Holding

The levy on admission of motor vehicles in a drive‑in theatre is, in pith and substance, a tax on the person entertained and therefore falls within the State’s competence under Entry 62 of List II, rendering it valid.

Summary

The respondent, Drive‑In Enterprises, operated a drive‑in cinema where patrons could view films while seated in their motor cars. The State of Karnataka imposed an entertainment tax on the admission of each motor vehicle into the auditorium under sub‑clause (v) of clause (i) of Section 2 of the Karnataka Entertainment Tax Act. The Karnataka High Court struck down the provision as ultra vires, holding that the tax was on the vehicle, not on a person entertained. On appeal, the Supreme Court examined whether the levy fell within the State’s legislative competence under Entry 62 of List II of the Seventh Schedule and applied the doctrine of pith and substance. It held that, in substance, the tax is levied on the person entertained who brings the vehicle for a more comfortable viewing experience, and therefore is an entertainment tax within the State’s power. Consequently, the High Court’s decision was set aside and the tax upheld.

Issues considered

Whether sub‑clause (v) of clause (i) of Section 2 of the Karnataka Entertainment Tax Act, imposing tax on admission of motor vehicles into a drive‑in theatre, is within the State Legislature's competence under Entry 62 of List II of the Seventh Schedule.
Whether the levy is in substance a tax on the vehicle (a non‑person) and thus ultra vires, or a tax on the person entertained.
Whether the doctrine of pith and substance validates the levy despite its nomenclature.

Legislation cited

Constitution of Indias. Entry 62, List II, Seventh Schedule

Subjects

entertainment taxdrive‑in theatrelegislative competenceEntry 62pith and substancestate taxationvehicle admissionultra viresseventh scheduleluxury tax

Judgment

A STATE OF KARN ATAKA AND ORS.

DRJVE-lN-ENTERPR!SES

MARCH 13. 2001

B [V.N. KHARE AND RUMA PAL, JJ.]

Karnataka Ente11ainment Tax Act : Section 2(i)(v).

Ente11ain1nenl Tax-On admission of ca.'~/1notor vehicles inside Drive-
in-Theatr'e-Levy of-High Cou11 struck do1vn the p1vvision as unconstitu-
c tional-Correctness u,f-1-/eld: The lel'y u.f enfe11aitunenf tax is on the person
en1e11ained and not on !he curs/n!olor 1•ehicles-l-Io1veve1; State Legislature
competenf lo levy enfe;tailunent tax under Entry 62, List fl on acbnission of
cars/1notor vehicles inside Dri 1'e-in-111ea1 re since the person entef1ained sits in
his car and views the film-Constitution of India, 1950, Ent;y 62, List fl, VII
D Sch.-Kamataka Cinemas (Regulation) Rules, 1971, R. 111-A-Karnataka
Cinema' (Regulation) Act, 1964, RP-g. 22.

Doctrines:

Doctrine of Pith and Substance-Meaning and applicability of
E
Words and Phrases :

"Ente11uinmenf "'-Meaning of-In the context r!f S. 2( e) ofthe Kamataka
Ente11ainment Tax Act.

F The respondent was the owner of a Drive-in-Theatre into which
admisssions \Vere given to persons desiring to view cinema while sitting in
their motorcars taken inside the theatre. The appellant-State levied enter- .,...
tainment tax under Section 2(i)(v) of the Karnataka Entertainment Tax
Act on admission of cars inside the theatre. The High Court held that the
levy was not on a person entertained (i.e. car/motor vehicles), the same was
G
ultra vi res and struck down Section 2(i)(v) of the Act as being beyond the
legislative competence of the State Legislature. Hence this appeal.

