TaxTMI 
TaxTMI 
1984 (7) TMI 353
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.... of 1927) and to provide for the payment of compensation to local authorities now levying a tax under the Act aforesaid, it is hereby enacted as follows: " The Act which was in force in the Andhra area of this State was extended to Telangana area, by the Madras Entertainments Tax (Andhra Pradesh Extension and Amendment) Act, 1958. It is necessary to notice certain relevant provisions of the Act. Section 3 is the interpretation clause containing certain definitions. The expression "admission" is defined by clause (1) in the following words: "'admission' includes admission as a spectator or as one of an audience to an entertainment." Clause (4) defines the expression "entertainment". According to it, "'entertainment' means cinematograph exhibition to which persons are admitted on payment ". The expression "payment for admission" is defined by clause (7) in the following words: "'payment for admission' includes- (a) any payment made by a person who, having been admitted to one part of a place of entertainment, is subsequently admitted to another part thereof for admission to which a payment involving a tax or a higher tax is required; (b) any payment for se....
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....cessary for the authorities to verify or enquire into the number of persons admitted to each show and/or to verify the correctness or otherwise of the returns submitted by the proprietor, containing particulars of the number of persons admitted to each show and the amount of tax collected. It was obviously found impracticable and inconvenient to check the correctness of the collections reported by the proprietors of cinema theatres in villages and small towns with less than 25,000 population. Lack of proper supervision and verification would necessarily give room for evasion and abuse on the part of the proprietors. It was, therefore, thought convenient and appropriate to devise a new method of levy of entertainment tax, based upon the gross collection capacity per show. Explanation to sub-section (1) of section 4-C. prescribed the manner in which the gross collection capacity per show was to be calculated. Subsection (1) of section 4-C may now be set out: "4-C.-Tax on entertainment shows in places with population not exceeding 25,000.-(1) On the entertainments held within the jurisdiction of any local authority whose population does not exceed twenty-five thousand, there shall ....
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.... upon the area of the local authority within whose jurisdiction the theatre is situated) of the gross collection per show, which is certainly much lower than what he collects on account of entertainment tax. But, the Legislature took into account the reality that all the seats or accommodation in the theatre may not be fully occupied for each show, or on each day, in a given week, month or the year, as the case may be. It is for this reason that lower percentages in section 4-C were prescribed. An illustration would bring home the point: if in a given theatre there are 1,000 seats and the total collection on account of payment for admission (excluding entertainment tax) was Rs. 1,000, the proprietor would have been liable, under section 4, to collect entertainment tax at 40 per cent (for the sake of convenience we are taking a mean figure between 35 per cent and 45 per cent prescribed by section 4(1). In other words, in addition to Rs. 1,000 collected on his own account, the proprietor would be obliged to collect Rs. 400 on account of the entertainment tax, and make over the said sum of Rs. 400 to the State; but, in a case where section 4-C applies, he would be liable to pay only 1....
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....5, and so on. The percentage of levy on the gross collection was substantially brought down, as compared to the rates prescribed in section 4-C(1). As against 13 per cent to 14½ per cent prescribed in section 4-C(1), section 5 prescribed the percentages at 8 per cent to 12 per cent. A proprietor opting for the scheme under section 5 was free to exhibit any number of shows he liked during that year. Whether he exhibited more number of shows or less than the prescribed number, the amount of tax payable by him remained constant In other words, while the authorities were rid of the verification of the number of shows held by a proprietor, the proprietor was rid of the obligation to satisfy the authorities about the number of shows held by him in a week/month/year. It may, however, be noted that this system of consolidated levy of entertainment tax was confined only to local authorities whose population did not exceed 25,000. Though the system was in vogue since 1976, not a single proprietor ever complained of this method of levy, and as we shall presently point out, the petitioners' contention has been that this system was beneficial to the proprietors, and for that reason th....
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.... option to be governed by section 5, and on the prescribed authority permitting him to do so, he was to be governed by the said method of levy. As under the previous section 5, the amount determined under section 5(1) can be raised in the case of increase in the gross collection capacity per show, but there was no provision for downward revision in case the gross collection capacity was decreased. Sub-section (1) of section 5 along with explanation I thereof read as follows: "5. Option to pay tax in lieu of tax payable under section 4.- (1) In lieu of the tax payable under section 4, in the case of 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 areas Theatres Amount of tax (1) (2) (3) ----------------------------------------....
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....ly the optional composition levy system-which until now was confined to local areas with less than 25,000 population, to the entire State. Just as before January 1, 1984, a proprietor governed by section 4-C had an option to enter into an agreement with the prescribed authority to be governed by the system of composition levy of tax as prescribed by section 5(1), now also the proprietor was given an option to opt to be governed by the weekly consolidated levy system, under section 5. By choosing to be governed by the weekly consolidated levy system under section 5, the proprietor was entitled to the same beneficial treatment as was available to a person choosing to be governed by old section 5. Of course, basic system of levy under section 4 remained as before. On December 29, 1983, the date on which the Ordinance No. 31 of 1983 was issued, the Government issued G.O. Ms. No. 615 enhancing the rates of admission. The new rates of admission ranged between Rs. 7 and paise 60. These rates were prescribed keeping in mind the percentage of tax as prescribed by section 4(1) of the Act, as amended by Ordinance 31 of 1983. For example, in case of a ticket of Rs. 7 denomination, the tax c....
