# SRINIVASA THEATRE AND ORS. ETC. ETC v. GOVERNMENT OF TAMIL NADU AND ORS. ETC. ETC

- **Citation:** [1992] 2 S.C.R. 164
- **Court:** Supreme Court of India
- **Decided:** 1992-03-12
- **Case number:** Civil Appeal Nos. 2004 to c 2012 of 1992
- **Bench:** M. N. Venkatachaliah, B. P. Jeevan Reddy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/srinivasa-theatre-and-ors-etc-etc-v-government-of-tamil-nadu-and-ors-etc-etc-11430
- **Pages:** 19

## Headnote

Tamil Nadu Entertainment Tax Ac~ 1939: Section SA(l) (As amended
by Act 40 of 1989)--Constitutional validity of.
C
Cinema Theatres-Entertainment Tax-Levy on the basis of 'admission
system' and 'composition system'-Classification of theatres for the purpose
of leVJTheatres situated within the Municipal Corporations and Special
Grade Municipalities governed by 'admission system'-Theatres situated in
other local areas of State governed by 'composition system'-Theatres situated
D within the radius of the five kilometers of Municipal Corporations and Special
Grade Municipalities brought over from 'composition system' to 'admission
system '---But temporary and open theatres exempted from 'admission
system'-Held classification of theatres was reasonable and has nexus with
the object of enactment-Held change-over to 'admission system' from 'com-.
position system' is not an unreasonable restriction-Exemption to open and
E
temporary theatres held not discriminatory-Section SA(l) held not violative
of Articles 14 and 19(1)(g).
F
G
Constitution of India, 1950: Articles 14 and 38.
Expression 'Equality before law' and 'equal protection of laws'-Mear.-
ing of-Relevance of State's obligation to bring equality as contemplated by
Article 38-Discussed.
Doctrine of legitimate expectatiott-Legitimate expectation based on
legislative practice cannot be invoked for invalidating a legislation.
The Tamil Nadu Entertainment Tax Act, 1939 provides for levy of
entertainment tax on admission to cinema theatres in the State of Tamil
Nadu. Until 1978 the entertainment tax was levied on the basis of 'admis·
sion system' i.e. on the actual number of tickets sold. In 1978 the Act was
·amended and sections S(A) and 5(8) were introduced. These sections
H introduced the 'composition system' of collection of entertainment tax
164
SRINNASA lHEATRE v. G .. ,TJ~RNMENT
165
-~
under which tax was levied based upon the: gross collection capacity of A
cinema theatres irrespective of the actual number oftickets sold. However,
the newly introduced 'composition system' was not made applicable to the
entire State. While the theatres situated within the Municipal Corporations of Madras, Madurai, Coimbatore and the Special grade
municipalities continued to be governed by the original system of taxation B
i.e. 'admission system' the theatres situated in all other local areas of the
y
State were governed by the composition system.
In 1989 the Act was further amended and Sub-section (1) of Section
S(A) of the Act was substituted. By this amendment, the percentage of
,...-- ......,,
entertainment tax vis-a-vis the rates of admission in force in corporation c
and special grade municipality areas was reduced from 53% to 40%. At the
same time all the theatres situated within the radius of five kilometers
,..._
from the peripheral limits of such areas (belt) which were hitherto
governed by the composition system were brought over to the admission
system. However, the temporary and open air theatres even though located D
in the belt of five kilometers were excluded from this switch-over.
The appellants challenged the validity of section S(A)(l) by filing
various writ petitions which were dismissed by a Division Bench of the
Madras High Court.
E
. --<
In appeals to this Court, it was contended on behalf of the appellant1'
(1) that the Amendment Act is arbitrary and violative of Article 14 inasmuch as (a) it classifies theatres situated in a local area into two categories
subjecting one such category to a hostile treatment; (b) it equates the
theatres situated in village panchayats and village townships and other F
lesser grade municipalities with the theatres in corporation areas and
~
special grade municipalities area and that such a classification has no
relation to the object of the enactment; (2) exemption of temporary and
_;.
open theatres from the 'admission system' of taxation is discriminatory;
(3) the impugned provisions are confiscatory in nature and they constitute
G
an unre

## Text

_Characters 0–39,924 of 45,645. This is a partial read: ask again with offset=39924 for what follows._

A
B
SRINIVASA THEATRE AND ORS. ETC. ETC.
v.
GOVERNMENT OF TAMIL NADU AND ORS. ETC. ETC.
MARCH 12, 1992
[M. N. VENKATACHALIAH AND B. P. JEEVAN REDDY, JJ.)
Tamil Nadu Entertainment Tax Ac~ 1939: Section SA(l) (As amended
by Act 40 of 1989)--Constitutional validity of.
