Holding

The 40% entertainment tax on cable television is a valid exercise of the State's taxing power and does not contravene Articles 14 or 19 of the Constitution.

Summary

The Tamil Nadu Entertainment Tax Act, 1939 was amended to levy a 40% tax on collections from cable television exhibitions. Cable TV operators challenged the amendment, alleging violations of Articles 14 and 19(1)(a) and (g) of the Constitution, claiming the tax was prohibitive, discriminatory against Doordarshan, and effectively a tax on education. The High Court dismissed the petitions and the operators appealed to the Supreme Court. The Court held that providing entertainment is a business activity that can be taxed, that the tax rate is within reasonable limits, and that there is no valid comparison with the government‑run Doordarshan, which is not a commercial enterprise. Consequently, the levy does not infringe Articles 14 or 19, and the appeal was dismissed.

Issues considered

Whether the 40% entertainment tax on cable television violates Article 19(1)(a) freedom of speech and expression.
Whether the tax violates Article 19(1)(g) freedom to carry on any trade, business or profession.
Whether the tax is discriminatory and violates Article 14 because it is not imposed on Doordarshan.
Whether the rate of tax is unreasonable or intended to destroy the cable television business.

Legislation cited

Tamil Nadu Entertainment Tax Act, 1939s. 3(2-B), s. 4, s. 4-E

Subjects

Entertainment TaxCable TelevisionFreedom of SpeechFreedom of TradeArticle 14Article 19TaxationDiscriminationConstitutional Law

Judgment

A. SURESH A
v.
STATE OF TAMIL NADU AND ANR.

NOVEMBER 21, 1996

[B.P. JEEVAN REDDY AND K.S. PARIPOORNAN, JJ.] B

Tamil Nadu Entertainments Tax Act, 1939: Sections 3 (2-B), 4 and
(ii) and 4-E.

Entertainment Tax-Cable Television-Levy of40% tax on collections
made through exhibition of-Held: not violative of Articles 14 and 19(1) C
(a) & (g).

Constitution of India, 1950: Articles 14, 19.

Entertainment Tax-Cable Television-Levy of tax on-Held: no D
comparison could be claimed with Doordarshan.

The Tamil Nadu Entertainment.Tax Act, 1939 was enacted to
impose tax on entertainments. The Act was amended to hring within
its ambit what was called 'cable television', by imposing a levy of
40% tax on collections made by the appellant through exhibition of E
the same. The appellant filed a writ petition before the High Court
challenging the validity of the Amending Act, which was dismissed.
Being aggrieved the appellant preferred the present appeal.

On behalf of the appellant it was contended that the Amending F
Act violated Article 19(1)(a) of the Constitution; that the tax was in
fact am! truth a tax on education;· that the rate of the tax was
prohibitive and was designed to kill tbe cable television in the interest
of cinema theatres; and that the Amendment was violative of Article
14 of the Constitution since it did not levy the tax on Doordarshan.
G
Dismissing the appeal, this Court

HELD: I. It may be true that providing entertainment is a form
of exercise of freedom of speech and expression. It is quite likely that
the appellants also relay the programmes broadcast by Doordarshan H
947
948 SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.

A and other T.V. networks and some of them may be informative in
nature or educational in character but the fact remains that their
activity is a combination of two rights i.e. business and speech-<mb-
clause (g) and (a) of clause (I) of Article 19. There is no reason why
the business part of it cannot be taxed. If tax can be levied upon
entertainment provided by cinemas, if taxes can be levied upon the
B Press, it is ununderstandable why the appellants' activity cannot be
taxed. Certainly, the appellants cannot claim that their activity is of
more significance to society than that of the Press. Where the freedom
of speech gets intertwined with business it undergoes a fundamental
change and its exercise has to be balanced against societal interests.
[952 H, 953 A,B)
c
Secretary, Ministry of Information and Broadcasting. Government of
India & Ors. v. Cricket Association ofBengal & Ors., )1995] 2 SCC 16 and
Express Newspapers v. Union of India., [1985] I SCC 641, relied on.