On hehalf' of the appellant-State it was contended that in pith and
substance, the levy was on the person entertained and not on the admission
H of cars/motor vehicles inside the Drive-in-Theatre and therefore, the State
378
,
STATE v. DRIVE-IN-ENTERPRISES 379
Legislature was fully competent to impose such a levy. A
Allowing the appeal, the Court

HELD : 1. When a levy is challenged, its validity has to be adjudged
with reference to the competency of the State Legislature to enact such a
law, and while adjudging the matter what is required to be found out is the B
real character and nature of levy, its pith and substance and it is in this
light, the competency of the State Legislature is to be adjudged. The
doctrine of pith and substance means that if an enactment substantially
falls within the powers expressly conferred by the Constitution upon the
Legislature, it cannot be held to be ultra vims merely because its nomencla-
ture shows that it encroa.ches upon matters assigned to another heading of
c
legislation. The nomenclature of a levy is not conclusive for determining its
true character and nature. [383-D-E]

Goodyear India lid v. State of Haryana, [1990] 2 SCC 71, R.R.
Engineering Co. v. Zita Parishad, Bareilly, [1980] 3 SCC 330; Kera/a State D
Electricity Board v. Indian Aluminium Co., [1976] 1 SCC 466; Raza Buland
. Sugar Co. v. Rampur Municipality, AIR (1962) All. 82 and Governor Gen·
eral-in-Council v. Province of Madras, AIR (1945) PC 98, referred to.

2.1. Entry 62 of List II of the Seventh Schedule of the Constitution
empowers the State Legislature to levy tax on luxuries, entertainment, E
amusements, betting and gambling. Under Entry 62, the State Legislature
is competent to enact law to levy tax on luxuries and entertainment. The
incidence of tax is on entertainment. Since entertainment necessarily im·
plies the persons entertained, _therefore, the incidence of tax is on the
person entertained. [386-H; 387-A] F

2.2. Section 3 of the Karnataka Entertainment Tax Act, which is the
charging provision, provides for levy of tax on each payment of admission.
Thus, under the Act, the State is competent to levy tax on each admission
inside the Drive-in· Theatre. The challenge to tlte levy is on the ground that
the vehicle is not a person entertained and, therefore, the levy is ultra vires. G
It cannot be disputed that the car or motor vehicle does not go in,ide the
Drive-in· Theatre of its own. It is driven inside the Theatre by the person
entertained. In other words the person entertained is admitted inside the
Drive-in·Theatre along with the car/motor vehicle. Thereafter the person-
entertained while sitting inside his car inside the auditorium views the film H
•

380 SUPREME COURT REPORTS (200 I] 2 S.C.R.
A exhibited therein. This shows that the person entertained is admittedinside
the Drive-in-Theatre along with the car/motor vehicle. This further show
that the person entertained carries his car inside the Drive-in-Theatre in
order to have better quality of entertainment. The quality of entertainment
also depends on with what comfort the person entertained has viewed the
cinema films. Thus, the quality of entertainment obtained by a person sitting
B
in his car would be different from a squatter viewing the film show. The levy
on entertainment varies with the quality of comfort with which a person
enjoys the entertainment inside the Drive-in-Theatre. In the present case, a
person sitting in his car or motor vehicle has the luxury of viewing cinema
films in the auditorium. It is the variation in the comfort offered to the
C person entertained for which the State Government has levied entertain-
ment tax on the person entertained. The real nature and character of
impugned levy is not on the admission of cars or motor vehicles, but the levy
is on the person entertained who takes the car inside the theatre and watches
the film while sitting in his car. Therefore, in pith and substance the levy is
D on the person who is entertained. Whatever be the nomenclature oflevy, in
substance, the levy under the heading "admission of vehicle" is a levy on
entertainment and not on admission of vehicle inside the Drive-in-Theatre.
So long as in pith and substance the levy satisfies the character of levy, i.e.
"entertainment", it is wholly immaterial in what name and form it is
imposed. The word "entertainment" is wide enough to comprehend in it, the
E luxury and comfort with which a person entertains himself. Once it is found
that there is nexus between the legislature competence and subject of
taxation, the levy is justified and valid. [387-B-H]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4319 of 1991.
F From tl1e Judgment and Order dated 7.11.90 of the Kamataka High
Court in W.P. No. 1624 of 1985.