C
Cinema Theatres-Entertainment Tax-Levy on the basis of 'admission
system' and 'composition system'-Classification of theatres for the purpose
of leVJTheatres situated within the Municipal Corporations and Special
Grade Municipalities governed by 'admission system'-Theatres situated in
other local areas of State governed by 'composition system'-Theatres situated
D within the radius of the five kilometers of Municipal Corporations and Special
Grade Municipalities brought over from 'composition system' to 'admission
system '---But temporary and open theatres exempted from 'admission
system'-Held classification of theatres was reasonable and has nexus with
the object of enactment-Held change-over to 'admission system' from 'com-.
position system' is not an unreasonable restriction-Exemption to open and
E
temporary theatres held not discriminatory-Section SA(l) held not violative
of Articles 14 and 19(1)(g).
F
G
Constitution of India, 1950: Articles 14 and 38.
Expression 'Equality before law' and 'equal protection of laws'-Mear.-
ing of-Relevance of State's obligation to bring equality as contemplated by
Article 38-Discussed.
Doctrine of legitimate expectatiott-Legitimate expectation based on
legislative practice cannot be invoked for invalidating a legislation.
The Tamil Nadu Entertainment Tax Act, 1939 provides for levy of
entertainment tax on admission to cinema theatres in the State of Tamil
Nadu. Until 1978 the entertainment tax was levied on the basis of 'admis·
sion system' i.e. on the actual number of tickets sold. In 1978 the Act was
·amended and sections S(A) and 5(8) were introduced. These sections
H introduced the 'composition system' of collection of entertainment tax
164
SRINNASA lHEATRE v. G .. ,TJ~RNMENT
165
-~
under which tax was levied based upon the: gross collection capacity of A
cinema theatres irrespective of the actual number oftickets sold. However,
the newly introduced 'composition system' was not made applicable to the
entire State. While the theatres situated within the Municipal Corporations of Madras, Madurai, Coimbatore and the Special grade
municipalities continued to be governed by the original system of taxation B
i.e. 'admission system' the theatres situated in all other local areas of the
y
State were governed by the composition system.
In 1989 the Act was further amended and Sub-section (1) of Section
S(A) of the Act was substituted. By this amendment, the percentage of
,...-- ......,,
entertainment tax vis-a-vis the rates of admission in force in corporation c
and special grade municipality areas was reduced from 53% to 40%. At the
same time all the theatres situated within the radius of five kilometers
,..._
from the peripheral limits of such areas (belt) which were hitherto
governed by the composition system were brought over to the admission
system. However, the temporary and open air theatres even though located D
in the belt of five kilometers were excluded from this switch-over.
The appellants challenged the validity of section S(A)(l) by filing
various writ petitions which were dismissed by a Division Bench of the
Madras High Court.
E
. --<
In appeals to this Court, it was contended on behalf of the appellant1'
(1) that the Amendment Act is arbitrary and violative of Article 14 inasmuch as (a) it classifies theatres situated in a local area into two categories
subjecting one such category to a hostile treatment; (b) it equates the
theatres situated in village panchayats and village townships and other F
lesser grade municipalities with the theatres in corporation areas and
~
special grade municipalities area and that such a classification has no
relation to the object of the enactment; (2) exemption of temporary and
_;.
open theatres from the 'admission system' of taxation is discriminatory;
(3) the impugned provisions are confiscatory in nature and they constitute
G
an unreasonable restriction upon the petitioners' fundamental right to
trade guaranteed by Article 19(1)(g); (4) The petitioners had come to
entertain a legitimate expectation, based on legislative practice, that they
would not be brought over to 'admission system' of taxation.
r
Dismissing the appeals, this Court,
H
A
B
c
166
SUPREME COURT REPORTS
(1992) 2 S.C.R.
HELD: 1. The Tamil Nadu Legislature is competent to declare that
the theatres situated within the five kilometer radius(belt) of the municipal .
corporation areas and the areas of special grade municipalities shall be
subjected to the same method of taxation as the theatres situated within
the said areas. The Act no doubt adopts the local areas declared under the
Tamil Nadu Municipal Corporation Act, Tamil Nadu Municipalities Act
and Tamil Nadu Gram Panchayats Act as the basis for prescribing the
rate of taxation. But it must be remembered that it was not obligatory upon
the legislature to do so. It could have adopted any other basis. It is only
for the sake of convenience that the existing local areas - convenient
existing units of references - were adopted. it is not a question of power
but one of convenience. [177C-D]
1.1 The theatres situated within the belt are proximate to the corporation and special grade municipality areas and thus enjoy a certain
--(
advantage which the theatres beyond the belt do not. They draw custom
D from within the corporation areas by virtue of their proximity. The corporation areas have a larger percentage of amuent persons than other
areas, who have more money at their disposal. They spend more on
entertainment. The municipal boundary has no significance for them. If
there is a good picture in a theatre situated beyond the municipal corporation limits they would go and see it. [177H, 178A-B)
E
1.~ The classification or the distinction made between theatres
situated within the belt and the theatres outside the belt is not an unreasonable one. The material placed before the Court shows that theatres
.situated within the belt are substantially in the same position as those
F
within the corporation or special grade municipality areas, if not better.