Corpus Juries Secundum (Vol. 16), p.1132, referred to.
D
2.1. The only question is whether the level of taxation is not
within reasonable limits and whether its incidence is such as to disable
the appellants from exercising their free speech right. Though the
appellants have alleged that the tax imposed is too heavy and is
E intended to drive them out of their business with a view to help the
cinema theatres, no material has been placed to substantiate the said
averement. [954 G,H]

2.2. There is also no substance in the grievance that taxes are only
levied upon them and not upon Doordarshan. There cannot be any
F comparison between Doordarshan and the appellants. Doordarshan is
a governmental organisation which is supposed to act in furtherance
of public interest. It is not a business carried on by the Government.
The revenues collected by it by permitting advertisements are only
intended to defray part of the huge expenditure the Government
incurs on establishing and maintaining the broadcasting system
G throughout the country. By no stretch of imagination can the appellants
claim any similarity with Doordarshan. [955 GH, 956 A)

2.3. The reason given by the State for imposing tax at the rate
of 40 percent is duly explained by the State. Since the appellants also
H carry on business it is their duty to share the burden of the State by
A. SURESHv. STATEOFT.N. [B.P.JEEVAN REDDY,J.] 949

paying taxes like any other business. The entertainment tax is an A
indirect tax. It is meant to be and is passed on to the consumer i.e.
subscriber. In the case of indirect taxes, levy at more than IOO per
cent of the value of the goods is not unknown e.g., in the case of
customs and central excise duties. As a matter of fact, even in the case
of direct taxes, levy at a rate higher than 50% is a regular feature. Of
course, these are instances not involving free speech right and stand B
upon a different plane. [955 E,F[

CIVIL APPELLATE/ORIGINAL JURISDICTION : Civil Appeal
Nos. 14737, 14727-28 of 1996.

From the Judgment and Order dated 30.11.94 of the Madras High C
Court in W.P. No. 16237, 16517 and 16272 of 1994.

WITH

Writ Petition (C) Nos. 119-20 of 1995 .
D
Under Article 32 of the Constitution of India.

A.K. Ganguli, R. Keruppan, T. Raja, K.K. Mani, M. Katy 6s
sunderam, M.A. Krishna Moorthy and V. Krishnamurty for the appearing
parties. -E

The Judgment of the Court was delivered by

B.P. JEEVAN REDDY, J. Tamil Nadu Entertainment Tax Act,
1939 was enacted to impose the tax on entertainments. By Act 37of1994 F
the Act was amended to bring within its purview what is called 'cable
· television'. The expression 'cable television' is defined inclause 2-B of
Section 3. The definition reads:

"Cable Television' means a system organised for television G
exhibition by using a video cassette or disc or both, recorder
. I
or palyer of similar such apparatus on which pre-recorded
video cassettes or discs or both are played or replayed and
the films or moving pictures or series of pictures which are
viewed and heard on the television receiving set at a residential
or non-residential place of a connection holder." H
950 SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.

A The expression "television exhibition". occurring in the above
definition, is defined in clause (11) of Section 3 in the following words:

"Television exhibition'means an exhibition with the aid of
any type of antenna with a cable net-work attached to it or
cable television, of a film, or moving picture or series of
B moving pictures, by means of transmission of television
signals by wire where 'subscribers' television sets at
residential or non-residential place are linked by metallic
coaxial cable or ontic fibre cable to a central system called
the head-end."

c The expression "entertainment" is defined in Clause (4) of Section 3
thus:

"Entertainment' means a horse race or cine1natograph
exhibition to which persons are admitted on payment or
television exhibition for which persons are required to make
D payment by way of contribution, or subscription,or
installation or subscription, or installation or subscription,
or installation or connection charges or any other charges
collected in any manner whatsoever.

