------------------------------------------------- The judgment of the Court was delivered by S.C. AGRAWAL, J.-These appeals and special leave petition raise common questions relating to the constitutional validity of sections 4 and 5 of the Andhra Pradesh Entertainments Tax Act, 1939 (hereinafter referred to as "the Act"), as amended by Act 24 of 1984, providing for imposition of entertainment tax in respect of entertainments held in cinema theatres located in the State of Andhra Pradesh. The Act has been enacted to provide for the levy of taxes on amusements and other entertainments. Prior to January 1, 1984, section 4 of the Act provided for levy of entertainment tax at a rate fixed on the basis of percentage of the payment made by a person for admission to any entertainment. In addition, there was a provision in section 4-A for levy of a fixed amount, by way of "show tax",....
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....ified in the corresponding entry in column (3) thereof. THE TABLE Local area Theatre Rate of tax on the gross collection capacity per show (1) (2) (3) (a) Municipal corporations and the Secunderabad cantonment area and the contiguous area of two kilometres thereof. (i) Air-conditioned (ii) Air-cooled (iii) Ordinary (other than air-conditioned and air-cooled) 29 per cent 28 per cent 25 per cent (b) Selection grade municipalities and the contiguous area of two kilometres thereof. (i) Air-conditioned (ii) Air-cooled (iii) Ordinary (other than air-conditioned and air-cooled) 28 per cent 27 per cent 24 per cent (c) Special grade municipalities and the contiguous area of two kilometres thereof. (i) Air-conditioned (ii) Air-cooled (iii) Ordinary (other than air-conditioned and air-cooled) 27 per cent 26 per cent 23 per cent (d) First grade municipalities and the contiguous area of two kilometres there of. (i) Air-conditioned (ii) Air-cooled (iii) Ordinary (ot....
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....yable under section 4." "Section 5(1). In lieu of the tax payable under section 4, in the case of the entertainments held in the theatres specified in column (2) of the table below and located in the local areas specified in the corresponding entry in column (1) of the said table, the proprietor thereof may, at his option and subject to such conditions as may be prescribed, pay the amount of tax to the State Government every week as specified in the corresponding entry in column (3) thereof: THE TABLE Local area Theatre Amount of tax (1) (2) (3) (a) Municipal corporations and the Secunderabad cantonment area and the contiguous area of two kilometres thereof. (i) Air-conditioned 24 per cent of the gross collection capacity per show multiplied by 22. (ii) Air-cooled 23 per cent of the gross collection capacity per show multiplied by 22. (iii) Ordinary (other than air-conditioned and air- cooled) 20 per cent of the gross collection capacity per show multiplied by 22. (b) Selection grade municipalities and the contiguous area of two kilometres there of.....
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....ll be taken into account. (2) The amount of tax under sub-section (1) shall be payable by the proprietor irrespective of the actual number of shows held by him in a week. (3) Any proprietor who opts to pay tax under this section shall apply in the prescribed form to the prescribed authority to he permitted to pay the tax under this section. (4) On being so permitted, such proprietor shall pay the tax for every week as specified in sub-section (1). (5) The option permitted under this section shall continue to be in force till the end of the financial year in which such option is permitted. (6) It shall be lawful for the prescribed authority to vary the amount of tax payable by the proprietor under sub-section (1) during the period of option permitted under this section at any time, if there is an increase in the gross collection capacity per show in respect of the place of entertainment by virtue of an upward revision of the rate of payment for admission therein or of the seating capacity or accommodation thereof or where the local area in respect of which permission is granted is upgraded or if it is found for any reason that the amount of tax has been fixed lower th....
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....tion 4-A, a fixed amount was leviable by way of show tax on each show. A number of writ petitions were filed in the High Court to challenge the validity of sections 4, 4-A and 5 of the Act, as amended by Act 24 of 1984. The said writ petitions were decided by a Division Bench of the High Court by judgment dated July 19, 1984 Reported as Alankar Theatre v. Entertainment Tax Officer [1991] 82 STC 417 (AP). The constitutional validity of the provisions was challenged on three grounds, viz.: (i) the levy of entertainment tax on the basis of gross collection capacity without reference to the actual amount collected or the actual number of tickets sold or the number of persons admitted was ultra vires the legislative power conferred on the State Legislature under entry 62 of List II of the Seventh Schedule; (ii) section 4 was hit by article 14 of the Constitution inasmuch as by treating unequals as equals, it gave rise to discrimination amongst different theatres situate within the same local area; and (iii) the levy of entertainment tax under section 4 being expropriatory amounts to an unreasonable restriction on the right guaranteed to the petitioners by article 19(1)(g)....
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....is expectation was unrealistic, or so unreasonable as to call for interference by the court. As regards the challenge based on article 19(1)(g), the High Court has taken note of the letter dated July 26, 1983, addressed by the Andhra Pradesh Film Chamber of Commerce, to the honourable Chief Minister of Andhra Pradesh wherein the exhibitors not only asked for introduction of a slab system all over the State but also suggested the rates of tax which suggestion was accepted by the Government with certain modifications varying from 2 to 4 per cent over the rates suggested by the association. The High Court observed that the rates of tax that were prescribed under section 4 based on an average expected occupancy rate of less than 50 per cent to 66 per cent, could not be said to be either unreasonable or expropriatory. The High Court, however, held that the agreements which had already been entered into by the proprietors of cinema theatres under section 5, as it stood prior to January 1, 1984, would be effective and valid for the period for which they were entered into. The High Court has also observed that merely because the form for exercise of option, as contemplated under sub-sectio....