The theatres within the belt are akin to and comparable to the theatres
situated within the areas of corporations and Special Grade
Municipalities. Further it is not disputed that the admission system
fetches more revenue to the State. It is precisely for this reason that the
said system is continued in the major cities. It cannot be said that the
G classification has no nexus to the object. [178H, 179A-C)
2.
The argument that if the theatres situated within a gram
panchayat or a lesser grade municipality are to be equated with the
theatres within tile corporation and other areas they should also be
H allowed to charge the rates of admission prevalent in corporation areas .,
. ,...
SRINIV ASA THEATRE v. GOVERNMENT
167
cannot be accepted. Firstly, rates of admission do not merely depend upon A
the category of local areas but also upon the amenities provided in the
theatres. Secondly, the very system of levy in both areas is different. Under
section 4 i.e., ~dmission system the rate of tax was 53% of the admission
charge, which .is now brought down to 40% by the impugned Amendment
Act on the actual number of tickets sold whereas in respect of theatres
governed by composition system, the rate of levy is upon the gross collec·
tion capacity irrespective of the actual number of tickets sold for a show
or over a week. Thirdly, the rates of admission are prescribed under a
different enactment. [179F-H, 180A]
B
Moreover, the petitioners are not suffering any real prejudice. C
Whichever the system of taxation, the amount collected by way of enter·
tainment tax is to be made over to the State. Even under the composition
system, the formula evolved is supposed to represent the amount really
collected by way of entertainment tax. It may be that in a given case or
probably in many cases • the exhibitors may be saving a part of the amount D
collected by way of entertainment tax by paying only the compounded
amount. But it may not necessarily be so. There may be theatres where the
formula may work to their prejudice because of their low occupancy rate.
In any event, the mere fact that an exhibitor is able to save a part of the
tax by paying the compounded amount cannot be treated as a benefit in
law which he is deprived of by following the admission system. [180B-D]
E
3. Open-air theatres and temporary theatres stand on a different footing from permanent theatres. They suffer from several disadvantages which
t~ others do not. They are a class apart. If the impugned provision has
treated them as a separate class, no objection can be taken thereto. [181B]
4. The theory of legitimate expectation based upon legislative practice cannot be brought in to defeat or invalidate a legislation. It may at the
most be used against an administrative action, and even there it may not
F
be an indefeasible right. No case has been brought to the notice of the
Court where a legislation has been invalidated on the basis that it offends G
the legitimate expectation of the persons affected thereby. [181C-FJ
Council of Civil Service Unions and Ors. v. Minister for the Civil
Service, (1985) A.C. 374, referred to.
5. The impugned change-over to the 'admission system' does not H
168
SUPREME COURT REPORTS
[1992] 2 S.C.R.
A
amount to unreasonable restriction upon the petifloners' fundamental
right to trade. [182A]
B
c
6. Article 14 of the Constitution enjoins upon the State not to deny
any persons 'Equality before law' or 'the equal protection of laws' within
the territory of India. The two expressions do not mean the same thing
even if there may be much in common. Their meaning and content has to
be found and determined having regard to the context and scheme of our
Constitution. The word "law" in the former expression is used in a generic
sense • a philosophical sense • whereas the word "laws" in the latter
expression denotes specific laws in force. [173C-E]
7. Equality before law is a dynamic concept having many facets. One
facet • the most commonly acknowledged . • is that there shall be no
privileged person or class and that none shall be above law. A facet which
is of immediate relevance herein is the obligation upon the State to bring
D about, through the machinery of law, a more equal society envisaged by
the preamble and part IV of our Constitution. For equality before law can
be predicated meaningfully only in an equal society i.e., in a society
contemplated .by Article 38 of the Constitution. [173F-G]
E
8. The instrument of taxation is not merely a means to raise revenue
in India; it is, and ought to be, a means to reduce inequalities. It is for this
reason that while ap!Jlyingthe doctrine of classifications ·developed mainly
with reference to and under the concept of "equal protection of laws" •
Parliament is allowed more freedom of choice in the matter of taxation
vis-a-vis other laws. If this be the situation in the case of direct taxes, it
F
should be more so in the case of indire~t taxes, since in the case of such taxes
the real incidence is upon some other than upon the person who actually
>-- -
ymakes it over to the State, though, it is true, he cannot avoid the liability on
)-
the ground that he has not passed it on. In the matter of taxation it is, thus,
j_
not a question of power but one of constraints of policy- the interest of
economy, of trade, profession and industry, the justness of the burden, its
G 'acceptability' and other similar considerations. But this does not mean that
taxation laws are immune from attack based upon Article 14. It is only that
parliament and legislatures are accorded a greater freedom and latitude in
choosing the persons upon whom and the situations and stages at which it
can levy tax. Under the Constitution, there is an added obligation upon the
H State to employ the power of taxation-nay, all its powers· to achieve the goal
SRINIVASA TIIEATRE v. GOVERNMENT [JEEVAN REDDY, J.) 169
_..J
adumbrated in Article 38. [174C-H, 175A]
A
Gorantia Butchayya Chowdary & Ors. v. The State of A.P. & Ors.,
A.I.R. 1958 A.P. 294; Moopil Nair v. State of Kera/a, ,[1961] 3 S.C.R. 77;
Spences Hotel Pvt. Ltd. v. State of West Bengal, (1991] 2 S.C.C. 154; S.K.
