Supreme Court of India
VENKATESHWARA THEATREversusSTATE OF ANDHRA PRADESH AND ORS.
- Citation
- 1993 INSC 188
- Decided
- 10 May 1993
- Disposal
- Dismissed
- Bench
- M M PUNCHHI
Holding
Sections 4 and 5 of the Andhra Pradesh Entertainment Tax Act, as amended, are constitutionally valid and fall within the State’s legislative competence under Entry 62 of List II, and do not violate Article 14 or Article 19.
Summary
The Supreme Court examined the constitutional validity of Sections 4, 4‑A and 5 of the Andhra Pradesh Entertainment Tax Act, 1939 (as amended by Act 24 of 1984 and later amendments) which levy tax on cinema shows based on a percentage of the gross collection capacity per show and provide an optional weekly consolidated payment scheme. The petitioners, owners of cinema theatres, challenged the provisions on three grounds: (i) they exceeded the State's legislative competence under Entry 62 of List II of the Seventh Schedule; (ii) the uniform rates and classification violated Article 14’s guarantee of equality; and (iii) the tax amounted to an unreasonable restriction on the freedom to trade under Article 19(1)(g) not saved by Article 19(6). The Court held that the subject of the tax – entertainment – falls within Entry 62, that the method of levy does not alter the nature of the tax, and that the classification of theatres and local areas is a reasonable, intelligible differentiation with a rational nexus to the tax’s purpose. Consequently, the provisions were held constitutionally valid. The appeal and the special leave petition were dismissed.
Issues considered
- The provisions of Sections 4, 4‑A and 5 of the Andhra Pradesh Entertainment Tax Act, as amended, are within the legislative competence of the State under Entry 62 of List II of the Seventh Schedule.
- Whether the classification of theatres and the uniform tax rates violate Article 14 of the Constitution.
- Whether the tax constitutes an unreasonable restriction on the freedom to trade under Article 19(1)(g) and is not saved by Article 19(6).
Legislation cited
- Andhra Pradesh Cinemas (Regulation) Act, 1955
- Andhra Pradesh Entertainment Tax Act, 1939s. 4, s. 4-A, s. 5, s. 6, s. 6-A
- Constitution of Indias. Article 14, s. Article 19(1)(g), s. Article 19(6), s. Entry 62 of List II (Seventh Schedule)
Subjects
Legislative competenceEntry 62 List IIEntertainment taxArticle 14 equalityArticle 19 freedom of tradeTax classificationGross collection capacityConstitutional validity
Judgment
A VENKA TESHW ARA THEATRE
v.
ST A TE OF ANDHRA PRADESH AND ORS.
MAY 10, 1993
B
[l\t.:M. PUNCHHI AND S.C. AGARWAL, JJ.]
Constitwion of India, 1950-Sevemh Schedule-List II, Entry 62· Taxes on
e111ertainme111s-A11dhra Pradesh Entertainment Tax Act, 1039-Constitwional
Validity of-Question as to legislative competence of State ugistawre-Factors
to be considered.
c
1\nd/Jra Pradesh E111ertai11111e111 Tax Act 1939-Sections -I and 5-l're and
post ame11dme111 ofA. P. Act 2-1of198-1-uvy oftax-Modes of-Alteration in the
mode whether has effect of altering the nature of tax-Legislative
competency-Scope C!f
D Constitution of India, 1950-Article N-Equality before iaw'-
Construction-Law to operate differently on d(tferent groups- Conditions for
classijication-ClassifYing items for tax-Leg isl aw re's discretion-Ambit
of-Discrimination-\Vhen becomes.
Andhra Pradesh Entertain111e111 Tax Act. 1939-Sections .+and 5-Whetl!er
E
11/tra vi res of Article l.f, Constillltion of India.
Andhra Pradesh Emertainment Tax Act, 1939-Section 5(6)-0ptionfor
payment o.f weekly consolidated amo11111-uga/iry.
Prior to .Januar~· 1, 1984, the Andina Pradesh Entertainment Tax Act,
.F
1989, in Section 4, provided for levy of entertainment tax at a rate fixed on the
basis of percentage of payment made b~· a person for admission to any
entertainment. In section 4-C, in respect of entertainments held within the
jurisdiction of any local authority where population did not exceed ~5, 000,
tax was levied at a certain percentage of the gross collection capacity per show
G and the percentage for such levy were fixed according to the population of the
local authority within the jurisdiction of which the entertainment held.
The Amending Act 24 of1984, replaced the earlier mode of levy of tax
prescribed in Section 4 and introduced a mode oflev~· ot'tax on the basis ofa
prescribed percentage of the gross collection capacity per show. The 1·ates
H
VENKATESHWARA THEATER v. STATEOFANDHRAPRADESH 617
were fixed on the basis of a percentage of th~ gross collection capacity per A
show varying with the category of the local area in which the theatre was
situated as well as on the nature of the theatre, viz. air conditioned air cooled
or (other than air conditioned and ~ir'-cooled)or permanent, semi-permanent
including touring and temporary theatres. The proprietor was ~iveri an
option to pay a weekly consolidated amount irrespective of the number of
shows actually held by him and the said amount was fixed on the ha~ of the B
prescribed number of shows per week. The number of shows varied with the
nature of the theatre as well as the category of the local area in which it was
situate. A fixed amount was also leviable by way of show tax on each show.
Before the High Court, a number of writ petitions were fded challenging C
the validity of sections 4,4-A and 5 of the Anclhra Pradesh Entertainments
Tax Act, 1939, as amended by Act24 ofl984, on the grounds that(i) the levy
of entertainment tax on the basis of gross collection capacity without refer-
ence to the actual amount collected or the actual number of tickets sold or the
number of persons admitted was ultra vires the legislative power conferred ori
the State Legislature under Entry 62 of List II of the Seventh Schedule of the D
Constitution; (ii) section 4 was hit by Article 14 ofthe Constitution, as it gave
rise to discrimnnation amongst different theatres situa.te within the same local
area; and that (iii) the levy of entertainment tax under section 4 being
exproprietory amounted to an unreasonable restriction on the right guaran-
teed to the petitioners by Article 19(1) (g) of the Constitution and was not
saved under Article 19(6). E
- Relying upori the decisions in Western india Theatres v. Cantonment
Board. U959] Supp. 2 SCR 63; Y. V. Srinivasamurthy v. State of Mysore, AIR
1959 SC 894 and State ofBombay v.R.M.D. Chamarbaugwala, AIR 1957 S.C.
699 the High Court dismissing the writ petitions held that the State Legisla-
ture was compl\!tent to ~-<!VY the tax under Entry 62 of List II of the Seventh F
Schedule; that :as the tax le,·ied retained the character of entertainment tax,
the Legislature was competent to adopt such basis or such measure, or ~ch
method of le,·y; that wide discretion was allowed to the Le~islature in the
matter of classification and in the matter of selection of persons to he taxed
and that the two-fold classification made by section 4 was neither discrimina- G
tory nor arbitrary or it did not mete out hostile discrimination to certain
theatres; that the rates of tax that were prescribed under section 4 based on
an a\•erage expected occupancy rate ofless than 50 per cent to 66 per cent, was:
nvither unreasonable nor expropriatory; that section 5 was only optional and
no one was compelled to be gm·erned by it or to opt for the composition
scheme and if a person opted to be governed by section 5, he must be deemed H
618 · SUPREME COURT REPORTS [1993] 3 S.C.R.
