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PETITIONER: DARSHAN LAL MEHRA AND 23 OTHERS

       Vs.

RESPONDENT: UNION OF INDIA AND OTHERS

DATE OF JUDGMENT04/08/1992

BENCH: KULDIP SINGH (J) BENCH: KULDIP SINGH (J) RAMASWAMY, K.

CITATION:  1992 AIR 1848            1992 SCR  (3) 704  1992 SCC  (4)  28        JT 1992 (4)   417  1992 SCALE  (2)113

ACT:      U.P.  Nagar  Mahapalika Adhiniyam,  1959-Sections  172, 2(77)-Theatre tax under Lucknow Nagar Mahapalika Theatre Tax Rules, 1965-Fixing rate of tax on the basis of annual rental value of cinemas-Whether  arbitrary or violative of  Article 14 of the Constitution of India, 1950.

HEADNOTE:      The  proposal of the Nagar Mahapalika, Lucknow to  levy theatre  tax,  @ Rs. 5 per cinema show held  in  a  building assessed on annual rental value of Rs. 10,000 or more and  @ Rs. 3 per cinema show held in a building assessed on  annual rental  value  of less than Rs. 10,000 was accepted  by  the State Government by following the procedure laid-down  under the U.P. Nagar Mahapalika Adhiniyam, 1959.      The  Lucknow Nagar Mahapalika Theatre Tax  Rules,  1965 were framed and enforced with effect from December 15,  1965 and the theatre tax was levied with effect from June 1,1967.      The  rate  of tax was increased from time to  time  and finally by a notification dated October 30, 1979 the theatre tax  was enhanced to Rs.25 per show on all  class-I  cinemas with annual rental value more than Rs. 10,000 and Rs. 20 per show on all class II cinemas with annual rental value of Rs. 10,000 or less.      The theatre tax imposed by Nagar Mahapalika,  Allahabad was  challenged before the High Court under Article  226  of the Constitution of India.  A Single Judge of the High Court dismissed the writ petition.  Appeal against the judgment of the  Single Judge was dismissed by a Division  Bench,  which was  reported as Niranjan Lal Bhargava Trust,  Allahabad  v. State of U.P. & others, (1972) All. L.J. 279.      Petitioner  No.6 challenged the initial  imposition  of theatre  tax  by filing a civil suit in the court  of  Civil Judge,  which  was dismissed.  A Single  Judge of  the  High Court, following the judgment in Niranjan Lal Bhargava                                                        705 Trust case, dismissed the second appeal filed by him.      About 20 days after the dismissal of the regular second appeal  by  the High Court, the petitioners  filed  a  Write Petition  No.3512/76  in  the  High  Court  challenging  the imposition  of  theatre  tax.  The said  petition  is  still

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pending before the High Court.      The  petitioners - the cinema owners/lessees  in  these Writ petitions under Article 32 of the Constitution of India challenged the imposition of theatre tax by the  Respondent- Nagar Mahapalika, Lucknow, contending that Section 172(2) of the   Act  was  unconstitutional  because  the   legislature abdicate   its   function  by   delegating   the   essential legislative  powers upon  the Nagar palikas to levy  all  or any  of  the  taxes  enumerated in  the  Section;  that  the classification  of  cinemas on the basis  of  annual  rental value  for  the  purpose  of fixing  the  rate  of  tax  was arbitrary  and  as such was violative of Article 14  of  the Constitution  of India; and that the classification  had  no nexus with the objects sought to be achieved.      Dismissing   the   writ   petitions   of   the   cinema owners/lessesse, this Court,      HELD : 1.01. The taxes under Section 172(2) of the U.P. Nagar  Mahapalika  Adhiniyam,  1959 can  be  levied  by  the Mahapalikas only for implementing those purposes and for  no other  purpose.   The Mahapalikas have  to  provide  special civic  amenities  at the places where  cinemas/theatres  are situated.   So long as the tax has a reasonable relation  to the  purposes  of  the Act the same cannot  be  held  to  be arbitrary.  The rate of tax to be levied and the persons  or the class of persons liable to pay the same is determined by inviting  objections,  which  are  finally  considered   and decided by the State Government. [709 F-H]      1.02.  The  tax  is  levied  in  accordance  with   the statutory rules framed by the State Government and the  said rules  are laid before each House of the  State  Legislature for  not  less  than  14  days  and  are  subject  to   such modifications as the legislature may make during the session they are so laid. [710A]      Gopal Narain v. State of Uttar Pradesh and Anr., [1964] 4  S.C.R.  869  and The Western India  Theatres  Limited  v. Municipal  Corporation of the City of Poona, [1959] Supp.  2 S.C.R. 71, followed.      1.03.  The annual rental value under the  Act  indicate the extent of the                                                        706 accommodation,  its  quality, the locality in  which  it  is situated and other factors which relate to the enjoyment  of the  building.  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.  There  is  nothing  unreasonable  or improper  in classifying the cinema houses on the  basis  of annual rental value. [710H-711B]      The  Western  Indian Theatres Ltd.  v.  The  Cantonment Board,  Poona  Cantonment,,  [1959]  Supp  (2)  S.C.  R.  63 followed.      Niranjan Lal Bhargave Trust, Allahabad v. State of U.P. and others, (1972) All L.J. 279, approved.