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....ct. It would, therefore, be sufficient if we refer to the provisions of the Amendment Act No. 24 of 1984 (hereinafter referred to as "the Amendment Act"). Section 4 of the Amendment Act changed the very basis of levy of entertainment tax. Hitherto the tax was levied on each payment for admission to the entertainment at a certain percentage of the payment for admission (exclusive of the amount of tax); but, by the Amendment Act, the tax was levied at a certain percentage of the gross collection capacity per show. In other words, the consolidated levy system per show prevalent under old section 4-C but confined to local areas with less than 25,000 population, was now extended to the entire State. It may be remembered that, under section 4-C, the proprietors of theatres within the limits of local areas with less than 25,000 population, had no option but to be governed by the consolidated levy system. The only option they had was either to be governed by section 4-C, or section 5. In other words, they had an option either to pay the consolidated amount per show as prescribed in section 4-C(1), or to pay the weekly consolidated amount (composition amount) under section 5(1). The same....
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....election (i) Permanent and semi20 per cent grade gram panchayats, permanent. townships and any other (ii) Touring and tempo19 per cent local areas. rary Explanation.-For the purpose of this section and section 5, the term 'gross collection capacity per show' shall mean the notional aggregate of all payments for admission, the proprietor would realise per show if all the seats or accommodation as determined by the licensing authority under the Andhra Pradesh Cinemas (Regulation) Act, 1955, in respect of the place of entertainment are occupied and calculated at the maximum rate of payments for admission as determined by the said licensing authority. (2) The amount of tax under sub-section (1) shall be payable by the proprietor on the actual number of shows held by him in a week. (3)................. (4)................. (5)................." "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 ....
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....) Permanent and semi15 per cent of the gross selection grade gram permanent. collection capacity per panchayats, townshow multiplied by 14. ships and any other. (ii) Touring and tempo14 per cent of the gross local area. rary. collection capacity per show multiplied by 7. --------------------------------------------------------------------------- Explanation.-For the purposes of computing the gross collection capacity per show in respect of any place of entertainment, the maximum seating capacity or accommodation and the maximum rate of payment for admission determined by the licensing authority under the Andhra Pradesh Cinemas (Regulation) Act, 1955, as on the date when the proprietor is permitted to pay tax under this section shall 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 be 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-sectio....
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....tes again differ within a given local area as between air-conditioned theatres, air-cooled theatres and ordinary (other than air-conditioned and air-cooled) theatres. This theatre-wise distinction, however, is maintained only up to, and including the level of first grade municipalities. Below that, i.e., from second grade municipalities and downwards, this distinction is not maintained. But again, in the case of gram panchayats, a distinction is maintained between permanent and semi-permanent theatres on one hand, and touring and temporary theatres on the other. The explanation to sub-section (1) of section 4 defines the "gross collection capacity per show". It means the full collection per show, if all the seats or accommodation as determined by the licensing authority under the Andhra Pradesh Cinemas (Regulation) Act, 1955, are occupied, calculated at the maximum rate of payment for admission as determined by the licensing authority. This amount is payable every week, on the number of shows actually held during that week. Now coming to section 5, the proprietor is given an option to pay a weekly consolidated amount, which may be called, for the sake of convenience, "compositio....
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.... List I. If it is treated as a tax on profession, occupation or calling, article 276 prescribes a ceiling of Rs. 250. If it is a tax on income, it is beyond the competence of the State Legislature, and as a tax on property it is expropriatory; (ii) section 4 as introduced by the Amendment Act, is arbitrary and discriminatory and is hit by article 14 of the Constitution. It seeks to treat unequals as equals, which itself is discriminatory and violative of article 14. Treating the air-conditioned, or air-cooled or ordinary theatres, as the case may be, within a local area, on the same par is unrealistic, unreasonable and arbitrary. An air-conditioned theatre situated in the heart of the city or municipality, will be better-off than an airconditioned theatre situated in a corner or on the outskirts of the city or municipality, as the case may be. Even the theatres situated within two kilometre-periphery of a local authority are included within that local authority. An air-conditioned theatre situated within two kilometreperiphery of a municipal corporation cannot be treated on the same par with an air-conditioned theatre situated in the heart of the city. Same would be the case with r....