A to have accepted all the conditions and features of the scheme.
Duririg the pendency of these appeals Special leave petition in this court
theActof1939wasamended b)' A.P.Act23of1988andA.P.Act 16 of1991,
whereby the Tables below sections 4, 4-A and 5 were substituted and sub·
B
section (6A) was inserted in section 5.
Before this Court the appellants and the petitioners reiterated two
contentions raised before the High Court while assailing the constitutional
-
-
\•alidity ofsections 4 and 5 of the Act, namely, (1) that the impugned pro,•isions
did not fall within the ambit of the legislavite power conferred on the State
Legislature under Entry 62 of List II of the Seventh Schedule of the Consti-
c
tution; (ii) that the impugned provisions were violative of Article 14 of the
Constitution, as they provided for imposing tax at a uniform rate on a
particular class of Cinema theaters irrespective of their location and occu-
pancy.
D Dismissing the appeal and the Special Leave petititftli this Court,
HELD: 1.1. While considering the question as to legislative competence
of the State Legislature, it is necessary to bear in mind that the impugned
provisions provide for imposition of a tax and a tax has two distinct clement~
viz., subject of tile tax and the measure of the tax. The subject of the tax is the
E person, think or actMty on which the tax is imposed, and the measure of the
tax is the standard hy which the amount of tax is measured. (632-D)
1.2. The competence of the Legislature to enact a law. imposing a tax
under a particular head of the legislative list has to be examined in the context
F of the subject of the tax. It the subject of the tax falls within the ambit of the
legislative power conferred by the ln!ad oflegislative entry, it would he within
the competence of the Legislature to impose such as tax. (632-E)
1.3. Prior to the enactment of Act 24 of 1984, there were two modes for
levy of the tax, one on the basis of the actual number of persons admitted to
G each show and the other on the basis of the percentage of the grows collection
capacity per show. As a result of the amendments introduced hy Act 24 of
1984, the system for levy of tax on the basis of number of persons actually
admitted to each show was dispensed with and the tax was to be le,·ied on till'
basis of the percentage of the gross collection capacity per show and diffc1·cnt
percentages were prescribed depending on the t~·pe of the theatre and tlu- \'
H
VENKA1ESHWARA THEATER v. STA TE OF ANDHRA PRADESH 619
nature of the local area where it was situated. (633-F-H) A
1.4. The question whether the alteration in the said mode oflel'Y of tax
hy Act 24 ofl984 has the effect of altering the nature of the tax in a way that
it has ceased to he a tax on entertainment., and falls beyond the field of
legislath·c competence conferred on the ;'\t<1tc Legislature hy Entry 62 of List
II, must be answered in the ncgati\•e. The fact that instead of tax being levied B
on the basis of the pa~·ment for admission made b~· the persons actually
admitted in the theater it is being levied on the basis of the gross collection
capacity per show calculated on the basis of the notional aggregate of all the
payments for admission which the proprietor would reali~c per show if all the
seats or accommodation in respect of the place of entertainment arc occupied
and calculated at the maximum rate of pa~·ments for admission, would not
c
alter the nature of the tax or the subject-matter of the tax which continues to
he a tax on entcrt~inment. (634-8-D)
1.5. The mode oflcl')' based on 'per payment for admi'ision' proscribed
under Section 4(1) prior to amendment by Act 24 ofl 984 necessitated enquiry D
into the number 11f shows held at the theatre and the number of persons
admitted to a cinema theatre for each show and gave room for abuse both on
the part of proprietor as well as other otlicers inchar~e of assessment and
collection of tax. The mode of lel'Y or measure of the tax prescribed under
section 4(1), as substituted by A ct24 ofl 984, is a more com·enient mode oflevy
of the tax inasmuch as it dispenses with the need to verify or enquire into the E
number of persons admitted to each stiow and to \'crify the correctness or
otherwise of the returns submitted by the proprietor containing the number
of persons admitted to each show and the amount of tax collected. (634-E)
1.6. On an examination of'the rates prescribed under both the modes it F
is found that under the system of consolidated levy prescribed under Section
4-C, the proprietor could break even if the average rate of occupanc~· was
40%. As regards the rates prescribed under Sections 4 and 5 as amended by
Act 24 of 1984 they are based on an al'eragc expected occupancy rate of less
than 509': or 669': depending upon the area in which the theatre is 5ituated.
This would mean that the entertainment tax that would be collected ewer and G
above the average occupancy rate would constitute the profit of the propri-
etor. In the circumstances, it cannot be said thatthe adoption of the system of
consolidated le\')' in Section 4(1) as amended by Act 24of1984 alters the
nature o[tax and it has ceased to be a tax on entertainments. (634-F-H)
H
620 SUPREME COURT REPORTS (1993) 3 S.C.R.
A I. 7. Once it is held that tax on entertainment could be levied either of the
two modes. viz., per pa)·mcnt;; of admission or gross collection capacity per
show, it is for the lcgi<;latu1·c to decide the particula_r mode or modes of levy
to be adopted and whether a choice should be available to the proprietor of
the cinema theatre in this regard. The legislatUre does not transgress the
limits of its legislative power conferred on it under Entry 62 of List II if' it
B decides tha~ consolidated le\')' on the basis of' gross collection capacit~· per
show shall be the onl)• mode for levy of tax on entertainments. (635-C)
1.8. The impugned p1·0,·isions contained in Sections 4 and 5 as amended
by Act 24of1984 arc not u/Jra vires the legislative power conferred on the
C State Legislature under Entry 62 of List II. (635-D).
Wes/em India Thea1res "· Ca111on111e111 Board, [1959) Supp. 2 SCR 63 and Y. V.
Srinivsasmurthy v. Swte of M~·.wr A IR ·1959 SC 894, explained.
D
2.()1. The right conferred b)' Article 14 postulates that all persons
similarly circumstanced shall be treated alike both in prh·ileges conferred
and liabilities imposed, Since the State, in exercise ot'it-. governmental power,
has, of necessity, to make laws opcrati~g differently on different groups of
persons within its territory to attain particular ends in giving effect to its
E p91icics, it is recognised that the State must possess the power of distinguish·
ing and classif)·ing persons or things to be subjected to such laws. It is,
however, required that the classification must satisfy two.conditions, namely,
(i) it is founded on an intelligible diffcrcntia which distinguishes those that are
grouped together from others; and (ii) the differcntia must have a rational
relation to the ohjectsoughtto be achieved b)' the Act. It is notthe requirement
F tbat the classification should he scicntiticall~· perfect or logically complete.