E Explanation-For the purposes of this clause and other
provisions of this Act, 'Cinematograph exhibition' includes
exhibition of film on Television screen through Video Cassette
Recorder and through cable television network'."

Section 4-E is the charging section so far as cable television is
F concerned. Sub-section (I) thereof provides :
"( 1) Notwithstanding anything contained in sections 4 and
7, there shall be levied and paid to the State Government a
tax hereinafter referred to as the entertainments tax calculated
at forty percent of the amount collected by way of contribution
G
or subscription or installation or connection charges or any
other charges collected in any manner whatsoever for
television exhibition."

A number of writ petitions were filed in the Madras High Court
H challenging the validity of the Amendment Act. The grounds of challenge,
A. SURESHv. STATEOFT.N. [B.P. JEEVAN REDDY,J.] 951

which are reiterated before us, are the following: A

(I} The State Legislature has no legislative competence to enact the
Amendment Act inasmuch as the subject matter of the enactment falls
exclusively within the province of Parliament i.e., list I of the Seventh
Scheduie to the Constitution.
B
(2) The impugned Act is ofno effect since the field is already occupied
by Cable Television Net-work (Regulation) Ordinance 9 of 1994 issued
by President of India and the subsequent enactment made by Parliament
replacing the ordinance.

' . c
(3) The Amendment Act is violative of the freedom of speech and
expression guaranteed to the petitioners by Article 19(1)(a) of the
Constitution.

(4) The Amendment Act is a colourable piece of legislation. The tax
in truth and effect is a tax on education inasmuch as the bulk of the D
programmes shown on cable television are educative programmes. The
entertainment constitutes less than I 0 per cent of the programmes shown
by them.

(5) The Amendment Act is violative of Article 14 of the Constitution E
since it does not levy the tax on Doordarshan and other establishments and
associations (like star-hotels and multi-storey housing complexes) providing
• entertainment through dish antennas.

(6) The tax is not on public entertainment but on private enjoyment F
i.e. , on people having entertainment sitting in their homes.

(7) The rate of tax is prohibitive and is designed to kill the cable
television in the interest of cinema theatres.

G
. /-. The defence of the State, in addition to disputing each of the above
contentions, was that since the cable television is akin to cinetna
entertainment-though provided in a different manner, taking advantage
of technological advance1nents-it is treated on par with cinema
entertainment in the matter of levy of entertainment tax. If one is good
and unexceptionable, so is the other, they say. H
952 SUPREME COURT REPORTS (1996] SUPP. 8 S.C.R.

A The High Court has dealt with each of these cont¢ntions advanced
by the writ petitioners separately and exhaustively and rejected each of
them. Since we agree with the reasoning and conclusions arrived at by the
High Court on all the issues, we think it unnecessary to deal with the
above submissions except contentions No. 3, 4, and 7. Leave granted in
all the special leave petitions.
B
The submissions of the learned counsel for the appellants (with
respect to contentions 3, 4, and 7 referred to above) are to the following
effect:- The appellants not only show films on their net-work using video-
cassette/disc and recorder but also relay the programs broadcast by
Doordarshan, B.B.C., C.N.N., Star T.V. and other similar T.V. net-works.
C Most of the programmes shown by them are educative in nature. The
entertainment part is hardly I 0 per cent. In any event providing
entertainment is also part of freedom of speech and expression. By levying
tax at the rate of 40 per cent of the appellants' collections, the State is
casting an unbearable burden upon the appellants. It is not possible for the
appellants to survive in business of providing entertainment if they are
D made to pay tax at the said rate. The immediate and direct effect of taxation
at the said rate is to deprive the appellants of their fundamental right of
freedom of speech and expression. It is really being done to help the
cinema operators, whose business is said to have been.adversely affected
by the entry of cable television. Even if some films are shown by the
appellants, that does not detract from the fact that to a substantial degree,
E the progammes relayed by them are educative and informative in nature.
Exhibition of films is providing entertainment. Providing entertainment
is also a mode of exercise of their freedom of speech and expression-and ...
that cannot be taxed. As a matter of fact, they perform the same function
as that of Doordarshan and yet they are being subjected to prohibitive rate
of taxation while Doordarshan goes sest free, say the counsel.
F
For a proper appreciation of the appellants contentions, it is necessary
to examine the nature of the activity carried on by the appellants. The
appellants are carrying on the business of providing entertainment. Their
main activity is to show films and other material using the video-cassettes
G or disc with the help of a V.C.R., disc playe_r or a similar apparatus. By_
means of cables, the T. V. sets in the homes of the subscribers are linked to
their apparatus with a view to enable the subscribers to receive the
programmes relayed by the appellants. For this service, each subscriber is
charged a particular amount every month. This is their business. It may
be true that providing entertainment is a form of exercise of freedom of
H speech and expression. It is quite likely that they also relay the programme
A. SURESH v. STATE OF T.N. [B.P. JEEVAN REDDY,J.] 953