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....ent held. In either event, it is entertainment tax. Mr. Babul Reddy says that entertainment is entertainment only when there is audience. He says that, if there is not a single person present, it is no entertainment at all. We are afraid Mr. Babul Reddy is taking an extreme example when he contemplates a show being held even when not a single soul is present. An entertainment held is an entertainment held, whether the theatre is full to its capacity, or whether its capacity is not fully occupied. It is difficult to conceive of a show being held with no one present; no proprietor would do that. The consolidated levy system does not envisage-nor did it envisage in the past, when it applied to areas with less than 25,000 population-full capacity occupancy for each show held; had it done so, it would have prescribed tax at such percentage of gross collection capacity as would equal the amount of tax collected in case of full capacity occupancy. The Legislature has been realistic; it has taken the same rate of occupancy as the basis of levy as was in vogue under section 4-C in the case of gram panchayats and townships. The rate prescribed by section 4-C was never complained of as either....
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....admission" basis (section 4 of the Act), and the other was on a consolidated basis per show (section 4-C). In either event, the tax was upon entertainment and was collected by the person who provided the entertainment, though calculated in different ways. No case could be brought to our notice which conceives, or imposes any such restriction, as contended for, upon the plenary power of the Legislature. Indeed, a similar contention was rejected by the Supreme Court in Western India Theatres v. Cantonment Board AIR 1959 SC 582. Entry 50 in List II of the Seventh Schedule of the Government of India Act, 1935, empowered the Provincial Legislatures to levy "taxes on luxuries including taxes on entertainments, amusements betting and gambling". Section 60 of the Cantonments Act, 1924, empowered the Board to levy taxes with the previous sanction of the Central Government. It was empowered to levy the same taxes which the State Legislature was entitled to levy under the Government of India Act. By a notification dated 17th June, 1948, taxes were levied in the Cantonment, Poona, in the following manner: "V. Tax on entertainments: 1.. Cinemas, talkies or dramas: In the case of the We....
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....e amenable to the tax. It is true that economists regard an entertainment tax as a tax on expenditure and, indeed, when the tax is imposed on the receiver of the entertainment, it does become a tax on expenditure, but there is no warrant for holding that entry 50 contemplates only a tax on moneys spent on luxuries, entertainments, or amusements. The entry, as we have said, contemplates a law with respect to these matters regarded as objects and a law which imposes tax on the act of entertaining is within the entry whether it falls on the giver or the receiver of that entertainment. Nor is the impugned tax a tax imposed for the privilege of carrying on any trade or calling. It is a tax imposed on every show, that is to say, on every instance of the exercise of the particular trade, calling or employment. If there is no show, there is no tax." We may also refer to another decision of the Supreme Court in Y.V. Srinivasamurthy v. State of Mysore AIR 1959 SC 894. Section 3 of the Mysore Cinematograph Shows Tax Act, 1951, levied entertainment tax "in a rising scale according to the seating accommodation and the cities where the cinematograph show is held"-as extracted in the....
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....he case of touring cinemas while the third basis is the lumpsum which is applicable to the entertainment of video exhibition. As long as entertainment levy is on entertainment, one cannot see why the Legislature cannot adopt different basis for the said levy. In the case of race-courses the levy is on the basis of payments for admission made by a person seeking entertainment. So also is the case of entertainment other than touring cinemas, video exhibition and video games. These are provided in clauses (a) and (b) of section 3(1) of the Act. In the case of touring cinemas and video exhibitions by the amending provisions different basis for the levy of entertainment duty have been adopted. We do not see why such different basis cannot be adopted for the levy of entertainment duty if the duty in substance is on entertainment. Neither the Constitution nor any other provision of law prohibits the adoption of a basis other than the 'payment for admission to entertainment' for levying entertainment duty. It is conceivable, for example, that entertainment duty could be levied on the number of shows held in a place of entertainment. It is, therefore, not possible for us to accept the conte....
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.... regard to the circulation and distribution of the newspaper or publication in the State............. .... It is clear, therefore, that the tax sought to be imposed by the impugned Act is a percentage of the aggregate of the entry fees received from the State of Bombay. On ultimate analysis it is a tax on each entry fee received from each individual competitor who remits it from the State of Bombay......... It is a kind of tax which, in the language of J.S. Mill quoted by Lord Hobhouse in Bank of Toronto v. Lambe (1887) 12 AC 575 (D), is demanded from the promoter in the expectation and intention that he shall indemnify himself at the expense of the gamblers who sent entrance fees to him. That, we think, is the general tendency of the tax according to the common understanding of men." Another limb of the same argument advanced by Mr. B. Subhashan Reddy is that, inasmuch as section 4-A of the Act levies entertainment tax per show-what may be conveniently called "show tax", the power of the Legislature to enact a law under entry 62 got exhausted with it. If so, the learned counsel argues, the levy of entertainment tax under section 4 on the gross collection capacity basis, i....
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.... Section 4 of the Amendment Act, as already indicated, provides for a two-fold classification of the theatres for the purpose of levy of tax under section 4(1). One is local authority-wise classification, and the other theatre-wise classification. Theatres situated within the municipal corporations of Hyderabad and Secunderabad, Vijayawada, Visakhapatnam and the Secunderabad cantonment area, and the contiguous area of 2 kilometres thereof, are classified into one category, whereas the theatres situated within the selection grade municipalities and the contiguous area of 2 kilometres thereof, are classified into another group. Similarly, a distinction is made between special grade, first grade, second grade and third grade municipalities, and gram panchayats. For theatres within the lower grade municipalities, lower percentages are prescribed in a descending order. Then again, within each local authority area up to and inclusive of first grade municipalities, a distinction is made between air-conditioned, air-cooled and ordinary theatres, and for them different rates are provided-again in a descending order. A look at the table contained in section 4(1) bears out this aspect. Thus, ....