JUDGMENT:      ORIGINAL  JURISDICTION  :  Writ Petition  (Civil)  Nos. 2426-2449 of 1980.

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    (Under Article 32 of the Constitution of India).      M.S. Ganesh for the petitioners.      Darshan  Lal  Misra,  Ms.  A.  Subhashini,  Ms.  Shobha Dikshit and P.K. Pillai for the Respondents.      The Judgment of the  Court was delivered by      KULDIP SINGH. J. The imposition of "theatre tax" by the Nagar Mahapalika, Lucknow has been challenged by the  cinema owners/lessees  in these petitions under Article 32  of  the Constitution of India.      Section  172  and 2(77) of the  U.P.  Nagar  Mahapalika Adhiniyam 1959 (the Act) are reproduced hereunder :          Section 172 : Taxes to be imposed under this Act.          (1) For the purposes of this Act and subject to the          provisions  thereof  and  of  Article  285  of  the          Constitution of India, the Mahapalika shall  impose          the following taxes, namely :                                                        707          (a) property taxes,          (b) ...............          (c) ...............          (2)  In  addition to the taxes  specified  in  sub-          section (1), the Mahapalika may for the purposes of          this  Act  and subject to  the  provisions  thereof          impose any of the following taxes, namely          (a)  a tax on trades, callings and professions  and          holding of public or private appointments;          (b) ...............          (c) ...............          (d) ...............          (d) ...............          (e) ...............          (f) ...............          (g) ...............          (h) ...............          (i) a theatre tax; and          (j)  any other tax which the State Legislature  has          the power under the Constitution of India to impose          in the State.          (3)  The  mahapalika taxes shall  be  assessed  and          levied  in accordance with the provisions  of  this          Act and the Rules and bye-laws framed thereunder.          (4)  Nothing  in this section shall  authorise  the          imposition  of any tax which the State  Legislature          has  no  power  to impose in the  State  under  the          Constitution of India.          Section  2 : In this Act unless there be  something          requgnant to the subject or context-          (77)  "theatre  tax" means a tax  on  amusement  or          entertainments.                                                        708      Sub-Section (1) of Section 199 of the Act requires  the Nagar  Mahapalika to make a preliminary proposal  specifying the  tax which it desires to impose under section 172(2)  of the Act, the persons or class of persons to be made  liable, the amount or rate levyable for each such person or class of persons  and  any  other information  which  the  Government requires. It further requires the executive committee of the Nagar Mahapalika to draft the rules in the respect which are finally  to  be framed by the State  Government.  The  draft rules  are published in the prescribed manner to enable  the affected  public to file objections. Section 200 of the  Act makes  it obligatory for  the Nagar Mahapalika  to  consider the objections so received and to re-publish the draft rules in  case  any  change is made therein as a  result  of  such consideration.  After  considering all  the  objections  the