broadcast by Doordarshan another T.V. net-works and some of them may A
be informative in nature or educational in character but the fact remains
that their activity is a combination of two rights i.e., business and speech~
sub-clauses (g) and (a) of clause (1) of A1ticle 19. There is no reasons why
the business part of it cannot be taxed. If tax can be lavied upon
entertainment provided by cinema, if taxes can be levied upon the Press, it
is ununderstandable why the appellants' activity cannot be taxed. Certainly, 8
the appellants cannot claim that their activity is of more significance to
society than that of the Press. Where the freedom of speech gets intertwined
with business it undergoes a fundamental change and it's exercise has to
be balanced against societal interests. In Secretary, Ministry of lnformation

- . and Broadcasting, Government of India & Others v. Cricket Association
of Bengal & Others, [1995] 2 SCC 161 one of us (B.P. Jeevan Reddy, J.)
stated the proposition, flowing from the decided cases, in the following
C
words: "Providing entertainment is implied in freedom of speech and
expression guaranteed by Article 19(l)(a) of the Constitution subject to
this rider that where speech and conduct are joined in a single course of
action, the free speech values must be balanced against competing societal
interests." (at age 297). D

Even with respect to the freedom of Press, this Court said in Express
Newspapers v. Union of India, [1985] l SCC 641:

"Newspaper industry enjoys two of the fundamental right,
namely the freedom of speech and expression guaranteed E

·- under Article 19(l)(a) and the freedom to engage in any
profession, occupation, trade, industry or business guaranteed
under Article 19(1 )(g) of the Constitution, the first because
it is concerned with the field of expression and communication
and the second because communication has become an
occupation or profession and because there is an invasion of F
trade, business and industry into that field where freedom of
expression is being exercised. While there can be no tax on
the right to exercise freedom of expression, tax is livable on
profession, occupation, trade, business and industry. Hence
tax is livable on newspaper industry. But when such tax G
transgreses into the field offreedom of expression and stifles
that freedom, it becomes unconsitutional. As long as it is
within reasonable limits and does not impede freedom ~f
expression ii will not be contravening the /imitation ofArticle
19(2). The delicate task of determining when it crosses from
the area of profession, occupation, trade, business or industry H
954 SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.

A into the area of freedom of expression and interferes with
that freedom is entrusted to the courts."

In other words, only when taxes are levied not for raising revenues
but for killing the appellants'business, can they legitimately complain.

B The Court also quoted with approval, in the said decision, the
following statement of law in Corpus Juris Secundum (Vol.16) says at
page I 132:

"213(13) Taxing and Licensing.-The constitutional .
guaranties of freedom of speech and of the press are subject
c to the proper exercise of the government's power of taxation,
• r

and reasonable license fees may be imposed on trades or
occupations concerned with the dissemination of literature
or ideas.