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....rmine the rate of occupancy. It is conceded by the learned counsel for the petitioners that there may be a difference in the rate of occupancy between two air-conditioned theatres situated in the heart of the City of Hyderabad, say, Abid's. It is also conceded that a far-flung airconditioned theatre may have a better rate of occupancy than an airconditioned theatre in the heart of the city. It is thus evident that location alone cannot constitute the basis for classification. It may be that the proprietor or lessee of a cinema-theatre situated in the outskirts of the city is better and well-connected with the distributors or the producers of films, and gets better pictures, while the proprietor/lessee of a cinema theatre in the heart of the city may not be so well-connected, with the result that he does not get good or fetching pictures. Indeed, instances are not lacking where the distributors who are powerful people in the film industry, themselves own theatres. They would prefer their own theatres, even though they are situated afar, to other theatres which may be situated in the heart of the city. Then again, the question arises "what do you mean by heart of the city?" There may....
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....733 can usefully be referred to in this behalf: "It is not in dispute that taxation laws must also pass the test of article 14. That has been laid down recently by this Court in Kunnathat Thathunni Moopil Nair v. State of Kerala AIR 1961 SC 552. But, in deciding whether a taxation law is discriminatory or not it is necessary to bear in mind that the State has a wide discretion in selecting the persons or objects it will tax, and that a statute is not open to attack on the ground that it taxes some persons or objects and not others. It is only when within the range of its selection, the law operates unequally, and that cannot be justified on the basis of any valid classification, that it would be violative of article 14. The following statement of the law in Willis on 'Constitutional Law', page 587, would correctly represent the position with reference to taxing statutes under our Constitution: 'A State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably............The Supreme Court has been practical and has permitted a very wide latitude....
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....the heavier when the legislation under attack is a taxing statute". The Supreme Court cited with approval the observations of the United States Supreme Court in Madden v. Kentucky 84 Lawyers' Edition, 590, to the following effect: "In taxation even more than in other fields, Legislatures possess the greatest freedom in classification. The burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it. " Indeed, in Twyford Tea Co. Ltd. v. State of Kerala AIR 1970 SC 1133, the Supreme Court had an occasion to point out that it is impossible to conceive of absolute equality between two persons at any given point of time, and if so, it is not reasonable to expect the Legislature to ensure absolute equal treatment. Hidayatullah, C.J., speaking for the majority, observed: "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....
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.... of 'wide range and flexibility' so that it can adjust its system of taxation in all proper and reasonable ways........." In Twyford Tea Company's case AIR 1970 SC 1133, the Supreme Court was considering the validity of the Kerala Plantation (Additional Tax) Act, 1960, as amended by 1967 Amendment Act, which levied a tax on plantations and, for that purpose, classified the plantations into seven categories, and imposed a uniform rate of Rs. 50 per hectare. In the case of cocoanut, arecanut, rubber, coffee, and pepper plantations, the plants capable of yielding produce were to be counted and then the hectares determined by dividing the total number of plants by a certain figure, while in the case of other plantations, the extent of land yielding crop was itself taken as the measure of tax. The Supreme Court justified the said difference in the method of taxation as fair and just, since the idea behind the said classification was to treat one actual hectare of crop-yielding plantation in the latter category as equal to the other areas converted into hectares on the basis of the number of plants or trees, in the former category. It was also observed that the differences in yield be....
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....roblems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry', that exact wisdom and nice adaption of remedy are not always possible and that 'judgment is largely a prophecy based on meagre and uninterpreted experience'. Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and, therefore, it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States Supreme Court in Secretary of Agriculture v. Central Roig. Refining Company (1950) 94 L Ed 381, be converted into Tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any Legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation....
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....s and major towns, not merely because of the comfort provided by air-conditioned and air-cooled theatres but also because these theatres normally get and screen better and first-run pictures. No material has been placed before us by the petitioners to show that this classification among local authorities, or among ordinary, air-cooled and air-conditioned theatres, is either unreasonable or unrelated to the object. Accordingly, we see no reason to hold the said classification either bad, or inadequate. Before, however, concluding this aspect, it is necessary to deal with certain cases cited by the counsel for the petitioners. The first one is the decision of the Supreme Court in Kunnathat Thathunni Moopil Nair v. State of Kerala AIR 1961 SC 552. In this case, the Travancore-Cochin Land Tax Act, 1955, as amended by Act 10 of 1957, was attacked on the ground, inter alia, of violation of article 14 of the Constitution. The Act levied a tax called "land tax" at a flat rate of Rs. 2 per acre in all the forests in the State of Kerala. The said tax was payable irrespective of the fact whether the owner of the forest derived any income, or whether the property is capable of yielding any ....