M. Veerappa for !he Appellants.

B.P. Gandhi, K.N. Nagpal and Anil Kumar Sangal for !he Respondent.
G
The Judgment of the Court was delivered by

V.N. KHARE, J. This appeal is directed against the judgment of the
Karnataka High Court passed in the writ petition filed by the respondent ,.
herein whereby sub-clause (v) of Clause (i) of Section 2 of the Ka.mataka
H Entertainment Tax Act (hereinafter referred to as 'the Act') was struck down
I,

STATE" DRNFAN-ENTERPRISES [V. N. KHARE, J,] 381
as being beyond the legislative competence of the State Legislature, A

The respondent herein, is tl1e owner and proprietor of a Drive-in-
Theatre in the outskirts of Bangalore city wherein cinema films are exhibited.
It is alleged that the Drive-in-111eatre is distinct and separate in its character
from other cinema houses or theatres. The Drive-in-Cinema is defined under
B
Rule 111-A of Karnataka Cinemas (Regulation) Rules 1971 (hereinafter
referred to as 'tl1e Rules') framed in exercise of the powers conferred on the
.-A State Government under Regulation 22 of the Karnataka Cinemas (Regula-
tion) Act, 1964. The definition of Drive-in-Cinema runs as under :

" 'Drive-in-Cinema' means a cinema with an open-air theatre premises c
into which admission may be given normally to persons desiring to
view the cinema while sitting in motor cars. However, where an
auditorium is also provided in a 'drive- in-cinema' premises, persons
other than those desiring to view the cinema while sitting in motor
cars can also be admitted. Such drive-in-cinemas may have a capacity
D
to accommodate not more than one.thousand cars."

The Drive-in-Theatre of the respondent with which \~le are concerned here
is a cinema with an open-air-theatre into which admissions are given to
person& desiring to ~ee cinema while sitting in their motor cars taken inside
the theatre. The Drive-in-Theatre has also an auditorium wherein other E
persons who are without cars, view the film exhibited therein either standing
or sitting. The persons who are admitted to view the film exhibited in the
audit.orium are required to pay Rs.3 for admission therein. It is not disputed
that the State Government has levied entertainment tax on such admission and
the same is being realised. However, if any person desires to take his car F
inside the theatre with a view to see the exhibition of the films while sitting
-1, in his car in the auditorium, he is further required to pay a swn of Rs.2 to
the proprietor of the Drive-in-Theatre, The appellant-State in addition to
charging entertaimnent tax on the persons being entertained, levied entertain-
ment tax on admission of cars inside the theatre, This levy was challenged
G
by the proprietors of the Drive-in-Theatres by means of writ petitions before
~ the Karnataka High Court which were allowed and levy was struck down by
a single Judge of the High Court. The said judgment was affirmed by a
__,;, Division Bench of that Court. It was held. that the levy being not on a person
entertained (i.e. Car/Motor vehicle), the same was ultra vires. After the
aforesaid decision, the Karnataka Legislature amended the Act by Act No.3 H
382 SUPREME COURT REPORTS (2001] 2 S.C.R.
A of 1985. By the said amendment. sub clause (v) was added to Clause
(i) of Section 2 of the said Act. Simultaneously, Sections 4A and 6 of t-
the Act were also amended. After the aforesaid amendments, the appellant
herein, again levied entertainment tax on admission of cars into Drive-in- "
Theatre. This levy was again challenged by means of a petition under Article
226 of the Constitution and the said writ petition was allowed, and as stated
B
above , the High Court struck down sub-clause (v) to Clause (i) of Section
2 of the Act.

Learned counsel appearing for the appellant urged that insertion of sub-
clause (v) of Clause (i) of Section 2 of the Act is a valid piece of legislation
c and after its insertion and amendment of Section 6 and Section 4A of the Act.
the appellant-State was competent to levy and realise the entertainment tax
on the admission of cars/motor vehicles inside the Drive- in-Theatre. Learned
counsel urged that in pith and substance, the levy is on the person entertained
and not on the admission of cars/motor vehicles inside the Drive-in-Theatre.
D It was also urged that the State Legislature is fully competent to impose such
a levy.