Classification would be justified if' it is not pal pablc arbltrar)'.. (636-A -C)
Re-Special Co11r1s Bill, (1979) 2 SCR 476 at pp. 534-536 and Klzandige Sham
Bhat 1 Agrirnlwra/ Income-Tax Officer, [1963) 3 SCR 809 at p. 817; followed.
1•
G
2.02. In the field of taxation the legislature exercises an extremely wide
discretion in classifying items for tax purposes, so long as it refrains from
clear and hostile discrimination against particular persons or classes. (636-E)
H
VENKATESHWARA THEATER v. STATE OFANDllh'..\ IK\DESH 621
East India Tobacco Co,.. State uf AP. [1963) 1 SCI< -'04 at p. 411; P.M. A
Ashwatfwnararnna Shetty v. State of Karnataka, [1988J Supp. 3 SCR 155 at p.
188; Federation u_( Hotel & Nestaurant Association of India v. Union of India,
[1989) 2 SCR 918 at p. 949, Kera/a Hotel & Restaurant Association\'. State of
Kera/a, [1990] 1 SCR 516 at p. 530: Gannon Dunkerley an(l Co. v. Srate of
Rajastfwn, [1993] 1 SCC 364 at 397; and San Antonio Independent Scfzoo/
District v. Bodriq11es. 411 US l at p. 41, referred to. B
2.03. Just as a ditlercncc in the treatment of persons similarly situate
leads to discrimination, so also discrimination can arise if persons who arc
unet1uals; i.e. different!~· placed, arc treated similarly. In such a case failure
. on the part of the legislature to classify the persons who are dissimilar in C
separate categories and applying the same law, irrespective of the differences
brings about the same con-sequence as in a case where the law makes a
distinction between persons who arc similarly placed. A law providing for
equal treatment of unequal object'>, transactions or persons would be con-
demned as discriminatory if there is absence ofrational relation to the object
intended tO be achieved by the Jaw. (637-A-B) D
- K.T Moopil Nairv. Tfze State of Kera/a & Anr., (196_1] 3SCR 77,distinguished.
fa/an Trading Co. (Pvt.) Ltd. v. Mill Mazdoor Union, [1967) 1 SCR 15 and
TW)ford Tea Co. lid. & Am·. v. The State of Kera/a & Anr.. [1970] 3 SCR 383, E
referred to.
2.04. In the instant case, the legislature has prescribed different rates of
tax by classifying theatres into different classes, namely, air-conditioned, air-
cooled, ordinary (other than air-conditioned and air-cooled), permanent and · F
semi-permanent and touring and temporary. The theatre~ ha\'c further been
categorised on the basis of the t~·pe of the local area in which they arc situate.
It cannot, therefore, be said that there has been no attempt on the part of the
legislature to classify the cinema theatres taking into consideration the
difterentiating circumstances for the purpose ofimposition of tax. (638-G-H)
G
2.05. In relation to cinema theatr·es it can be said that the attendance in
the various cinema theatres within a local area would not be uniform and
would depend on factors which may vary from time to time. Rut this does not
mean that cinema theatres in a particular category oflocal area will always
H
(i22 Sl'PRD1E CIJl.'.RT REPORTS (199313 S.C.R.
A be at a disadvantage so as to he prcjudiciall~· aflcdcd h~· a uniform rate as
compared to cinema theatres havin~ a better hK~Jtion in the same local area.
The contention that the impugned provisions arc violati\'e ofright to et1uality
guaranteed under Article 14ofthc Constitution on the basis thatunet1uals are
being treated equally cannot be accepted. (639-B-C)
)_
3. The prm·ision for.enhanccmentcontaincd in sub-section (6) of section
5 relates to the cases where the proprietor of a cinema theatre opts for
pa~·ment of week!~· consolidated amount. Since the proprietor has the option
to opt for the said scheme he cannot complain that the scheme sutlers from
inequalit~· on account of absence of a corresponding pro,·ision for reduction
of amount of tax. (639-E)
c
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1527
of 1986 etc. etc.
0 Frum the Judgment and Order dated 7 .8.1984 of the Andhra Pradesh High
Court in Writ Petition No. 8173or1984.
A.K. Ganguly. M.B. Shctyc, A. Subha Rao, B. Kanta Rao. T.V.;S.N. Chari,
·:\Is. Bharathi Reddy and Ms. Promila for the appearing parties.
E: The Judgment of the (\rnrt was delivered by
S.C. AGRAWAL, ,J.: These appeal and special leave petitions raise
common questions relating to the constitutional validity of Sections 4 and 5 of the
Andhra Pradesh Entertainments Tax. 1939 (hereinafter referred to as 'the Act'), as
F amended by Act 24 of 1984, providing for imposition of entertainments tax in
respect of entertainments held in cinema theatres located in the State of Andhra
Pradesh.
The Act has been enacted to pro\"ide for the levy of taxes on amusements and
other attainments. Prior to January I. 1984, Section 4 of the Act provided for levy
G of entertainment tax at a rate fixed on the basis of percentage of.the payment made
by a person for admission to any entertainment. In addition, there was a provision
in Section 4-A for levy of a fixed amount, by way of"show tax", for.each show.
By Act 58 of 1976. Section 4-C was introduced in the Act and Section 5 of the Act
was substituted. Under Section 4-C, it was provided that in respect of entertain-
H
VEN KATES I l\V ARA THEA lER v. STATE OF ANDHRA PRADESH (AGRA WAL.J] 623
men ts held wnhm the jurisdh:tion of any local authority whose population did not A
exceed 25,000, a tax for e\'ery entertainment show would be levied, not on the
basis of each payment for admission, but at a certain percentage of the gross
collection capacity per show. The percentages for such levy were fixed according
to the population of the local authority within the jurisdiction of which the
entertainments were held. 'Gross collection capacity per show' was defined in the
Explanation to Section 4-C to mean the notional aggregate of all payments for B
admission the pro!1rietor would realise per show, if all the seats or accommodation
as determined by the licensing authority under the Andhra Pradesh Cinema<;
(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. The levy of tax in the manner as prescribed under Section
4-C could be dispensed with if the proprietor of the theatre opted for the c
composition scheme contemplated by Section 5 whereunder it was open to a
proprietor to enter into an agreement with the prescribed authority to compound
the tax payable under Section 4-C for a fixed sum which was to be arrived at in
accordance with the formula prescribed under Section 5. According to this
fonnula, the tax was payable on the basis of a percentage of the gross collection
D
capacity per show for the fixed rounds of shows for the whole year and the number
of shows was fixed on the ba<;is of the number of shows exhibited in the previous
year. This timl1lgement continued till December 31, 1983, whereafter the provi-
sions of Sections 4, 4-A and 5 were amended by Act No. 24 of 1984.