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....he same principle as in Moopil Nair's case AIR 1961 SC 552. Again we must say that the facts of this case bear no analogy to the case before us. Here, the theatres are classified not only local authority-wise, but also having regard to their nature of construction, which takes in the type and cost of construction as well. Indeed, both the above cases have been referred to and distinguished in the case of Twyford Tea Company v. Kerala State AIR 1970 SC 1133, referred to supra. We may indicate that, unreasonableness of the levy was argued before us both under article 14, as well as under article 19. With a view to avoid repetition, we would deal with the reasonableness of the levy while dealing with the attack based on article 19(1)(g). G. Challenge based on article 19(1)(g): The reasoning on this count is that, the petitioners being citizens of India have a fundamental right to carry on business and that, levying the entertainment tax at a certain percentage of the gross collection capacity, without reference to the actual collection of entertainment tax, or the actual total collections, as the case may be, amounts to an unreasonable restriction upon the said fundame....
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....aneously, under G.O. Ms. No. 615 the rates of admission were also raised. According to the impugned Amendment Act, the tax payable by a permanent and semi-permanent theatre in a gram panchayat/selection grade gram panchayat/township/any other local area [not falling within categories (a) to (f) mentioned in the table in section 4(1)], is 20 per cent of the gross collection capacity. In other words, if a cinema theatre in a gram panchayat or township is having 1,000 seats and the rate of admission, excluding the entertainment tax is, say, Rs. 2,000, the proprietor would be collecting an amount of Rs. 1,500 by way of entertainment tax (we are taking a mean figure of 75 per cent in the range of 65 per cent-80 per cent prescribed by Ordinance 31 of 1983, and which rates continue to obtain even today). Thus, the total gross collection of the proprietor would be Rs. 3,500 out of which Rs. 1,500 represents the amount collected on account of entertainment tax. As against this, he would be paying, under section 4(1) of the Amendment Act, 20 per cent of the gross collection, i.e., 20 per cent of Rs. 3,500 towards entertainment tax, which comes to Rs. 700, which is less than 50 per cent of th....
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.... of air-conditioned theatres within these cities, the proprietor would be obliged to pay Rs. 1,015 as against the amount of Rs. 1,500 collected by him, which means that he must have about 67 per cent average occupancy rate to break even. Thus, it is evident that the Legislature proceeded on a definite and clearly ascertainable basis. It proceeded on the assumption that, while the average occupancy rate in a village will be lower, the rate of occupancy will ascend higher and higher corresponding to the level or grade of the local authority. A look at the rates prescribed in section 4(1) bears out this analysis. We shall now refer to certain definite figures supplied to us by the counsel for the petitioners in this behalf. Mr. E. Raja Rao, the learned counsel for the petitioner in W.P. No. 7014 of 1984 has supplied us the figures relating to the "Padma Priya" theatre, an air-conditioned theatre situated at Kakinada. Kakinada is a selection grade municipality. The following table of particulars has been furnished by the learned counsel: --------------------------------------------------------------------------- At the rate Gross Net approx. Tax under Tax under Tax under of....
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....(house full) 70 per cent 2,155.30 1,228.54 926.76 738.96 586.01 60 per cent 1,847.40 1,053.03 794.37 738.96 586.01 50 per cent 1,539.50 877.53 661.98 738.96 586.01 40 per cent 1,231.60 702.02 529.58 738.96 586.01 --------------------------------------------------------------------------- According to these particulars, 58 per cent average occupancy rate would be sufficient for the proprietor to break even under section 4 of the Amendment Act, whereas in the case of his opting under section 5, even less than 50 per cent average occupancy rate would do. Of course, according to the particulars furnished, his rate of occupancy is only 22.89 per cent during the period March 26, 1984 to May 13, 1984. While we do not wish to burden this judgment with the particulars of several theatres furnished to us, we would refer to the particulars furnished with respect to a theatre, "Sree Venkateswara Picture Palace, Ongole" to demonstrate the unacceptability of the actual occupancy figures placed before us by the petitioners. According to the statistics furnished by Sri M.R.K. Choudhary, the learned counsel for the petitioner in W.P. No. 6827 of 1984, the average occupancy rate....
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....d also to levy the tax on the basis of the status of the local area without reference to the population. (4)................ (5) After the promulgation of the Ordinance, various representations have been received by the Government. Thereupon the Government examined the desirability of replacing the present system of levy of tax on each payment for admission with a view to further rationalise and simplify the system of levy of entertainments tax and to reduce the possibility of evasion of tax and to ensure realisation of proper tax revenue under the Entertainments Tax Act. In this regard the Government also held discussions with the Film Chamber of Commerce, Film Exhibitors' Association and also film producers. Thereupon, the Government introduced the L.A. Bill No. 14 of 1984 to amend the Andhra Pradesh Entertainments Tax Act, 1939, in the A.P. Legislative Assembly on March 16, 1984." In the above circumstances, we view with scepticism the actual occupancy figures furnished by the petitioners. There is also the allegation of large scale evasion of tax pleaded by the Government. If the average rate of occupancy is 10 per cent, then the situation must be that the occupancy ra....