Learned counsel for the respondent. inter alia, urged that the Drive-
in-Theatre is a different category of cinema unlike cinema houses or theatres,
E that. the special feature of the Drive-in-Theatre is that, a person can view the
film exhibited therein while sitting in his car, that. the admission of cars/motor
vehicles into Drive-in theatre is incidental and part of concept of Drive-iu-
Theatre, that. the film that is shown in Drive- in- Theatre is like any other
film shown in cinema houses, and that, t.he State Legislature is not competent
to levy entertainment tax on admission of motor vehicles inside the Drive-
F . in-Theatre. Learned counsel further argued that the incidence of tax being on
the entertainment. the Stat.e Legislature is competent to enact law imposing ~- .
tax only on person entertained. In nut-shell, the argument is that the State
Legislature can levy entertainment tax on human beings and not on any
· inaniniate object. According to learned counsel, since the vehicle is not a
G person entertained, the State Legislature is not competent to enact law to levy
entertainment tax on the admission of cars/motor vehicles inside the Drive-
in-Theatre.

On the arguments of learned counsel for the parties, the question arises
H as to whether the State Legislature is competent to enact law to levy tax 1mder
STATE v. DRIVE-IN-ENTERPRISES [V. N. KHARE, J.] 383
Entry 62 of List II of Seventh Schedule on admission of cars/motor vehicles A
-\ inside the Drive-in-Theatre.

Whereas in the present case, the vires of an enactment is impugned on
the ground that the State Legislature lacks power to enact such an enactment,
what the Court is required to ascertain is the ttue nature and character of such
an enactment with reference to the power of the State Legislature to enact B
such a law. While adjudging the vires of such an enactment, the Court must
.k examine the whole enactment, its object, scope and effects of its provision.
If on such adjudication it is found that the enactment falls substantially on
a matter assigned to the State Legislature, in that event such an enactment
must be held to be valid even though nomenclature of such an enactment C
shows that it is beyond the competence of the State Legislature. In other
words, when a levy is challenged, its validity has to be adjudged with
reference to the competency of the State Legislature to enact such a law, and
while adjudging the matter what is required to be found out is the real
character and nature of levy. In sum and substance, what is to be found out
D
is the real nature of levy, its pith and substance and it is in this light the
competency of the State Legislature is to be adjudged. The doctrine of pith
and substance means that if an enactment substantially falls within the po\vers
expressly confeITed by the Constitution upon the Legislature, it cannot be held
to be ultra virl!s merely because its nomenclature shov,1.s that it encroaches
upon matters assigned to another heading of legislation. The nomenclature of E
a levy is not conclusive for determining its true character and nature. It is
no longer res integra that the nomenclature of a levy is not a true test of
nature of a levy. In Goodyear India l.Jd. & Ors. v. State of Haryana & Anr.,
[1990] 2 SCC p.71, it was held that the nomenclature of an Act is not
conclusive and for determining the trne character and nature of a particular F
levy with reference to the legislative competence of Legislature, the Court
will look into pith .and substance of the legislation. In Mh. R.R. Engineering
Co. v. 'Zila Parishad, Bareilly & Anr., [1980] 3 SCC p.330 the question arose
as to whether the Zila Parishad can levy tax on calling or property. The
argument was t:iat the levy is tax on income, therefore, it is ultra vires. G
However, this Court held thus :

"The fact that the tax on circumstances and property is often levied
on calling or property is not conclusive of the nature of the tax; it is
only as .a matter of convenience that income is adopted as a yardstick
or measure for assessing the tax. The measure of the tax is not a true H
384 SUPREME COURT REPORTS [2001] 2 S.C.R.
A test of the nature of the tax. Considering the pith and substance of the
tax, it falls in the category of a tax on 'a man's financial position, ~
his status taken as a whole and includes what may not be properly
comprised under the term "property" and at the same time ought not
to escape assessment'."