Datta, I. T.O. v. Lawrence Singh Ingty, (1968) 2 S.C.R. 165 and Elei Hotel
B
-
and Investments Ltd. v. Union of India, (1991) 2 S.C.C. 166, referred to •
....,,,.
East India Tobacco Co. v. State of A.P., (1963) 1 S.C.R. 404 and
Sanjeev Coke Mfg. Co. v. Bharat Coking Coal Ltd. & Anr., (1983) 1 S.C.R.
1000, cited.
-y
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2004 to c
2012 of 1992.
From the Judgment and order dated 8.10.90 of the Madra~ High
Court in W.P. Nos. 8710/89, 8734/89~ 8736/89, 8751/89, 8748/89, 8735/89,
8749/89, 8727/89 and 8737/89.
D
WITH
Civil Appeal Nos. 2013 to 2021/92, 2022 to 2024/92, 2025, 2026,
2027-2028 and 2029 of 1992.
A.K. Ganguli, K. Parasaran, B.R.L. Iyenger, Mrs. Nalini ChidamE
baram, A.V. Rangam, A.T.M. Sampath, Prubir Choudhary, M.N. Krishnaman~ K.P. Sunder Rao and G. Srinivasan for the Appellants.
R. Mohan and V. Krishnamoorthy for the Respondents.
The following Judgment of the Court was delivered by
F
..,,
B.P. JEEVAN REDDY, J. Heard learned counsel for the petitioners
.-Aand the respondents .
Leave granted.
G
These appeals are preferred by the writ petitioners in a batch of writ
petititons which were dismissed by a Division Bench of the Madras High
'\
Court by its common judgment and order dated 8th October, 1990. Questions arising in· these appeals are common. So are the relevant facts. For
the sake of convenience, we shall take the facts in Civil Appeal No. 2008 H
170
SUPREME COURT REPORTS
(1992] 2 S.C.R.
A
of 1992 arising from writ petition No. 8748 of 1989 (filed by Raja Theatre,
represented by it licencee-Parasuram Petty, village, Madurai).
B
Tamil Nadu Entertainment Tax Act, 1939 provides for levy of entertainment tax on admission to cinema theatres, among others. The rates of
admission to cinema theatres in the States of Tamil Nadu are prescribed
under the Tamil Nadu Cinema (Regulation) Act and the rules made
thereunder. Different rates of admission are prescribed depending upon
the locality in which the theatre is situated and the amenities provided
therein. Entertainment Tax is prescribed at a particular percentage of the
rate of admission, which percentage again differs from locality to locality.
C Entertainment Tax, thus, constitutes a component of the total amount
charged for admission to a cinema theatre.
Until the year 1978, entertainment tax was collected on the actual
number of tickets sold. The owners/exhibitors of cinema theatres were
D required to make over the actual amount of entertainment tax collected by
them for each show to the Government. With a view to simplify the
collection of tax, Section 5(A) and 5(B) were introduced by the 1978
Amendment Act. These Sections, introduced a new and substitute method
of collection of entertainment tax based upon the gross collection capacity
of a cineme theatre. A formula was devised to determine the tax payable
E per show or per week, as the case may be. Gross collection capacity meant
the total amount that would be collected by a cinema theatre if all the seats
therein are filled. But inasmuch as no cinema theatre can expect to have
its full capacity filled for each show on each day of the month, a reasonable
figure was adopted and the tax payable per show determined. If the
F
exhibitor opted to pay the tax every week, he was entitled to exhibit any
.number of .shows in the week not exceeding 28 shows. This.system, which
may be called 'composition system', for the sake of convenience, dispensed
with the requirement of verification of the number of tickets sold for each
show in each cinema theatre. It appears to be convenient to theatre-owners
G as well since they are relieved of the botheration of submitting returns and
establishing their correctness. However, this method was not made ap-
. plicable to the entire State. The theatres situated within the Municipal
Corporations of Madras, Madurai, Coimbatore and the special grade
municipalities continued to be governed by the original system of taxation,
which may for the sake of convenience be called 'admission system'.