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....t 12 per cent for 21 shows Major panchayats 16 per cent 11 per cent for 14 shows Minor panchayats 14 per cent 9 per cent for 10 shows Touring and open-air theatres 13 per cent 8 per cent for 7 shows Due consideration is to be given to the theatres which are on the outskirts of the cities which are not screening new release pictures. A reduction of 3 per cent is to be given for these theatres. Thanking you, Yours faithfully, Sd/- G.V. RAGHAVENDRA RAO), President." A reading of the letter shows that the rates suggested by the Association are the percentages of the gross collection capacity only. Indeed, the said figures cannot be understood otherwise. The consolidated levy system was already in vogue, but confined to local authorities with less than 25,000 population; there the tax was levied at a certain percentage of gross collection capacity. The Association was asking for extension of the said system to the entire State, and also suggested the rates. The expression "compulsory" in the table contained in the said letter, means the rates under section 4, while the expression "compounding" means the tax under section 5, of the Amendment Act. It would al....
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....ce is very significant, and establishes the following facts: viz., (i) extension of compulsory consolidated levy system to the entire State was suggested by the A.P. Film Chamber of Commerce itself; (ii) the rates of tax suggested by the Association clearly belie the actual occupancy figures furnished by the petitioners. The rates now prescribed by the Legislature vary from 2 per cent to 4 per cent over the rates suggested by the Association. If the rates now prescribed by section 4 of the Amendment Act contemplate an occupancy ratio of 66 per cent to 50 per cent, it would follow that the rates suggested by the Association contemplate, and are based upon, a slightly lower rate of occupancy, by about 5 per cent to 10 per cent. If, according to the picture painted before us, a large number of theatres except a few fortunate ones, are having an average occupancy rate far below 50 per cent, it is inconceivable as to why the A.P. Film Chamber of Commerce suggested the above rates; (iii) that, there ought to be a distinction between the theatres situated within the municipal corporations, and the theatres situated within the selection grade and special grade municipalities, and so on was....
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....ation. We are unable to appreciate this submission. Even in paragraph 5 of the counter-affidavit, it was clearly stated that the Government held discussions with the A.P. Film Chamber of Commerce, Film Exhibitors' Association, and also film producers, and the learned Government Pleader has produced the record before us containing the said letter. We are not treating the said letter as amounting to an estoppel against the petitioners, nor are we saying that, because of the said representation, the petitioners are not entitled to urge their contentions. We are relying upon the said letter only to examine the reasonableness of the rates prescribed by the Amendment Act and the distinction made local authoritywise. According to us, it is an important circumstance relevant on the above aspects, and not that it is conclusive against the petitioners. Therefore, it is really immaterial which particular theatre concerned in this batch of writ petitions was, or was not a member of the A.P. Film Chamber of Commerce. It was argued by the counsel for the petitioners that, whereas in the case of an attack upon the statute based upon article 14 of the Constitution, the burden is upon the petiti....
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....n such matters, and more so in the matter of levy of rates by a taxing enactment. The Act is designed to simplify the tax structure and its collection, with a view to eliminate the scope for evasion and corruption. Previously, every fact stated by the proprietor was the subject-matter of verification. The number of shows held by him, the number of persons admitted to a cinema theatre for each show, were also the subject-matter of enquiry and, in the very nature of things, it was impracticable and inconvenient, and gave room for any amount of abuse both on the part of the proprietors, as well as the officers incharge of assessment and collection of tax. Under the new system, all these enquiries are eliminated to a very large extent. If it is a case of section 5, practically no enquiry is necessary. The tax payable has to be determined having regard to the seating capacity, rates of admission, and percentage, and the number of shows prescribed in the section. In the case of section 4, the only verification that now needs to be done is the number of shows held by a proprietor. No other investigation or verification is necessary. If a show is held, a particular amount of tax is payable....
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....he entertainment tax. Acceptance of this argument would not only amount to shutting our eyes to reality, but would also amount to ignoring the statutory provisions and conferring unexpected and extraordinary benefits upon the proprietors, unintended by the Legislature or the Government. We are of the opinion that the payments for admission prescribed by G.O. Ms. No. 615 are made up of two components, viz., (i) payment for admission per se, and (ii) entertainment tax. Section 4 of the Amendment Act devises a new method of levy, designed to collect that amount from the proprietor which he collects on account of entertainment tax. The only difference between the old system and the new system is that, instead of tacking on the tax to each payment for admission, the tax is now tacked on to the gross collection capacity, providing a lesser rate, for the reasons explained at length hereinbefore. H. Minor and specific submissions: (i) A controversy was raised before us as to the meaning of the words "seats or accommodation as determined by the licensing authority under the Andhra Pradesh Cinemas (Regulation) Act, 1955, in respect of the place of entertainment", occurring in explanati....
