1988 (4) TMI 414 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 5 of the Andhra Pradesh Entertainments Tax Act, 1939 regarding the meaning of "contiguous area of 6 kms" and the appropriate tax rate for theatres located within different municipalities.

Analysis:
The judgment delivered by the Andhra Pradesh High Court, in the case involving two writ petitions, focused on the interpretation and application of section 5 of the Andhra Pradesh Entertainments Tax Act, 1939. Under section 4 of the Act, entertainment tax is levied on the gross collection of shows held in specified theatres within designated local areas. Section 5 provides theatre owners with the option to pay tax in lieu of the tax payable under section 4, with the tax amount specified in a corresponding table. The key issue in this case revolved around the meaning of the term "contiguous area of 6 kms" as mentioned in the table to section 5.

The authorities sought to collect tax from the petitioners at a higher rate applicable to theatres within selection grade municipalities and the contiguous area of 6 kms, despite the petitioners' theatres being situated within a third grade municipality called Kovvur. The contention of the petitioners was that their theatres should be charged under the entry for third grade municipalities (entry f) rather than the entry for selection grade municipalities (entry b) due to the variance in tax rates. The crux of the matter was determining the appropriate tax rate based on the location of the theatres and the interpretation of the term "contiguous area of 6 kms".

The High Court analyzed the conflicting interpretations arising from the literal reading of the statutory provisions. It emphasized the need for reconciliation between the entries to avoid confusion and conflicting purposes. The Court reasoned that the term "contiguous area" should not refer to an area under the jurisdiction of another local body but should be interpreted as part of the municipality where the theatre is situated. Referring to section 13 of the Act, which mandates payment to the local authority within whose jurisdiction the theatre is located, the Court highlighted the impracticality of collecting tax for one municipality and paying it to another unrelated municipality.

Based on these considerations, the Court concluded that the theatres located within Kovvur municipality should not be subjected to the higher tax rate applicable to selection grade municipalities but should instead pay tax under the entry for Kovvur municipality. Therefore, the writ petitions were allowed, and the petitioners were relieved from the obligation to pay tax under the entry for selection grade municipalities. The judgment highlighted the importance of interpreting statutory provisions in a manner that aligns with the legislative intent and avoids conflicting or impractical outcomes.