H Theatres situated in all other local areas of the States are governed by the
--y
SRINIVASA THEATRE v. GOVERNMENT [JEEVAN REDDY, J.] 171
composition system.
In 1989, the Act was further amended by Tamil Nadu Act 40 of 1989,
the Act impugned herein. By virtue of this Act, the percentage of entertainment tax vis-a-vis the rates of admission in force in corporation and
special grade municipality areas was brought down from 53% to 40%. At
A
the same time, all the theatres situated within the radius of five kilometers B
from the peripheral limits of such areas were brought within the purview
of the admission system. In other words, the theatres situated within the
five kilometer 'belt' abutting the said areas, which were hitherto governed
by the composition system were brought over to the admission system. The
several theatres concerned in this batch of appeals are all situated within C
one or the other such 'belt'. The theatre concerned in writ petition No.8748
to 1989 is situated in village Parasuram Petty and was governed by composition system but since it falls within the five kilometer belt abutting
Madurai Corporation area, it is brought over to admission system. This
change is brought about by substitution of Sub-Section (1) of Section 5(A),
and in particular, by virtue of the two provisos appended to Sub-section D
5(A) (i). However, the temporary (tourist) and open air theatres even
though located in the belt are excluded from this switch-over.
Petitioner-appellants impugned the validity of Section 5(A)(i) on
several grounds all of which have been negatived by the High Court.
E
S/Sri B.R.L. Iyengar, K. Parasarn and Sampath urged the following
contentions before us:
1. The Act classifies the theaters in the State with reference to their
location i.e., with reference to the local areaa wherein they are situated.
The theatres situated within the municipal corporaton limits are subjected
to a higher rate of tax than the theatres situated in the selection grade
municipalities. Similarly, the theartres situated within the area of selection
grade municipalities are subjected to a higher rate of tax than the theatres
situated in the first grade municipalities and so on. This classification is an
eminently reasonable one. Even the rates of admission prescribed under
Tamil Nadu Cinema {Regulation) Act and rules recognize this distinction.
F
By virture of the impugned amendment, however, several theatres situated
within panchayat towns, village panchayats and other lesser grade
municipalities, which theatres were hitherto enjoying the benefit of composition system are suddenly deprived of the said beneficial system and H
172
SUPREME COURT REPORTS
[1992) 2 S.C.R.
A placed on par with the theatres situated in corporation areas and special
grades municipalities for no other reason than that they happen to fall
within the five, kilometer radius of such areas. The result is that in a
village/municipality abutting a municipal corporation area, while some
theatres are governed by the composition systems, the other theatres
B
c
D
(which happen to fall within the 'belt') are governed by a different systems,
namely admission system. This invidious distinction, amounting to hostile
discrimination, has been brought about for no valid reason. Having
adopted the gradation of the local area as the basis for method of taxation,
rate of tax and all other purposes, there is no justification to treat some of
the theatres situated in some of these areas differently. Indeed, the very
creation and concept of 'belt' is impermissible.
2. The Amendment Act is arbitrary, unreasonable and violative of
Article 14 inasmuch as (a) it classifies theatres situted in a local area into
two categories subjecting one such situated in a category to a hostile
treatment;
(b) it equates the theatres situated in village panchayats and village
town-ships and other lesser grade municipalities with the theatres in corporation areas and special grade municipalities areas; in short, it seeks to
treat unequals equally, which itself is a negation of the guarantee of equal
E protection of laws.
F
There is absolutely no basis for the above two war classification nor
such classification has any relation to the object of the enactment. The
respondents failed to place before the court any material justifying such
classification and discrimination.
3. The unreasonableness of the impugned provision is evident from
the fact that the appellant-theatres continue to be governed by the rates of
-.
.admission prescribed for their respective local areas. For example, the
l
theatre concerned in writ petition No. 8748 of 1989 is governed by and
G permitted to charge rates of admission prescribed for a panchayat-which
are much lower than the rates of admission prescribed for similar theatres
situated in Madurai corporation area-while in the matter of method of
taxation it is equated with the theatres in the said corporation area. This
is a dear case of hostile discrimination.
H
4. The petitioners had come to entertain a legitimate expectati?n,
--
y
SRINIVASA THEATRE v. GOVERNMENT [JEEVAN REDDY, J.] 173
based on legislative practice, that they would not be treated on par with A
the theatres situated in municipal corporation and special grade
municipality areas and had adjusted their affairs accordingly. The sudden
change brought about by the impugned Act has dealt a severe blow to them
and has put their vary continued existence in peril.
5. The impugned provisions are confiscatory in nature. They conB
stitute an unreasonable restriction upon the fundamental right to trade
guaranteed to them by Article 19(1)(g) of the Constitution of India.