B (emphasis supplied)

In Kera/a State Electricity Board v. Indian Aluminium Co., [1976] 1
sec p.466, it was held thus:
"For deciding under which entry a particular legislation falls the
c theory of 'pith and substance' has been evolved by the courts.
If in pith and substance a legislation falls within one list or the
other but some portion of the subject-matter of that legislation
incidentally trenches upon and might come to fall under another list,
the Act as a whole would be valid notwithstanding such incidental
trenching."
D
In Governor General in Council v. Province of Madras, AIR (1945) P.C. p.98,
the question arose as to whether the levy was sales tax or excise duty. In that.
connection the Privy Council held :

"Its real nature, its 'pith and substance' is that it imposes a tax on
E the sale of goods. No other succinct description could be given
of it except that it is a 'tax on the sale of goods'. It is in fact a
tax which according to the ordinary canons of interpretation appears
to fall precisely within Entry No.48 of the Provincial Legislative
List."
F In Leventhal & Ors. v. David Jones l.Jd., AIR (1930) P.C. p.129, the question
arose as to whether the Legislature can impose Bridge tax when the :y· ·
power to Legislate was really in respect of "tax on land". The levy of
Bridge tax was held valid under legislative power of tax on land. It was held
as thus:
G "The appellants' contention that though directly imposed by the
legislature, the bridge tax is not a land tax, was supported by argument
founded in particular on two manifest facts. The bridge tax does not
extend to land generally throughout New South Wales, but to a limited
area comprising the City of Sydney and certain specified shires, and
H the purpose of the tax is not that of providing the public revenue for
STATE v. DRIVE-IN-ENTERPRISES [V. N. KHARE, J.] 385
the common purposes of the State but of providing funds for a A
particular scheme of bettenneut. No authority was vouched for the
proposition that an impost laid by statute upon property within a
defined area, or upon specified classes of property, or upon specified
classes of persons, is not within the true significance of the term a tax.
Nor so far as appears has it even been successfully contended that
B
revenue raised by statutory imposts for specific purposes is not
taxation."

(emphasis supplied)

In Raza Buland Sugar Co. v. Rampur Municipality, AIR (1962) Allahabad
p.82, which was subsequently approved in 1965 (!) SCR p.970, the qnestion
c
arose as to whether the Municipal Board can levy water tax when the power
to legislate was in respect of die land and building. The High Court held that
in pith and substance water tax is not on water but it is a levy o~ land and
building.
D
We are in full agreement with the aforestated statement of law and are
of the view that it is not the nomenclature of the levy which is decisive of
the matter, but its real nature and character for detennining the competency
on power of State Legislature to enact Jaw imposing levy. It is in the light
of the aforesaid statement of,Iaw, we would examine the validity of levy
E
challenged in the present case. Before we deal with the question in hand, we
would first examine the provisions of the Act Section 2 (a) of the Act defines
'admission'. 'Admission' includes admission as a spectator or as one of the
audiences, and admission for the purpose of amusement by taking part in an
entertainment. Clause (b) of Section 2 defines "admission to an entertain-
ment" which includes admission to any place in which an entertainment is F
held. Clause (cb) of Section 2 defines "cinema theatre" means any place of
entertainment in which cinematography shows are held to which persons are
admitted for payment. Clause (e) of Section 2 of the Act defines "entertaih-
ment" which means a horse race or cinematography shows including exhi-
bition of video films to which persons are admitted on payment.
G
Section 2 (i) defmes 'payment for admission' which runs as under;

"(i) 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 H
386 SUP,REME COURT REPORTS [2001] 2 S.C.R.
A higher tax is required.

' (ii) x,xx xxx

(iii) xxx xxx

B · ·'' ·(iv) xxx xxx '
i'
(v) any payment for admission of a motor vehicle into the auditorium
of a cinema known as drive- in-theatre." j._
l ' ; . , .•

(emphasis supplied)
c Section .3)s a. charging !ection. The relevant provisions run as nnder:

"J. Tax on paymdnts foradmission lo entertainments. - (I) There shall
.,. '·be ievied and paid to the State Government on each payments for
admission (excluding the amount of tax) to an entertainment, [other
D than the entertainment referred to in sub-clause (iii) of clause (e) of
Section 2), entertainment tax at 70 per cent of such payment).

(2) Notwithstanding ;mything contained in sub- section (I) there shall
· be levied and paid to the State Government (except as otherwise
expressly provided in this Act) on every complimentary ticket issued
E by the proprietor of an entertainment, the entertainment tax at the
"appropriate rate specified in sub-section (I) in respect of such
"'' 'eni:ertainment,'as if full payment had been made for admission to the
"'entertainment' according to the Class of seat or accommodation which
the holder of such ticket is entitled tci occupy or use; and for the
purpose of this Act, the holder of such ticket shall be deemed to have
F
·been admitted on payment."