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....he financial year if there is a reduction in the seating capacity or in the accommodation of the place of entertainment at any time during the period of six months commencing from the 1st day of April and ending with 30th day of September or from the 1st day of October and ending with 31st day of March of any financial year. The learned counsel appearing for the appellants have assailed the constitutional validity of sections 4 and 5 on two grounds, viz., (1) that the impugned provisions do not fall within the ambit of the legislative power conferred on the State Legislature under entry 62 of List II of the Seventh Schedule of the Constitution; and (2) that the impugned provisions were violative of the right to equality guaranteed under article 14 of the Constitution inasmuch as they treated unequals as equals by imposing tax at a uniform rate on a particular class of cinema theatres irrespective of their location and occupancy. While considering the question as to legislative competence of the State Legislature, it is necessary to bear in mind that the impugned provisions provide for imposition of a tax and a tax has two distinct elements, viz., subject of the tax and ....
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....ing the provisions of the Mysore Cinematograph Shows Tax Act, 1951, enacted under the Constitution, which authorised levy of tax on cinematograph shows at rates prescribed in a rising scale according to the seating accommodation and the cities where the cinematograph show was held, this Court following the decision in Western India Theatres case [1959] Supp 2 SCR 63 held that the said Act was validly enacted in exercise of the legislative power conferred by entry 62 of List II. In the instant case, we find that prior to the enactment of Act 24 of 1984, section 4 provided for levy of entertainment tax on the basis of each payment for admission to the cinema theatre and under section 4-C, in respect of entertainments held within the jurisdiction of a local authority whose population did not exceed 25,000 the tax was levied on the basis of the prescribed percentage of the gross collection capacity per show. In other words, there were two modes for levy of the tax, one on the basis of the actual number of persons admitted to each show and the other on the basis of the percentage of the gross collection capacity per show. As a result of the amendments introduced by Act 24 of 1984, th....
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....y the correctness or otherwise of the returns submitted by the proprietor containing the number of persons admitted to each show and the amount of tax collected. Prior to the enactment of Act 24 of 1984, tax was leviable on the basis of either of the two modes under section 4(1) and 4-C. On an examination of the rates prescribed under both the modes, the High Court found that under the system of consolidated levy prescribed under section 4-C, the proprietor could break even if the average rate of occupancy was 40 per cent. As regards the rates prescribed under sections 4 and 5 as amended by Act 24 of 1984, the High Court has observed that the said rates are based on an average expected occupancy rate of less than 50 per cent or 66 per cent depending upon the area in which the theatre is situated. This would mean that the entertainment tax that would be collected over and above the average occupancy rate would constitute the profit of the proprietor. In the circumstances, it cannot be said that the adoption of the system of consolidated levy in section 4(1) as amended by Act 24 of 1984 alters the nature of tax and it has ceased to be a tax on entertainments. It has been urged ....
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..... We find it difficult to accept this contention. Article 14 enjoins the State not to deny to any person equality before the law or the equal protection of the laws. The phrase "equality before the law" contains the declaration of equality of the civil rights of all persons within the territories of India. It is a basic principle of republicanism. The phrase "equal protection of laws" is adopted from the Fourteenth Amendment to the U.S. Constitution. The right conferred by article 14 postulates that all persons similarly circumstanced shall be treated alike both in privileges conferred and liabilities imposed. Since the State, in exercise of its governmental power, has, of necessity, to make laws operating differently on different groups of persons within its territory to attain particular ends in giving effect to its policies, it is recognised that the State must possess the power of distinguishing and classifying persons or things to be subjected to such laws. It is, however, required that the classification must satisfy two conditions, namely, (i) it is founded on an intelligible differentia which distinguishes those that are grouped together from others; and (ii) the d....
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....leads to discrimination, so also discrimination can arise if persons who are unequals, i.e., differently placed, are treated similarly. In such a case failure on the part of the Legislature to classify the persons who are dissimilar in separate categories and applying the same law, irrespective of the differences, brings about the same consequence as in a case where the law makes a distinction between persons who are similarly placed. A law providing for equal treatment of unequal objects, transactions or persons would be condemned as discriminatory if there is absence of rational relation to the object intended to be achieved by the law. In Kunnathat Thathunni Moopil Nair v. State of Kerala [1961] 3 SCR 77, this Court was dealing with a law providing for imposition of uniform land tax at a flat rate without having regard to the quality of the land or its productive capacity. The law was held to be violative of article 14 of the Constitution on the ground that lack of classification had created inequality. The said decision in K.T. Moopil Nair's case [1961] 3 SCR 77 has been explained by this Court in Jalan Trading Co. (Private) Ltd. v. Mill Mazdoor Sabha [1967] 1 SCR ....
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.....The burden is on a person complaining of discrimination. The burden is proving not possible 'inequality' but hostile 'unequal' treatment. This is more so when uniform taxes are levied. It is not proved to us how the different plantations can be said to be 'hostilely or unequally' treated. A uniform wheel tax on cars does not take into account the value of the car, the mileage it runs, or in the case of taxis, the profits it makes and the miles per gallon it delivers. An Ambassador taxi and a Fiat taxi give different outturns in terms of money and mileage. Cinemas pay the same show fee. We do not take a doctrinnaire view of equality." (pages 393-94) In the instant case, we find that the Legislature has prescribed different rates of tax by classifying theatres into different classes, namely, air-conditioned, air- cooled, ordinary (other than air-conditioned and air-cooled), permanent and semi- permanent and touring and temporary. The theatres have further been categorised on the basis of the type of the local area in which they are situate. It cannot, therefore, be said that there has been no attempt on the part of the Legislature to classify the cinema theatres taking ....