1992 (8) TMI 243 - SC - VAT and Sales Tax

Imposition of theatre tax by the Nagar Mahapalika, Lucknow challenged by the cinema owners/lessees in these petitions under article 32 of the Constitution of India. Held that - Appeal dismissed. The theatre tax is levied as a tax on amusement and entertainment. The amusement in a building is affected by all those factors which are taken into consideration while fixing the annual rental value of the building. Higher rental value in relation to a cinema house shows that it has better accommodation, better situation and better facilities for amusement and entertainment. The higher annual value is indicative of a better quality cinema house as compared to a cinema house which has a lesser annual rental value. We are, therefore, of the view that there is nothing unreasonable or improper in classifying the cinema houses on the basis of annual rental value. The learned counsel for the petitioners has not raised any other point before us.

Summary

Issues:
Challenge to imposition of "theatre tax" by Nagar Mahapalika, Lucknow under article 32 of the Constitution of India.
Constitutionality of section 172(2) of the U.P. Nagar Mahapalika Adhiniyam, 1959.
Classification of cinemas based on annual rental value for fixing tax rate under article 14 of the Constitution of India.

Analysis:

1. Challenge to Imposition of "Theatre Tax":
The cinema owners challenged the imposition of "theatre tax" by the Nagar Mahapalika, Lucknow, under article 32 of the Constitution of India. The petitioners argued that the tax was unconstitutional due to the abdication of essential legislative powers by the Legislature to the Mahapalikas. However, the Court held that the Mahapalikas can impose taxes mentioned in section 172(2) of the Act only for the purposes laid down in the Act. The tax must have a reasonable relation to the Act's purposes, and the Mahapalikas are required to provide special civic amenities at cinema/theatre locations. The Court cited precedents to support its decision, emphasizing that the tax is levied in accordance with statutory rules framed by the State Government.

2. Constitutionality of Section 172(2) of the Act:
The contention regarding the constitutionality of section 172(2) of the Act was based on the argument that the Legislature had delegated unguided and uncanalized powers to the Mahapalikas. The Court rejected this argument, highlighting that the taxes can only be levied for implementing the Act's purposes. The Mahapalikas are bound by the Act's provisions and are required to follow the procedure laid down in the legislation. The Court emphasized that the tax imposition process involves public consultation, objections consideration, and finalization by the State Government, ensuring a structured and lawful approach.

3. Classification of Cinemas for Tax Rate Fixation:
The petitioners also challenged the classification of cinemas based on annual rental value for fixing the tax rate, alleging arbitrariness and violation of article 14 of the Constitution of India. The Court disagreed with this contention, drawing parallels to previous judgments where differential tax rates based on factors like seating capacity and location were deemed reasonable. The Court explained that the annual rental value reflects various factors related to the cinema's quality, location, and facilities for amusement, justifying the differential tax rates. The classification based on rental value was deemed reasonable and not violative of article 14.

In conclusion, the Supreme Court dismissed the writ petitions challenging the theatre tax imposition, upholding the constitutionality of section 172(2) of the Act and the classification of cinemas based on annual rental value for tax rate fixation. The Court ordered the petitioners to pay costs and provided detailed reasoning based on legal precedents and constitutional principles to support its decision.