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....of the licensing authority may appeal to the Government who may make such order as is deemed fit." The form of licence (form B) also deals with this aspect. Column 11 along with the table appended thereto (i.e., to form B), reads as follows: "11. Maximum number of persons permitted and maximum rates of admission allowed in each part of the auditorium under sub-paragraph (2) of paragraph 19 of appendix 1 and sub-rule (3) of rule 12. ---------------------------------------------------------------------------- Class of accomMaximum number of Maximum rates of modation persons permitted admission allowed ---------------------------------------------------------------------------- (1) (2) (3) ---------------------------------------------------------------------------- Note.-These rates of admission shall not be increased during the currency of this licence without an order in writing by the licensing authority permitting such increase. --------------------------------------------------------------------------- ............". It would be evident from a reading of the above provisions that what the law prescribes is only the maximum number of seats and maxi....
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....ts entered into under section 5, whose term is not yet over? The complaint of the concerned petitioners is: even though the period for which they had entered into an agreement is not yet over, the authorities are saying that that agreement is no longer effective and are calling upon the petitioners to pay tax according to new section 4 or section 5, as the case may be. It may be remembered that, according to section 5 as it obtained prior to January 1, 1984, persons opting for that system were obliged to enter into an agreement with the prescribed authority. Once the agreement is entered into, the rights of the parties are governed by the agreement. There is no express provision in the Amendment Act terminating such agreements. The only question is, whether the said consequence follows by necessary implication. The contention of the learned Government Pleader is that, inasmuch as the very statutory provision under which the agreements were entered into has since been repealed, the agreements too come to an end automatically. We are not prepared to agree with the learned Government Pleader. The old section 5 has been repealed by re-enacting it. Even now, it continues to apply to are....
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....ed, established, made, entered into, granted or done under the provisions so re-enacted." We are unable to see how the language of the said section advances his contention. All that it says is that if any engagements are entered into under the repealed enactment, such engagements shall be deemed to be the engagements entered into under the repealed Act, in so far as the provisions thereof are consistent with the provisions so re-enacted. But, it does not follow from section 18 that, all agreements entered into under the repealed law stand abrogated, if not consistent with the re-enacted law in every particular. We, therefore, hold that the agreements already entered into under section 5, prior to January 1, 1984, will be effective and valid for the period for which they are entered into. On the expiry of the said agreements, however, the proprietors would be governed by the law in force on that date. (iii) Another argument advanced by certain counsel is that, whereas sub-section (3) of section 5 contemplates rules to be made prescribing the form in which the option should be exercised, and also prescribing the authority who shall permit the proprietor to be governed by section 5....
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.... in accordance with section 5 since then. Firstly, having sent an intimation which has been acted uponin view of the fact that the petitioners have been paying, without any objection by the authority, the tax under section 5-it is not open to the petitioners to raise this contention. Secondly, the decision of the Supreme Court in the Dargah Committee v. State of Rajasthan AIR 1962 SC 574 furnishes a complete answer to this submission. It has been held that, merely because the forms to be prescribed by rules are not prescribed, the Act cannot be said to have not come into operation, or to be ineffective or unenforceable. (iv) Mr. M.R.K. Choudhary raised a further contention to the effect that, section 5, in so far as it does not provide for reduction of the composition amount in case of reduction of seating capacity of a theatre, during the period of one year (for which the option is exercised), is discriminatory. The contention is that, once an option is exercised under section 5 of the Amendment Act, it is effective and valid till the end of the financial year in which such option is permitted [vide sub-section (5)]. While subsection (6), it is contended, provides for enhanceme....
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....an obligation to "permit" the said intimation, by determining the amount as per the reduced seating capacity (on May 31, 1984 the seating capacity of the petitioner's theatre was reduced). It may be that the prescribed authority has not sent a communication formally permitting the petitioner to opt under section 5; yet, in view of the fact that the petitioner has been paying only in accordance with section 5 and no objection was raised thereto by the prescribed authority, it is clear that the petitioner was permitted to be governed by section 5. In other words, his option was permitted. Having availed of the beneficial rate contained in section 5, since April 7, 1984, it is not open to the petitioner now to argue that he is not governed by section 5 and that, he will exercise a fresh option now. The option exercised by him on April 7, 1984, is good and valid till the end of the financial year 1984-85, i.e., till March 31, 1985, and the amount determined under section 5 as on that date, cannot be reduced for any reason. Normally, however, the authority must send a communication signifying his permission. (v) Another contention raised with reference to section 5, by Mr. Channabasa....
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....e rates prescribed by the G.O. and permissible for that type of theatre; for this, he need not take more than two weeks. Reasonably speaking, one week can be taken as the outer limit within which he should signify his response. While we cannot say, on the material placed before us, on which date actually did the petitioners in these four writ petitions apply for reduction of rates of admission, all we wish to say is that, in case the licensing authority has not indicated his response within one week from the date of receipt of application, it shall be deemed that, with effect from the expiry of seventh day from the date of receipt of the application by the licensing authority, the proposed reduced rates have come into existance, so long as the rates are those which are prescribed by G.O. Ms. No. 615. It is open to the petitioners to satisfy the prescribed authority under section 5 of the Amendment Act about the aforesaid facts, and the authority shall pass appropriate orders on that basis, keeping in mind the observations made herein. If it is found that the rates of admission must be deemed to have been reduced with effect from the date, on or before the date on which the petition....