Sub-Section (1) of Section 6 runs as nuder:

. "~. Manner ,of payment of tax. - (1) [Save as otherwise pro,vided in
Section 4-A,or 4-B, the entertainment tax shall be levied in respect
G
of each payment for admission or each admission] on a complimen-
·,L,•tary ticket :and shall be calculated ,and paid on the. number of
admissions."
·'" 1 t,l L · !·.; : " •r,
·, 1Entry.62 of List II of Seventh Schedule empowers the State Legislature
H to levy tax, on lu:imries, entertainment, amusements,.. betting and gambling.
STATE v. DRIVE-IN-ENTERPRISES [V. N. KHARE, J.] . 387

Under Entry 62, the State Legislature is competent to enact law to levy' tax A
on luxuries and entertainment. The incidence of tax is on entertainment.' Since
entertainment necessarily implies the persons entertained, therefore, the in-
cidence of tax is on the person entertained. Coming to the question whether
the State Legislature is competent to levy tax on admission of cars/motor
vehicles inside the Drive-in-Theatre especially when it is argued that cars/
B
motor vehicles are not the persons entertained. Section 3 which is' charging
provision, provides for levy of tax on each payment of admission. Thus, tirider
the Act, the State is competent to levy tax on each admission inside the Drive-
in-Theatre. The challeng~ to the levy is on the ground that the vehicle is. not
a person entertained and,· therefore, the levy is ultra vires. It can~o; be
disputed that the car or motor vehicle does not go inside the Drive-in-Th~atre c
of its own. It is driven inside the Theatre by the person entertained. In other
words the person entertained is admitted inside the Drive-in Theatre along
with the car/motor vehicle. Thereafter the person entertained while sitting in
his car inside the auditorium views the film exhibited therein. This shows that
the person entertained is admitted inside the Drive-in Theatre along with the D
car/motor vehicle. This further shows that the person entertained carries his
car inside the Drive-in-Theatre in order to have better quality of entertain-
ment. The quality of entertainment also depends on with what comfort the
person entertained has viewed the cinema films. Thus, the quality of enter-
tainment obtained by a person sitting in his car would be different from a
squatter viewing the film show. The levy on entertainment varies with the E
quality of comfort with which a person enjoys tl1e entertainment inside the
DriveMinM Theatre. In the present case, a person sitting in his car or motor
vehicle has luxury of viewing cinema films in the auditorium. It is the
variation in the comfort offered to the person entertained for which the State
Government has levied entertainment tax on the person entertained. The real F
nature and character of impugned levy is not on the admission of cars or
motor vehicles, but the levy is on the person ente11ained who takes the car
inside the theatre and watches the film while sitting in his car. We are,
therefore, of the view that in pith and substance the levy is on the person
who is entertained. Whatever be the nomenclature of levy, in substance, the
G
levy under heading "admission of vehicle" is a levy on entertainment and not
on admission of vehicle inside the Drive-in-Theatre. As long as in pith and
substance the levy satisfies the character of levy, i.e. "entertainment", it is
wholly immaterial in what name and form it is imposed. The word "enter-
tainment" is wide enough to comprehend in it, the luxury or comfort with
which a person entertains himself. Once it is found there is a nexus between H
388 SUPREME COURT REPORTS [2001] 2 S.C.R.
A the legislative competence and subject of taxation, the levy is justified and
valid. We, therefore, find that the State Legislature was competent to enact i.
sub-clause (v) of clause (i) of Section 2 of the Act. We accordingly hold that
the impugned levy is valid.

For the aforesaid reasons, we are of the view that the High Court fell
B
in serious error in holding that sub- clause (v) of clause (i) of Section 2 of
the Act is ultra vires Entry 62 of List II of Seventh Schedule.

Consequently, this appeal deserves to be allowed. The judgment under
appeal is set aside. The writ petition shall stand dismissed. The appeal is
C allowed. There shall be no order as to costs.

V.S.S. Appeal allowed.