1be provisions of Sections 4, 4-A and 5, as amended by Act 24of1984, were E
as foUows:
"Section 4. ( 1) There shall be levied and paid to the State Govern-
ment a tax on the gross collection capacity on every show {herein-
after referred to as the entertainments tax) in respect of entertain-
ments held in the theatres specified in column (2) of the table below F
anq located in the located areas specified in the corresponding entry
in "'1lumn ( l) of the said table, calculated at the rates specified in the
corresponding entry in column (3) thereof.
THE TABLE G
Local Area Theatre Rate of tax on the
gross collection ca-
pacity per show
(1) (2) (3) H
624 SUPREME COURT REPORTS [1993] 3 S.C.R.
A (a) Municipal corporations (i)Air-conditioned 29 per ce
and the Secunderabad
Cantonment area and (ii) Air-cooled 28 per cent
the contiguous area (iii )Ordinary 25 per cent
tllefelif. (other than air-
conditioned and air-
B cooled)
(b) Selection grade muni- (i) Air-conditioned 28 per cent
cipalities and
contiguors area ·of (ii) Air-cooled 27 per cent
· two Kilometres (iii )ordinary (other 24 per cent
thereof. than air-conditioned
c and air~cooled)
(c) Special grade munici- (i) Air-conditioned 27 per cent
palities and contiguous (ii) Air- cooled 26 penent
area of two Kilometres (iii) Ordinary 23 per cent
thereof. (other than air-
conditioned and
D
air-cooled)
(d) First grade munici-
palities and conti.- (i) Air-condiioned 26 per cent
guous area of two (ii) Air-cooled 25 per cent
Kilometres thereof. (iii) Ordinary (other 22 per cent
E than air-conditioned
and air-cooled)
(e) Second grade munici- All categories 21 per cent
palities and contiguous
area of two Kilometres
thereof.
F (f) Third grade municipalities, All categories 20 per cent
and contiguous area of two
Kilometres thereof.
(g) Gram panchayats, selec- (i) Permanent and
tion grade gram panchayats, semi-permanent 20 per cent
townships and any other (ii) Touring and 19 per cent
G local areas. temporary
.Etplanation.- 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 propri~tor would
H realise per show if all the seats 6r accommodation a~ d~tem;tln'ed b·
. .
VENKA 1ESHWARA THEA 1ER v. STA1E OF ANDf!RA PRADESH [AGRA WAL.JI 625
the licensing authority under the Andhra Pradesh Cinemas (Regu.- A
lation) Act, 1955, in respect of the place of entertainment arc
~
occupi.ed and calcul.ated 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 B
proprietor on the actual number of shows held by him in a week ...
··section 4-A. (1) In addition to the tax under Section 4, there shall
be levied and paid to the State Government in the case of entertain-
ments held in the local areas specified in column (1) of the Table c
below, a tax calculated at the rates specified in the corresponding
entry in column (2) thereof;
THE TABLE
D
Local Areas Rate of tax for every
show
(a) Municipal Corporation and the Six rupees
Secunderabad cantonment area and
contiguous area of two Kilometers thereof.
E
(b) ·Selection grade, Special grade and the Six rupees
first grade municipalities and contiguous
area of two kilometers thereof. ·
(c) Second grade and Third grade Four rupees
municipalities and contiguous area of
F
two kilometers thereof.
(g) Gram Panchayats, selection grade Two rupees.
gram panchayats, townships and·
any other local areas.
(2) The tax leviable under sub-section ( 1) shall be recoverable from G
the proprietor.
(3) The provisions of this Act other than Sections 4, 6 and 13 shall,
so far as may be, apply in relation to the tax payable und~r sub-
.section (1) as they apply in relation to the tax payable under Section H
4"
626 Sl'PREME COURT REPORTS [t993J 3 s.c.~.
A ··sectilln 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 colunm (l) 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 Governmem every
B week as specified in the corresponding entry in colunm (3) thereof:
THE TABLE
Local Area Theatre Amount of tax
(I) (2) (3)
c
(a) Municipal corpora- (i) Air-conditioned 24 per cent
tions and the of the gross
Secunderabad canton- collection capacity
ment area and the per show multi-
D contiguous area of plied by 22
two kilometrers
thereof. (ii) Air-cooled 23 per cent of the
gross collection
capacity per show
multiplied by 22.
E {iii) Ordinary 20 per cent of the
(other than air- gross collection
conditioned and capacity per show
air-cooled) multiplied by 22
(b) Selection grade muni- (i) Air-conditi- 23 per cent of the
cipalities and contiguAus aned gross collection
F
area of two kilometrers show multiplied by
thereof.· 22.
(ii) Air- cooled 22 per cent of
the gross collec-
tion capacity per
G show multiplied ,.
.. by 22 .
(iii) Ordinary 19 per cent of the
(other than air- gross collection
conditioned and capacity per
air-cooled show multiplied by 22
H (c)Special grade munici- (i) Air- conditi- 22 per cent of the
- VENKAIBsHwARA THEATER v. STA TE OF ANDHRA PRADESH [AGRAW AL,J]
palities and contiguous
area of two kilo-
metrers thereof.
oned gross show multi-
lied by 21.
627
A
(ii) Air- cooled 21 per cent of the
gross collection ca-
,,..._ pacity per show B
multiplied by 21.
(iii) Ordinary 18 per cent of the
(other than air- gross collection
'. conditioned and capacity per show
air-cooled) multiplied by 2 L
(d) First grademunicipali- (i) Air-conditi- 21 per cent of the
c
ties and contiguous oned gross show
area of two kilo- multilied by 21.
metrers thereof.
(ii) Air- cooled 20 per cent of the
gross collection D
capacity per show
multiplied by 21.
(iii) Ordinary 17 per cent of the
(other than air- gross collection
conditioned and capacity per show
air-coiled) multiplied by 21. E
(e) Second grade muni- All categores 16 per cent of the
cipalities and conti- gross collection
guors area of two capacity per
Kilometres thereof show.
(t) Third grade muni- All categores 15 per cent of the
cipalities and gross Collection F
contiguous area of capacity per show
two Kilometres multiplied by 17:
thereof. ,.
(g) Gram panchayats, (i) Permanent 15 per cent of thf
selection grade gram and semi- gross collection
panchayats, townships permanent capacity per G
and any other show multi-
local areas. plied by 14.
(ii) Touring 14 per cent of the
and temporary gross collection
capacity per show
multiplied by 7. H
628 SUPREME COURT REPORTS [199313 S.C.R.
A Explanation. - For the purposes of computing the gross collec-
tion capacity per show in respect of any place of entertainment, the
-
maximum seating capacity or accommodition 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
B section shall be taken into account.