Article 14 of the Constitituion enjoin upon the State not to deny to
any person 'Equality before law' or 'the equal protection of laws' within C
the territory of India. The two expressions do not mean the same thing
even if there may be much.in common. Section 1 of the XIV Amendment
to the U.S. Constitution uses only the latter expression whereas the Irish
Constitution (1937) and the West German Constitution (1949) use the
expression "equal before law" alone. Both these expressions are used
together in the Universal Decl_aration of Human Rights, 1948, Article 7 D
whereof says "All are equal before the law and are entitled without any
discrimination to equal protection of the law." While ascertaining the
meaning and content of these expression, however, we need not be constrained by the interpretation placed upon them in those countries though
their relevance is undoubtedly great. It has to be found and determined E
having regard to the context and scheme of our €onstitution. It appears to
us that the word "law" in the former expression is used in a generic sense-a
philosophical sense-whereas the word "law'' in the latter expression denotes
specific laws in force.
Equality before law is a dynamic concept having many facets. One F
facet-the most commonly acknowledged-is that there shall be no previleged
person or class and that none shall be above law. A facet which is of
immediate relevance herein is the obligation upon the State to bring about,
through the machinery of law, a more equal society envisaged by the
preamble and part IV of our Constitution. For equality before law can be G
predicated meaningfully only in an equal society i.e., in a society contemplated by Article 38 of the Constitution, which reads:
"38. State to secure a social order for the promotion of welfare
of the people. (1) The state shall strive to promote the welfare
of the people by securing and protecting as effectively as it may H
A
B
c
174.
SUPREME COURT REPORTS
[1992] 2 S.C.R.
a social, economic and political, shall inform all the institutions
of the national life.
r
-
(2) The State shall, in particular, strive to minimise the inequalities in income, and endeavour to eliminate inequalities, in
status, facilities and opportunities, not only amongst individuals
but also amongst groups of people residing in different areas
or engaged in different vocations."
The instrument of taxation is not merely a means to raise revenue
in India; it is, and ought to be, a means to reduce inequalities. You don't
tax a poor man. You tax the rich and the richer one gets, proportionately
greater burden he has to bear. Indeed, a few years ago, the Income Tax
Act taxed 94p out of every rupee earned by an individual over and above
Rupees one Lakh. The Estate Duty Act, no doubt since repealed, Wealth
Tax Act and Gift Tax Act are all measures in the same direction. It is for
D the reason that while applying the doctrine of classification-developed
mainly with reference to and under the concept of "equal protection of
laws"-Parliament is allowed more freedom of choice in the matter of
taxation Vis-a-vis other laws. If this be the situation in the case of direct
taxes, it should be more so in the case of indirect taxes, since in the case
E
F
of such taxes the real incidence is upon some other than upon the pe~son
who actually makes it over to the State, though, i~ is true, he cannot avoid
the liability on the ground that he has not passed it on. In the matter of
taxation it is, thus, not a question of power but one of constraints of
policy-the interests of economy, of trade, profession and industry, the
justness of the burden, its 'acceptability' and other similar considerations.
We do not mean to say that taxation laws are immune from attack based
upon Article 14. It is only that parliament and legislatures are accorded a
greater freedom and latitude in choosing the persons upon whom and the
situations and stages at which it can levy tax. We are not unware that this
greater latitude has been recogtiised in VSA and UK even without resorting to the concepts of 'equality before law' or "the equal protection of
G laws" -as something that is inherent in the very power of taxation and it has
been accepted in this country as well. (See in this connection the decision
of Subba Rao, CJ., (as he then was) in Gorantia Butchayya Chowdary &
Ors. v. The State of A.P. & Ors., 1958 A.P. 294, wh~re the several US and
English decisions have been carefully analysed and explained). In the
H context of our Constitution, however, there is an added obligation upon the
SRINIVASA THEATRE v. GOVERNMENT [JEEVAN REDDY, J.] 175
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State to employ the power of taxation-nay, all its powers-to achieve the goal A
adumbrated in Article 38.
The decisions of this court on the above aspect are legion, starting
from Moopil Nair v. State of Kera/a, [1961) 3 SCR 77. One of the latest
decisions is in Spences Hotel Pvt. Ltd. v. State of West Bengal, [1991] 2
S.C.C. 154 wherein almost all the earlier decisions of this court on this B
aspect have been referred to and discussed. To bring out the principle, it
would be sufficient if we refer to two of them namely S.K Datta, l.T.O. v.
Lawrence Singh Ingty, [1968] 2 S.C.R. 165 and Elel Hotel and Investments
Ltd. v. Union of India, [1991] 2 S.C.C. 166. In the former case, this court
observed: -
C
"It is not in dispute that taxation laws must also pass the test
of Art. 14. '.fhat has been laid down by this Court in Moopil
Nair v. State of Kera/a, [1961] 3 S.C.R. 77. But·as observed by
this Court in East India Tobacco Co. v. State of Andhra
Pradesh, [1963] 1 S.C.R. 4040, in deciding whether a taxation D
law is discriminatory or not it is necessary to bear in mind that
the State has a wide discretion in selecting persons or objects
it will tax, and that a statute is not open to attack on the ground
that it taxes some persons or objects and not others; it is only
when within the range of its selection, the law operates unequally, and that cannot be justified on the basis of any valid
classification, that it would be violative of Article 14. It is well
settled that a State does not have to tax everything in order to
tax something. It is allowed to pick and choose districts, objects,
persons, methods and even rates for taxation if it does so
reasonably."