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....siness; but, it would not follow that the imposition of the tax in question is an unreasonable restriction upon the appellant's fundamental right to carry on trade. Generally speaking, the amount or rate of a tax is a matter exclusively within the legislative judgment and as long as a tax retains its avowed character and does not confiscate property to the State under the guise of a tax, its reasonableness is outside the judicial ken." (vii) Another contention raised in W.P. No. 7659 of 1984 and some other writ petitions is that, the higher rate of tax imposed on airconditioned, and air-cooled theatres as compared to ordinary theatres, is discriminatory against the air-conditioned and air-cooled theatres and is, therefore, void. We are wholly unable to appreciate this contention. The air-conditioned and air-cooled theatres form a distinct category from the ordinary theatres. Indeed, there is a distinction as between air-conditioned and air-cooled theatres. People would prefer to go to an air-conditioned or air-cooled theatre, than an ordinary theatre. Particularly during summer and other hot days, many people would prefer not to go to ordinary theatres. On the contrary, the v....
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.... April 1984 or later, and posted for hearing within a few weeks of the reopening of the courts after summer vacation, the learned Government Pleader stated that it has not been possible to verify the individual facts and circumstances stated in these several writ petitions, and to file counters with respect to those averments. He stated that, only a general counter meeting the legal submissions raised could be filed, within this short period. It is, therefore, not possible for us to express any opinion on the correctness or otherwise of the facts alleged by the petitioner, except to reiterate our scepticism about the correctness of such low occupancy figures as 10 per cent or 12 per cent. This scepticism of ours is based upon our opinion that a theatre with such a low rate of occupancy cannot survive in business and that, the simple law of economics would drive it out of the market. But, even if the said figures are taken to be correct in the cases of this particular theatre, even then it would not affect the validity of sections 4 and 5, for the reasons given hereinbefore. The only question to be dealt with is, whether the absence of a power to exempt renders the Act harsh and ....
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....ayable under section 4. If there are any bona fide cases of hardship, they can be met by reserving such power in the Government, to be exercised on due verification. In this behalf, we may refer to the fact that it is always open to a proprietor to apply for reduction of his seating capacity/accommodation, or the rates of payment for admission, as the case may be, to accord with the occupancy position. There is no reason to believe that, if and when such an application is made by any of the petitioners including the petitioner concerned in W.P. No. 7676 of 1984, the appropriate authorities under the A.P. Cinemas (Regulation) Act and the Rules, would not consider the same according to law and taking into account the relevant facts and circumstances of the case. (ix) Mr. G.R. Subbarayan, the learned counsel appearing in some of the writ petitions, contended that though the petitioners have applied for reduction of seating capacity, the authorities are not taking any action thereon while, at the same time, taking into account the existing seating capacity both for the purpose of section 4, as well as section 5. A similar submission was dealt with by a Bench of this Court, to whi....
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....is reduced by the licensing authority under the A.P. Cinemas (Regulation) Rules, the authority under the Entertainments Tax Act shall take the same reduced capacity as the basis for determining the amount payable under section 4of course, also taking into consideration the open space or accommodation, if any, as clarified above. In case of section 5, however, the situation would be slightly different, because the reduction in seating capacity cannot have the effect of reducing the composition amount during the financial year, during which the option has already been exercised and permitted. In case, however, the option is exercised for the first time after reduction of the seating capacity, the prescribed authority shall determine the composition amount taking into account the said reduced capacity, and also the open accommodation, if any, as explained herein. (x) Another contention raised is to the effect that, as between the gram panchayats, there ought to have been a further classification, viz., between major and minor panchayats, and again between panchayats and townships, all of which are now grouped together under clause (g) of the table in section 4(1). We are unable to ....
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....e reasons, all the writ petitions fail and are dismissed, subject to clarifications and directions contained in section H of this judgment. We direct the parties to bear their own costs in these writ petitions. Government Pleader's fee Rs. 100 in each. Writ petitions dismissed. After the judgment was pronounced, Mr. B. Subhashan Reddy, counsel for some of the writ petitioners, brought to our notice the following difficulty in implementing the interim orders of this Court. He submitted that in all these writ petitions uniform interim orders were passed permitting the proprietors to pay tax at the rate they were paying under and in accordance with the Ordinance 31 of 1983 and that stay was granted for the difference of amount, i.e., difference between the tax payable as per the Amendment Act and the tax payable under Ordinance 31 of 1983 on condition of the petitioners furnishing bank guarantee for such difference in amount. Mr. Subhashan Reddy stated that after April 1, 1984 some of the proprietors have opted to be governed by the composition scheme under section 5 as introduced by the Amendment Act. He says that inspite of the "proprietors" opting to the composition....