(2) The amount of tax under sub-section ( l) shall be payable by the.
proprietor irrespective of the actual number of shows held by him .
in a week.
c
(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
D week as specified in sub-section (1).
(5) The option permitted under this section shall continue to be in
force till th~ end of the financial year in which such option is
permitted.
E
(6) It shali be lawful forthe prescribed authority to vary the amount
of tax payable by the proprietor under sub-section (1) during the
period of option permitted under this section any time, if there is an
increase in the gross collection capacity per show in respect of the
place of entertainment by virtue of an upward revision of the rate of
F payment for admission therein or of the seating capacity or accom-
modation thereof or where the local area in respect of which
p'ermission is granted is upgraded or if it is found for any reason that
the amount of tax has been fixed lower than the correct amount.
(7) Every proprietor who has been permitted to pay the tax under this
G section shall intimate to the prescribed authority forthwith such
increase in the gross collection capacity per show in respect of the
plll;ce of entertainment, failing which it shall be open to the pre-
scribed authority by giving fifteen days notice to cancel the option
so permitte<;l.
n·
'
VENKA1ESHWARA THEA1ER v. STA1E OF ANDHRA PRADESH [AGRAWAL.JI . 629
- (8) Where a proprietor fails to pay the amount of tax on the due date,
such amount of tax shall be recoverable with interest calculated at
A
such rate as may be prescribed.
(9) The amount of tax due under this section shall be rounded of to
the nearest rupee and for this purpose, where such amount contains
part of a rupee consisting of paise, then if such part if fifty paise or B·
more it shall be increased to one rupee and if such part is less then
fifty paise, it shall be ignored."
As a result of the said amendments, the earlier mode of levy of tax on the
basis of the percentage of each payment for admission prescribed in Section 4 was
c
replaced by a mode similar to that provided in Section 4-C, i.e., on the basis as
prescribed percentage of the gross collection capacity per show. In the table
appended below sub-section (1) of section 4 rates were fixed on the basis of a
percentage of the gross collection capacity per show varying with the category of
the local area in which the theatre was situated as well as on the nature of the
theatre, viz. air-conditioned and air-cooled or ordinary (other than air-conditioned D
and air-cooled) or permanent, semi-permanent including touring and temporary
theatres. In the Explanation to sub-section (1) of section 4, the term 'gross
c.ollection capacity per show' was defined in the same terms as in the Explanation
to Section 4-C, to mean the full collection per show if all the seats in the theatre
are occupied. In sub-section (2) of section 4, it was specifically provided that the
amount of tax under sub-section (I) shall be payable by the proprietor on the actual E
number of shows held by him in a week. Section 5 gave an option to the proprietor
to pay a week! y consolidated amount irrespective of the number of shows actually
held by him and the said amount was fixed on the basis of the prescribed number
of shows per week. The number of shows varied with the nature of the theatre as
well as tire category of the local area in which it was situate. In section 4-A, a fixed
F
..._ amount was leviable by way of show tax on each show .
A number of writ petitions were filed in the High Court to challenge the
validity of sections 4, 4-A and 5 of the Act, as amended by Act 24 of 1984. The
said writ petitions were decided by a division bench of the High Court by judgment
dated July 19, 1984. G
The constitutional validity of the provisions was challenged on three
grouqds, viz. : (i) the levy of entertainment tax on the basis of gross collection
capacity without reference to the actual amount collecte.d or the actual number of
tickets sold or the number
.
of persons admitted was ultra vires the legislative power
. '
H
630 SUPREME COURT REPORTS [1993] 3 S.C.R.
_.,,
A conferred on the State Legislature under entry 62 of List II of the Seventh Schedule;
(ii) section 4 was hit by Article 14 of the Constitution inasmuch as by treating
unequals as equals, it gave rise to discrimination amongst different theatres situate .
within the same local area; and (iii) the levy of entertainment tax under section 4
being exproprietory amounts to an unreasonable restriction on the right guaranteed
to the petitioners by Article 19 {1) (g) of the Constitution, and was not saved by
B clause (6) of Article 19.
Relying upon the decisions of this Court in Western India Theatres v.
Contomnent Board, 1959 Supp. 2 SCR 63, Y. V. Srinivasamurthy vs. State of
Mysore.AIR 1959SC894,andStateof{3ombayv.R.M.D. Chamarbaugwala,AIR
1957 SC 699, the High Court has held that the State Legislature was competent to
c levy the impugned tax under entry 62 of list II of the Seventh Schedule to the
Constitution' since the said head of legislative power empowers imposition of tax
upon entertainments and amusements and not on the persons entertained or the
persons provided amusement and it has to be paid by the persons who provides the
entertainment or amusement. The High Court further held that so long as the tax
D levied retains the character of entertainment tax, the Legislature is competent to
adopt such basis or such measure, or such method of levy, as it thinks appropriate.
The High Court rejected the contention that the only method in which Legislature
can levy the entertainment tax is that prescribed in the .old Section 4, i.e., on the
basis of the payment of admission. The challenge on the ground of Article 14 was
negatived by the High Court on the view that wide discretion is allowed to the
E Legislature in the matter of classification and in the matter of selection of persons
to be taxed and that. the two-fold classification made by section 4 could not be said
to be either discriminatory or arbitrary much less could it be said that it metes out
hostile discriminatiQn to certain theatres. The High Court also observed that since
it was not possible to predicate absolute equality between two theatres, and also
because the situation and economics of each theatre are different, it is impossible
F to expect, or call upon the Legislature to evolve such classification which would
meet every conceivable case and which would not result in prejudice even to a
single theatre. It was observed that different rates have been prescribed for
different local areas and for different types of theatres, i.e. ordinary, air-cooled and
air-conditioned and the Legislature took note of the fact that rate of occupancy in
villages will be lower compared to towns, and similarly, in biggertowns there will
G
be greater rate of occupancy, and finally in cities, the rate of occupancy would be
even higher and it could not be said that this expectation was unrealistic, or so
unreasonable as to call for interference by the court. As regards the challenge
b~sed on Article 19 ( 1) (g), the High Court has taken note of the letter dated July
26, 1983 addressed by the Andhra Pradesh Film Chamber of Commerce, to the
H Hon'ble Chief Minister of Andhra Pradesh wherein the exhibitors not only asked
VENKA TESHWARA THEATER v. STA TE OF ANDHRA lf{l~;Ql!'~H [AGRA W AL,J] 631
for introduction of a slab system all over the State but also suggested the rates of A
tax which suggestion was accepted by the Government with c~rtain modifications
varying from 2 to 4% over the rates suggested by the Association. The High Court
observed that the rates of tax that were prescribed under section 4 based on an
average expected occupancy rate of less than 50 per cent to 66 per cent, could not
be said to be either unreasonable or exproprietory. The High Court, however, held
that the agreements which had already. been entered into by the proprietors of B
cinema theatres under section 5, as it stood prior to January 1, 1984, would be
effective and valid for the period for which they were entered into. Ttie High Court
has also observed that merely because the form for exercise of option, as
contemplated under sub-section (3) of section 5, had not been prescribed, it could
--- not be said that section 5 had not come into operation or was unenforceable and
that it was open for the proprietor to send an intimation on an ordinary paper and c
the authority would be bound to treat it as proper intimation. The High Court
rejected the contention that section 5 was discriminatory inasmuch as it did 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 was
exercised although under sub-section (6) of section 5 the provision had been made
D
for enhancement of the composition amount in case the seating capacity/accom-
modation or the rates of payment for admission were enhanced. The High Court
observed that section 5 was only optional and no one was compelled to be
governed by it or to opt for the composition scheme contained in section 5 and that
according to the said scheme the option once exercised was in force till the end of
the financial year in which such option was permitted and that if a person opts to E
be governed by section 5 h'e does so with his eyes open and he must be deemed to
have accepted all the conditions and features bf the scheme and it was not open to
him to say that he would avail of the beneficial provisions of the scheme, while
rejecting those features which are not advantageous to him.