As a general rule, the constitutional guaranties of freedom is
D
speech and of the press are subject to the proper exercise of
the government's power of taxation, so that the imposition
of uniform and non-discriminatory taxes is not invalid as
applied to persons or organisations engaged in the
dissemination of ideas through the publication or distribution
E of writing. The guarantee of freedom of the press does not
forbid the taxation of money or property employed in the
publishing business, or the imposition of reasonable licenses
and license fees on trades or occupations concerned with the
-·
dissemination of literature or ideas."

F Dealing with the power of the State to levy taxes, the Court observed:
"Taxation is the legal capacity of sovereignty for one of its governmental
agents to exact or impose a charge upon persons or their property for the
support of the. government and for the payment for any other public
purposes which it may constitutionally carry out."
G
In this view of the matter, the only question is whether the level of
taxation is not within reasonable limits and whether it's incidence is such
as to disable the appellants'from exercising their free speech right. Though
the appellants' have alleged that the tax imposed is too heavy and is intended
to drive them out of their business with a view to help the cinema theatres,
H no material has been placed before us to substantiate the sad averment.
A.SURESHv. STATEOFT.N. [B.P.JEEVANREDDY,J.] 955

The respondent's case is that the cable television has taken the place of A
cinema. It has replaced the cinema to a certain degree. The cable television
is performing the very same function as is performed by the cinema.
Cinema also provides entertainment. It also provides educational
programmes. Indeed according to the learned counsel for the state, major
chunk of the programmes shown on cable television are pure and simple
entertainment and that they are mainly engaged in showing films which B
are broadcast either by T.V. net-works or relayed by the appellants with
the help of a V.C.R. Counsel complained that some of the programmes
shown by the appellants are having a deleterious effect upon the young
and impressionable. With a view to promote their business, counsel
submitted, the appellants are showing programmes designed to cater to
base instincts and vulgar tastes. It is accordingly submitted that the rate of C
• >
entertainment tax levied upon cable television at the same level and on the
same par as the entertainment tax levied upon cinema theatres is neither
unreasonable nor excessive. It is submitted that the levy of entertainment
tax at 40 per cent of the collections is no higher than the rate of tax levied
upon the cinema. It is also brought to our notice that the rate of taxation
has since been brought down to 20 per cent, If the levy of entertainment D
tax at the rate of 40 per cent or thereabouts on the cinema theatres is not
impermissible, it is submitted, the levy of entertainment tax at the same
or lesser rate on cable television cannot also be held to be· bad.

We are inclined to agree with the submission of the learned counsel E
for the State of Tamil Nadu. The reason given by the State for imposing
tax at the rate of 40 per cent is duly explained by the State and we do not
see any flaw in it. Since the appellants also carry on business it is their
duty to share the burden of the State by paying taxes like any other business.
The entertainment tax is an indirect tax. It is meant to be and is passed on
to the consumer i.e., subscriber. In the case of indirect taxes, levy at more F
than 100 per cent of the value of the goods is not unknown e.g. , in the
case of customs and central excise duties. As a matter of fact, even in the
case of direct taxes, levy at a rate higher than 50% is a regular feature. Of
course, these are instances not involving free speech right and stand upon
a different plane. G

We are also unable to see any substance in the grievance that taxes
are only levied upon them and not upon the Doordarshan. We do not
think that there can be any comparison between Doordarshan and the
appellants. Doordarshan is a governmental organisation which is supposed
to act in furtherance of public interest. It is not a business carried on by H
I
956 SUPREME COURT REPORTS (1996] SUPP. 8 S.C.R.

A the Government. The revenues collected by it by permitting advertisements
are only intended to defray part of the huge expenditure the Government
incurs on establishing and maintaining the broadcasting system throughout
the country. By no stretch of imagination can the appellants claim any
similarity with Doordarshan.

8 For the above reasons the appeals and writ petitions fail and are
dismissed. There shall be no order to costs.

v.s.s. Appeals and Petitions dismissed.

....