Similarly, it was observed in the other case by one of us
(V enkatachaliah, J.) :
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"It is now well settled that a very wide latitude is available to
the legislature in the matter of
1classification of objects, persons G
and things for purposes of taxation. It must need to be so,
having regard to the complexities involved in the formulation
of a taxation policy. Taxation is not now a mere source of raising
money to defray expenses of government. It is a recognised fiscal
tool to achieve fiscal and social objectives. The differentia of H
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G
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176
SUPREME COURT REPORTS
[1992) 2 S.C.R.
classification presupposes and proceeds on the premise that it
distinguishes and keeps apart as a distinct class hotels with
higher economic class hotels with higher economic status
reflected in one of the indicia of such economic superiority.
The presumption of constitutionality has not been dislodged by
the petitioners by demonstrating how even hotels, not brought
into the class, have also equal or higher chargeable receipts
and how the assumption of economic superiority of hotels to
which the Act is applied is erroneous or irrelevant."
We shall now proceed to examine the contentions before us in the
light of the above principles, but before we do that we think it appropriate
to remind ourselves of the following dictum :
" ... in the ultimate analysis, we are not really to concern ourselves with the hollowness or the self-condemnatory nature of
the statements made in the affidavits filed by the respondents
to justify and sustain the legislation. The deponents of the
affidavits filed into Court may speak for the parties on whose
behalf they swear to the statement. They do not speak for the
Parliament. No one may speak for the Parliament and Parliament is neverbefore the Court. After Parliament has said what
is intends to say, only the Court may say what the Parliament
meant to say. None else. Once a statute leaves Parliament
House, the Court's is the only authentic voice which may echo
(interpret) the Parliament. This the Court will do with reference to the language of the statute and other permissible aids.
The executive Government may place before the court their
understanding of what Parliament has said or intended to say
or what they think was Parliament's object and all the facts and
circumstances which in their view led to the legislation. When
they do so, they do not speak for Parliament. No Act of
Parliament may be s~ruck down because of the understanding
or misunderstanding of Parliamentary intention by the executive government or because their (the Government's) spokemen
do not bring out relevant circumstances but indulge in empty
and self-defeating affidavits. They do not and they cannot bind
Parliament. Validity-of Legislation is not to be judged merely
by affidavits filed on behalf of the State, but by all the relevant
1
SRINNASA THEATRE v. GOVERNMENT [JEEVAN REDDY, J.] 177
~
circumstances which the court may ultimately find and more A
especially by what may be gathered from what the legislature
has itself said. We have mentioned the facts as found by us and
we do not think that there has been any infringement of the
right guaranteed by Article 14." (SOnjeev Coke Manufacturing
...,,
Company v. Bharat Cooking Coal Ltd. & Anr., [1983) 1 S.C.R. B
1000 at 1029).
We shall first examine whether it was not competent for the Tamil
Nadu Legislature to declare that the theatres situated within the fiv!!
'Y kilometer radius (belt) of the municipal corporation areas and the areas of
special grade municipalities shall be subjected to the same method of c
taxation as the theatres situated within the said area ? It is true that the
r
Act adopts the local areas declared under the Tamil Nadu Municipal
Corporation Act, Tamil Nadu Municipalities Act and Tamil Nadu Gram
Panchayats Act as the basis for prescribing the rate of taxation. But it must
be remembered that it was not obligatory upon the legislature to do so. It D
could have adopted any other basis. It is only for the sake of convenience
that the existing local areas, convenient existing units of reference, were
adopted. It is not a question of power but one of the convenience. There
was nothing precluding the legislature to have declared in the very first
instance (i.e. at the· time of 1978 Amendment Act) that the admission
~ system was to continue in force now only in the corporation areas but also E
in five kilometer radius (belt) abutting each of those areas. The only
question then would have been, as not it is, whether such a course brings
about an unreasonable classification or whether it amounts to treating
unequals on a uniform basis.
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It is urged for the appellants that as a result of creation of such belts,
.....
theatres situated in a given local areas, be it a 'gram panchayat or a lesser
grade municipality, are getting categorised into two classes-those which
happen to fall within the belt and those outside. The former are obliged to
follow the admission system whereas the latter continue to enjoy the facility G
of composition system. This is undoubtedly true as a fact but the question
is whether such a classification, brought about by the impugned provisions
Y
of the Act, is unreasonable and un-related to the object underlying the
enactment? It cannot be denied that the theatres situated within the belt
are proximate to the corporation and special gracle municipality areas anct
thus enjoy a certain aavantage which the theatres beyond the belt do not. H
178
SUPREME COURT REPORTS
[1992] 2 S.C.R.