C.A.Nos. 4642-47/84, 193-221/85, 222/85, 223/85, 224-28/85. 229. 232-34/ F
85, 1468/85 and 1469-70/85 have been tiled against the said decision of the High
Court dated July 19, 1984. C.A. Nos. 5722/85, 1527/86, and SLP (C) No. 3127/
85 have been filed against the decision of the High Court dated August 7, 1984
which is based on the earlier decision dated July 19, 1984 and similarly C.A. Nos.
1858/89 and 4798/89 are directed against the decisions dated February 12, 1986
G
and March 30, 1989 based on the earlier decision dated July 19, 1984.
During the pendency of these appeals, the Act was amended by A.P. Act 23
of 1988 and A.P. Act l 6 of l 991 whereby the Tables below Sections 4, 4-A and
5 were substituted and sub-Section (6-A) was inserted in Section 5 whereby
H
A
632 SUPREME COllRT REPORTS (1993) 3 S.C.R.
provision was made for reduction of the amount of tax payable by the proprietor
during the financial year if there is a reduction in the seating capacity or in the
---
accommodation of the place of entertainment at any time during the period of six
months commencing from the Ist day of April and ending with 30th day of
September or from the Istday ofOctoberandending with 3 lstday ofMarchof any
financial year.
B
The learned counsel appearing for the appellants have assailed the constitu-
tional validity of sections 4 and 5 on two grounds, viz. : (1) that the impugned
-
provisions do not fall within the ambit of the legislative power conferred on the
State Legislature under Entry 62 of List II of the Seventh Schedule of the
Constitution; and (2) that the impugned provisions were violative of the right to
c equality guaranteed under Article 14 of the Constitution inasmuch as they treated·
unequals as equal by imposing tax at a uniform rate on a particular class of cinema
theatres irrespective of their location and occupancy.
While considering the question as to legislative competence of the State
D Legislature, it is necessary to bear in mind that the impugn~\:! provisions provide
fir imposition of a tax and a tax has two distinct elements, viz., subject of the tax
and the measure of the tax. The subject of the tax is the person, thing or activity
on which the tax is imposed, and the measure of the tax is the standard by which
the amount of tax is measured. The competence of the Legislature to enact a law
imposing a tax under a particular head of the legislative list has to be examined in
E the context of the subject of the tax. If the subject of the tax falls within the ambit
of the legislative power conferred by the head of legislative entry, it would be
within the competence of the Legislature to impose such a tax. It is, therefore,
necessary to examine the scope of the legislative entry, viz., Entry 62 of List 11,
-
which is invoked in support of the competence of the State Legislature to impose
the tax and ascertain whether the subject of the tax imposed by the impugned
F
provisions falls within the ambit of the said entry. Entry 62 of List II is as follows
"62. Taxes on luxuries, including taxes on entertainments, amuse-
ments, betting and gambling."
G
The said entry is in pari materia with entry 50 of the Provincial List in the
Seventh Schedule to the Government oflndia Act, 1935. O:instruing the said entry,
this Court, in the Western India Theatres v. Canronmem Board (supra), has
rejected the contention that the entry contemplates a law imposing taxes on
persons who receive or enjoy the luxuries or the entertainments orthe amusements
H
VENKATESHWARA TIIEATERv.STATEOFANDHRAPRADESH [AGRAWAL,J] 633
---- and has held -
"The entry contemplates luxuries, entertainments and amusements -
as objects on which the tax is to be imposed ....._. .........The entry, at;
we have said, contemplates a law with respect to the matters
regarded as objects and law which imposes tax on the act of
entertaining is within the entry whether it falls on the giver or the B
receiver of that entertainment." (p.69)
In that case, the Cantonment Board had imposed entertainment tax of Rs. 10
per show on the cinema houses of the appellant in the said appeal and Rs. 5 per
show on others. Upholding the said imposition this Court has held- c
"It is a tax imposed on every show, that is to say, on every instance
Jf the exercise of a particular trade, calling or employment. If there
is no show, there is no tax .......The impugned tax is a tax on the
entertainment resulting in a show". (p. 69-70)
D
Similar! y, in Y. V. Srinivasamurthy v. State ofMysore (supra), upholding the
provisions of the Mysore Cinematograph Shows Act, 1951 enacted under the
Constitution, which authorised levy of tax on conematograph shows at rates
prescribed in a rising scale according to the seating accommodation and the cities
where the cinematograph show was held, this Court following the decision in
E
Westem India Theatres case (supra) held that the said Act was validly enacted in
exercise of the legislative power conferred by entry 62 of List II.
In the instant case, we find that prior to the enactment of Act 24 of 1984,
Section 4 provided for levy of entertainment tax on the basis of each payment for
admission to the cinema theatre and under' Section 4-C, in respect of entertain- F
ments held within the Jurisdiction of a local authority whose population did not
exceed 25,000 the tax was levied on the basis of the prescribed percentage of the
gross collection capacity per show. In other words, there were two modes for levy
of the tax, one on the basis of the actual number of persons admitted to each show
and the other on the basis of the percentage of the gross collection capacity per
show. As a result of the amendments introduced by Act 24 of 1984, the system for G
levy of tax on the basis of number of persons actually admitted to each show was
dispensed with and the tax was to be levied on the basis of the percentage of the
gross collection capacity per show and different percentages were prescribed
depending on the type of the theatre and the nature of the local area where it was
situated. Under section 5, an option was given to pay a tax on the basis of the
H
634 SUPREME COURT REPORTS [1993) 3 S.C.R.
A prescribed percentage fixed for a fixed number of shows in a week irrespective of
the number of shows actually held. It is not disputed that the tax as it was being
levied prior.to January 1, 1984, i.e. before the amendment of Section 4 by Act 24
of 1984, was a tax on entertainment falling within the ambit of entry 62 of List II.