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draft  rules are finalised by the Nagar Mahapalika  and  are forwarded to the State Government along with the objections. Section  201  of the Act empowers the  State  Government  to reject,  modify  or  to accept  the  proposed  rules.  Under Section  202  of  the Act it is only  after  the  rules  are finalised by the State Government that the Nagar  Mahapalika can pass a special resolution imposing the tax from the date to be specified. Under section 203 the special resolution is sent  to  the  Government  and the tax  is  imposed  on  the publication  of  the resolution in the  Government  gazette. Section  540(4)   of the Act provides that  all  rules  made under the Act shall be laid for not less than 14 days before each House of the State Legislature as soon as they are made and   shall  be  subject  to  such  modifications   as   the legislature may make during the session they are to laid.      The  proposal of the Nagar Mahapalika, Lucknow to  levy theatre  tax,  @ Rs.5 per cinema show held  in  a   building assessed on annual rental value of Rs. 10,000 or more and  @ Rs. 3 per cinema show held in a building assessed of  annual rental  value of less than Rs. 10,000, was accepted  by  the State Government by following the procedure laid-down  under the  act.  The  rules called The  Lucknow  Nagar  Mahapalika Theatre Tax Rules were framed and enforced with effect  from December  15,  1965 and thereafter the tax was  levied  with effect from June 1, 1967. The rate of tax was increased from time to time and finally by a notification dated October 30, 1979 published in the U.P. Government Gazette dated  October 31, 1979 the theatre tax was enhanced to Rs. 25 per show  on all  class-I- Cinemas with annual rental value of more  than Rs. 10,000 and Rs. 20 per show on all class II cinemas  with annual rental value of Rs. 10,000 or less.                                                        709      At  this stage we may notice the fact that the  theatre tax imposed by Nagar Mahapalika Allahabad was challenged  by the cinema exhibitors before the Allahabad High Court by way of a writ petition under Article 226 of the Constitution  of India. The grounds of attack were substantially the same  as before  us in these petitions A learned Single Judge of  the High  Court dismissed the writ petition. Appeal against  the judgment  of  the learned Single Judge was  dismissed  by  a Division Bench consisting of R.S. Pathak and H. Swarup,  JJ. The  judgment  rendered by the Division Bench  of  the  High Court is reported as Niranjan Lal Bhargava Trust,  Allahabad v. State of U.P. & others, (1972) All L.J. 279.      Gulu Thadani, petitioner No.6 before us challenged  the initial imposition of theatre tax by filing a civil suit  in the  court of Civil Judge, Lucknow which was  dismissed.  He contested  the suit up to the High Court. A  learned  Single Judge of the High Court, following the judgment in  Niranjan Lal  Bhargava Trust case, dismissed the second appeal  filed by Gulu Thadani on November 27, 1976. On December 17,  1976, about  20  days after the dismissal of  the  regular  second appeal by the High Court, the petitioners before us filed  a writ  petition  No.3512/76  in  the  Allahabad  High   Court (Lucknow Bench) challenging the imposition of theatre tax on various  grounds. The said petition is still pending  before the High Court.      The  learned counsel for the petitioners has  contended that  Section 172(2) of the Act is unconstitutional  because the legislature has abdicated its function by delegating the essential legislative powers upon the Nagar Palikas to  levy all or any of the taxes enumerated in the Section. According to him the said power is unguided and uncanalised. We do not agree  with the learned counsel. Section 172(2) of  the  Act authorises  the  Mahapalikas to impose the  taxes  mentioned

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therein, "for the purposes of this Act". The obligations and functions cast upon the Mahapalikas are laid down in various provisions of the Act. The taxes under Section 172(2) of the Act,  therefore,  can be levied by he Mahapalikas  only  for implementing  those purposes and for  no other propose.  The Mahapalikas  have to provide special civic amenities at  the places  where cinemas/theatres are situated. So long as  the tax has a reasonable relation to the purposes of the Act the same  cannot be held to be arbitrary. The rate of tax to  be levied and the persons or the class of persons liable to pay the  same  is determined by inviting  objections  which  are finally  considered  and decided by  the  State  Government. There is no force in the argument that the legislature has                                                        710 abdicated its function to the Mahapalikas. The tax is levied in  accordance with the statutory rules framed by the  State Government and the said rules are laid before each House  of the  State  Legislature for not less than 14  days  and  are subject  to such modifications as the legislature  may  make during the session they are so laid. The view we have taken, we  are supported by the judgments of this Court,  in  Gopal Narain  v. State of Uttar Pradesh and Anr., [1964] 4  S.C.R. 869  and  The Western India Theatres  Limited  v.  Municipal Corporation of the city of Poona, [1959] Supp. 2 S.C.R.  71. We  , therefore reject the contention raised by the  learned counsel for the petitioners.      The second contention raised by the learned counsel for the petitioner is that the classification of cinemas on  the basis  of annual rental value for the purpose of fixing  the rate of tax is arbitrary and as such is violative of Article 14  of  the  Constitution of India.  According  to  him  the classification  has no nexus with the objects sought  to  be achieved.  We  do not agree. In The Western  India  Theatres Ltd. v. The Cantonment Board, Poona, Cantonment, [1959] Supp 2   S.C.R.   63   the  Cantonment   Board,   Poona   imposed entertainment tax on cinemas. Rs. 10 per show was levied  on the two cinemas of Western India Theaters Ltd. and Rs. 5 per show  in other cases. The argument raised before this  court to the effect that the Cantonment Board had singled-out  the two  cinema houses for discriminatory treatment by  imposing higher rate of tax, was answered as under :          "It may not be unreasonable or improper if a higher          tax is imposed on the show given by a cinema  house          which  contains large seating accommodation and  is          situate in fashionable or busy localities where the          number  of  visitors is more numerous and  in  more          affluent  circumstances  than the tax that  may  be          imposed  on shows given in a smaller  cinema  house          containing  less accommodation and situate in  some          localities where the visitors are less numerous  or          financially in less affluent circumstances, for the          two  cannot, in those circumstances, be said to  be          similarly situate".      The  annual  rental value under the  Act  indicate  the extent  of the accommodation, its quality, the  locality  in which  it is situated and other factors which relate to  the enjoyment of the building. The theatre tax is                                                        711 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

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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.      The  writ  petitions  are  dismissed  with  costs.   We quantify the costs as Rs. 1000 to be paid by each petitioner. V.P.R.                                   Petitions dismissed.                                                        712