A
They draw custom from within the corporation areas by virtue of their
proximity. The corporation areas have a larger percentage of affluent
persons than other areas, who have more money at their disposal. They
spend more on entertainment. The municipal boundary has no significance
from them. If there is a good picture in a theatre situated beyond the
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municipal corporation limits they would go and see it. This is not a mere
surmise. The respondents have given a concrete instance which is also
referred to in the judgment of the High Court. A sketch drawn in respect
of Erode town alongwith the daily collection particulars of a theatre,
Bharati theatre, situated in the belt abutting the said town was placed
before the High Court. On a consideration of the same, the High Court
has observed:
"The sketch produced by the respondents shows the mushroom
growth of theatres just outside the limits of the Erode Special
Grade Municipality which lie within the five kilometer belt. The
daily collection of Bharati theatre which is in the five kilometer
belt shows that the theatres within the Special Grade
Municipality are mostly showing old pictures whereas Bharati
theatre was exhibiting a comparatively new picture .. We are,
therefore, satisfied that the theatres in the five kilometre belt
can by no stretch of imagination be said to be not on par with
the theatres in the respective corporation of the Special Grade
Municipalities."
It is further stated in the counter-affidavit that the distributors are
preferring. the theatres in the periphery of corporation and Special Grade
Municipality areas for exhibiting first run pictures over the theatres within
those areas. It is also averred that in the interior areas of such abutting
panchayats, (i,e., outside the five kilometer radius) the theatres exhibit only
second run pictures and there is ·definitely less population in and around
such theatres. In those areas, it is stated, there is practically no floating
G population, whereas in the theatres within the five kilometer belt, mostly
first run pictures are exhibited and there is considerable floating population. It is also submitted by the respondents that a number of housing
colonies have sprung up just outside the corporation limits and the limits
of Special Grade Municipalities, the inhabitants whereof patronise theatres
i
within the belt. All this shows that the classification or the distinction made
H between theatres situated within the belt and the theatres outside the belt
SRINIVASA THEATRE v. GOVERNMENT (JEEVAN REDDY, J.] 179
is not an unreasonable one. It also establishes that the theatres within the A
belt are akin to and comparable to the theatres situated within the areas
of corporation and Special Grade Municipalities. It is not disputed that the
admission system fetches more revenue to the State. It is precisely for this
reason that the said system is continued in the major cities. It cannot be
said that the classification has no nexus to the object.
It is then argued that the theatres situated within a village panchayat
or a lesser Grade Municipality cannot be equated with the theatres situated
within the corporation areas or for that matter those situated within the
areas of Special Grade Municipalities merely by virtue of the fact that they
abut the latter areas. The material referred to above does, however, establish that the theatres situated within the belt are substantially in the same
position as those within the corporation/special grade municipality areas,
if not better. We may also mention that the concept of belt is not a novel
one. In adjoining Andhra Pradesh, this concept has been in force since
quite a few years earlier to its introduction in Tamil Nadu.
It is then argued that while equating the theatres situated within the
belt with the theatres situated within the corporation areas, the rates of
admission for the theatres in the belt are retained at the original level. (As
stated hereinabove, rates of admission are prescribed under the Tamil
Nadu Cinema (Regulation) Act and the rules and orders made thereunder.
Different rates of admission are prescribed for theatres situated in different
categories of local areas and also having regard to the amenities provided
therein). The petitioners grievance is that theatres situated within a gram
panchayat or a lesser grade municipality, as the case may be, are permitted
only the rates of admissible for that local areas, and that even after they
are equated with the theatres within the corporation areas, they are still
not· allowed to charge the higher rates of admission in force in such areas.
The argument is that if they are to be equated with the theatres within the
corporation and other areas they should also be allowed to charge the rates
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of admission prevalent in corporation areas. We are tiot impressed, Firstly, G
rates of admission do not merely de~end upon the category of local are a
but also upon the amenities provided in the theatre. Secondly, the very
system of levy in both areas is different. Under section 4(i.e., admission
system) the rate. of tax was 53% of the admission charge, which is now
brought down to 40% by the impugned Amendment Act on the actual
number of tickets sold whereas in respect of theatres governed by composi- H
180
SUPREME COURT REPORTS
(1992] 2 S.C.R.
tion system, the rate of lery-whether it is 27% or any other percentage is
).- -
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upon the gross collection capacity irrespective of the actual number of
tickets sold for a show or over a week. Thirdly, the rates of admission are
prescribed under a different enactment. If the petitioners are so advised
they can always apply to the appropriate authority for revision of rates of
B
admission. It is not submitted by the petitioners that any of them has
-,·
applied and have been refused.