The question is whether the alteration in the said mode oflevy of tax by Act 24 of
1984 has the effect of altering the nature of the tax in a way that it has ceased to
B be a tax on entertainments and falls beyond the field of legislative competence
conferred on the State Legislature by Entry 62 of List II. In our view, the said
question must be answered in the negative. The fact that instead of tax being levied
on the basis of the payment for admission made by the persons actually admitted
in the theatre it is being levied on the basis of the gross collection capacity per show
calculated on the basis of the notional aggregate of all the payments for admission
c which the proprietor would reaiise per show if all the seats or accommodation in
respect of the place of entertainment are occupied and calculated at the maximum
rate of payments for admission, would not, in our opinion, alter the nature of the
tax or the subject-matter of the tax which continues to be a tax on entertainment.
The mode of levy based on 'per payment for admission· prescribed under Section
4( 1) prior to amendment by Act 24 of 1984 necessitated enquiry into the number
I)
of shows held at the theatre and the number of persons admitted to a cinema theatre
for each show and gave room for abuse both on the part of proprietor as well as
other officers incharge of assessment and collection of tax. The mode of levy or
measure of the tax prescribed under section 4(1), and substituted by Act 24 of
1984, is a more convenient mode of levy of the tax inasmuch as it dispenses with
E the need to verify or enquire into the number of persons admitted to each show and
to verify the correctness or otherwise of the return submitted by the proprietor
containing the number of persons admitted to each show and the amount of tax
collected. -
Prior to the enactment of Act 24 of 1984, tax was leviable on the basis of
F either of the two modes under Section 4( 1) and 4-C. On an examination of the rates
prescribed under both the modes, the High Court found that under the system of
consolidated levy prescribed under Section 4-C,the proprietor could break even if
the average rate of occupancy was 40%. As .regards the rates prescribed under
Section 4 and 5 as amended by Act 24 of 1984, the High Court has observed that
the said rates are based on an average expected occupancy rate of less than 50%
G
or 66% depending upon the area in which the theatre is si.tuated. This would mean
that the entertainment tax that would be collected over and above the average
occupancy rate would constitute the profit of the proprietor. In the circumstances,
it cannot be said that the adoption of the system of consolidated levy in Section 4( 1)
as amended by Act 24 of 1984 alters the nature of tax and it has ceased to be a tax
H on entertainments.
VENKA TESHWARA THEATER v. STA TE OF ANDHRA PRADESH [AGRA WAL.J] 635
It has been urged that since both the modes oflevy of tax were prevalent prior A
to the enactment of Act 24 of 1984, an option should have been given to the
proprietor of a cinema theatre to choose between either of the two modes and that
under the impugned provisions the choice is confined to two modes of assessment
under the same system of consolidated levy based on the gross collection capacity
per show, one on the basis on the gross collection capacity per show, under Section
4(1) and other on the basis of gross collection capacity per show for a prescribed B
number of shows per week under section 5. We find no substance in this
contention. Once it is held that tax on entertainment could be levied by either of
the two modes, viz., per payment of admission or gross collection capacity per
show, it is for the legislature to decide the particular mode or modes of levy to be
adopted and whether a choice should be available to the proprietor of the cinema
theatre in this regard. The legislature does not transgress the limits of its legislative c
power conferred on it under Entry 62 of List II if it decides that consolidated levy
on the basis of gross collection capacity per show shall be the only mode for levy
of tax on entertainments.
We are, therefore, unable to accept the contention urged on behalf of the D
appellants that the impugned provisions contained in Section 4 and 5 as amended
by Act 24 of 1984 are ultra vires the legislative power conferred on the State
Legislature under Entry 62 of List II.
The challenge to the impugned provisions on the basis of Article 14 is
grounded on the principle that discrimination would result if unequals are treated E
equally are reliance is placed on the decision of this Court in K. T. Moopil Nair v.
The State of Kera/a & Anr., [1961] 3 SCR 77. It has been urged that under section
4, as substituted by Act 24 of 1984, a uniform rate has been prescribed for cinema
theatres of a particular class situate in different parts of the same local area
although the average rate of occupancy in the cinema theatres located in different
parts of the same local area is not the same and a cinema theatre which is located F
in the central part of the local area would have better rate of occupancy as
compared to a theatre located in a remote part and further that the occupancy in the
theatre depends on various 11thcr factors which have not been taken into account.
We find it difficult to accept tll1s contention.
G
Article 14 enjoins the State not to deny to any person equality before t.he Jaw
or the equal protection of the laws. The phrase "equality before the law" contains
the declaration of equality of the civil rights of all persons within the territories of
India. It is a basic principle of republicanism. The phrase "equal protection of
laws" is adopted from the Fourteenth Amendment to U.S. Constitution. The right
H
636 SUPREME COURT REPORTS [1993] 3 S.C.R.
A conferred by Article 14 postulates that all persons similarly circumstanced shall
be treated alike both in privileges conferred and liabilities imposed. Since the
State.• in exercise of its governmental power, has, of necessity, to make laws
operating differently on different groups of persons within its territory to attain
particular ends in giving effect to its policies, it is recognised that the State must
possess the power of distinguishing and classifying persons or things to be
B subjected to such laws. It is, however, required that the classification must satisfy
two conditions namely, (i) it is founded on an intelligible diffcrentia which
distinguishes those that are grouped together from others; and (ii) the differentia
must have a rational relation to the object sought to be achieved by the Act. It is
not the requirement that the classification should be scientifically perfect or
logically complete. Classification would be justified if it is not palpably arbitrary.
c [Sec: Re Special Courts Bill, [1979] 2 SCR 476 at pp. 534-536'].lt there is equality
and uniformity wiU1in each group, the law will not be condemned as discrimina-
tive, though due to some fortuitous circumstance arising outofa peculiar situation
some included in a class get and advantage over others, so long as they are not
singled out for special treatment. [See: Khandige Sham Bhat v. Agricultural
Income-Tax Officer, (1963] 3 SCR 809 atp. 817]
D
Since in the present case we are dealing with a taxation measure it is
necessary to point out that in the field of taxation the decisions of this Court have
permitted the legislature to exercise an extremely wide direcretion in classifying
items for tax purposes, so long as it refrains from clear and hostile discrimination
E against particular persons or classes. [See: East India Tobacco Co. v. State ofA.P.,
(1963] l SCR404,atp.41 i,P.M.AshwathanarayanaShettyv.StateofKamataka,
1988, Supp. 3 SCR 155, at p. 188, Federation of Hotel & Restaurant Association
oflndiav. Union ofIndia, (1989] 2 SCR 918, at p. 949,Kerala Hou~! & Restaurant
Association v. State of Kera/a, [1990] 1 SCR 516, at p. 530, and Gannon
Dunkerley and Co. v. State of Rajast/1011, (1993] 1 SCC 364, at p. 397].
F
Reference, in this context, may also be made to the decision of the U.S.
Supreme Court in San Antonio Independent School District v. Bodrig11es, 411 US
1 at p. 41, wherein Justice Stewart, speaking for the majority has observed :
G "No scheme of taxation, whether the tax is imposed on property,
income or purchases of goods and services, has yet been devised
which is free of all discriminatory impact. In such a complex arena
in which no perfect alternatives exist, the court does well not to
impose too rigorous a standard of scrutiny lest all local fiscal
schemes become subjects of criticism under the Equal Protection
H Clause:·
VENKATESHWARA THEATER v. STATEOFANDHRA PRADESH [AGRAWAL,]] 637
Just as a difference in treatment of persons similarly situate leads to A
discrimination, so also discrimination can arise if persons who are unequals, i.e.
differently placed, are treated similarly. In such a case failure on the part of the
legislature to classify the persons who are dissimilar in separate categories and
applying the same law, irrespective of the differences, brings about the same
consequence as in a case where the law makes a distinction between persons who
are similarly placed. A law providing for equal treatment of unequal objects, B
transactions or p€rsons would be condemned as discriminatory if there is absence
of rational relation to the object intended to be achieved by the law.
In K. T. Moopil Nair v. State of Kera/a (supra), this Court was dealing with
a law providing for imposition of uniform land tax at a flat rate without having
regard to the quality of the land or its productive capacity. The law was held to be
c
violative of Article 14 of the constitution of the ground·tbat lack of classification
had created inequality.
The said decision in K. T. Moopil Nair's case (supra) has been explained by
this Court is Jalan Trading Co. (Pvt.) Ltd. v. Mill Mazdoor Union, [1967] l SCR D
15, in the context of challenge to the validity of section 10 of the Payment of Bonus
Act, 1965 providing for payment of a minimum bonus of 4% by all industrial
establishments irrespective of the fact whether they were making profit. This
Court held that the judgment in Moopil Nair's case (supra) has not enunciated any
broad proposition that when persons or objects which are unequals are treated in
the same manner and are subje.cted to the same burden or liability discrimination E
inevitably results. It was observed : /
"It was not said by the Court in that case that imposition of uniform
liability upon persons, objects or transactions which are unequal
must of necessity lead to discrimination. Ordinarily it may be
F
predicated of unproductive agricultural land that it is incapable of
being put to profitable agricultural use at any time. But that cannot
be so predicated of anindustrial establishment which has suffered
loss in the accounting year, or even over several years successively.
Such an establishment may suffer loss in one year and make profit
in another. " (p.35) G
It was further observed :
'"Equal treatment of unequal objects, transactions or persons is not
liable to be struck down as discriminatory unless there is simulta-
H
638 SUPREME COURT REPORTS [1993] 3 S.C.R.
A neously absence of a rational relation to the object intended to be
achieved by the law." (p.36)
The limitations of the application of the principle that discrimination would
result if unequals are treated as equal, in the field of taxation, have been pointed
out by this Court in T'"r;.ford Tea Co. Ltd. & Anr. v. Tile State of Kera/a & Anr.,
B [ 1970] 3SCR 383, wherein tax at a uniform rate was imposed on plantations.
Hidayatul !ah, CJ, speaking for the majority, while upholding the tax, has observed
"It may also be conceded that the uniform tax falls more heavily on
some plantations than on others because the profits are widely
c
discrepant. But does that involve a discrimination? If the answer be
in the affirmative hardly any tax direct or indirect would escape the
same ensure for taxes touch purses of different lengths and the very
uniformity of the tax and its equal treatment would become its
undoing. The rich and the poor pay the same taxes irrespective of
D their incomes in many instances. such as the sales-tax and the
profession tax etc." (pp. 389-390)
It was further observed :
"The burden is on a person complaining of discrimination. The
E
burden Is proving not possible 'inequality' but hostile 'unequal'
treatment. This is more so when uniform taxes are levied. It is not
proved to us how the different plantations can be said to be 'hostilely
or unequally' treated. A uniform wheel tax on cars does not take into
account the value of the car, the mileage it runs, or in the case of
F taxis, the profits it makes and the miles per gallon it delivers. An
ambassador taxi and a fiat tasi give different out turns in terms of
money and mileage. Cinemas pay the same show fee. We do not
take a doctrinaire view of eguality ... (p.393-94)
In the instant case, we find that the legislature has prescribed different rates
G of tax by classifying theatres into different classes, namely, air-conditioned, air-
cooled, ordinary (other than air-conditioned and air-cooled), permanent and semi-
permanent and touring and temporary. The theatres have further been categorised
on the bas"is of the type of the local area in which they are situate. It cannot,
therefore, be said that there has been no attempt on the part of the legislature to
classify the cinema theatres taking into consideration the differentiating circum-
H
_, VENKA TESHWARA THEATER v. STA TE OF ANDHRA PRADESH [AGRA W AL,J] 639
stances for the purpose of imposition· of tax. The grievance of the appellants is that A
the classification is not perfect. What they want is that there should have been
further classification amongst the theatres falling in the same class on the basis of
the location of the theatre is each local area. We do not think that such a contention
is well founded.
In relation to cinema theatres it can be said that the attendance in the various B
cinema theatres within a local area would not be uniform and would depend on
factors which may very from time to time. But this does not mean that cinema
theatres in a particular category of local area will always be at a disadvantage so
as to be prejudicely affected by a uniform rate as compared to cinema theatres
having a better location in the local area. It is, therefore, not possible to accept the
contention that the impugned provisions are violative of right to equality guaran-
c
teed under Article 14 of the Constitution on the basis that unequals are being
treated equally.
Another contention that has been urged on-behalf of the appellants is that
while provision was made under sub-section (6) of section 5 for enhancement of D
the amount of tax in the event of increase in· the amount of gross collection
capacity, there was rlo corresponding provision for reduction for the amount of tax
in the event of1"eduction in the gross colle~tion capacity. The said provision for
enhancement contained in sub-section (6)of section 5 relates to the cases where
the proprietor of a cinema theatre opts for payment of weekly consolidated
amount. Since the proprietor has the option to opt for the said scheme he cannot E
complain that the scheme suffers from inequality on account of absence of a
corresponding provision for reduction of arnou11t of tax. In any event the said_
grievance has how been removed by the introduction of sub-section (6-A) in
section 5 by amendments, introduced in the Act by A.P. Act 23 of 1988 and A.P.
Act 16of1991.
F
In the result, we find no merit in these appeals and the special leave petition
and they are accordingly dismissed. The parties are, however, left to bear theirown
costs.
V.P.R. Appeals dismissed.
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