TMI Blog1992 (3) TMI 308X X X X Extracts X X X X X X X X Extracts X X X X ..... overned prior to 1978 amendment. - Civil Appeal No. 2004-2012 of 1992, C.A. Nos. 2013-2029 of 1992 - - - Dated:- 12-3-1992 - VENKATACHALIAH M.N. AND JEEVAN REDDY B.P. JJ. A.K. Ganguly, B.R.L. Iyengar, K. Parasaran and Ms. Nalini Chidambaram, Senior Advocates (M.N. Krishnamani, P. Chaudhary, K.P. Sunder Rao, G. Srinivasan and A.V. Rangam, Advocates with them), for the appellants. R. Mohan and V. Krishnamurthy, for the respondents. -------------------------------------------------- The judgment of the Court was delivered by B.P. JEEVAN REDDY, J.- Heard learned counsel for the petitioners and the respondents. Leave granted. These appeals are preferred by the writ petitioners in a batch of writ petitions which were dismissed by a Division Bench of the Madras High Court by its common judgment and order dated October 8, 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 of 1992 arising from Writ Petition No. 8748 of 1989 (filed by Raja Theatre, represented by its licensee-Parasuram Petty village, Madurai). Tamil Nadu Entertainments Tax Act, 1939, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ituated in all other local areas of the State are governed by the 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 per cent to 40 per cent. At the same time, all the theatres situated within the radius of five kilometres 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 kilometre "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 one or the other such "belt". The theatre concerned in Writ Petition No. 8748 of 1989 is situated in village Parasuram Petty and was governed by composition system but since it falls within the five kilometre 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 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 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 protection of laws. There is absolutely no basis for the above two-way 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 theatre concerned in Writ Petition No. 8748 of 1989 is governed by and 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstitution, 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 a social order in which justice, social, economic and political, shall inform all the institutions of the national life. 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 94 paise 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 this reason that while applying the doctrine o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mer case, this Court observed: "It is not in dispute that taxation laws must also pass the test of article 14. That has been laid down by this Court in Kunnathat Thathunni Moopil Nair v. State of Kerala [1961] 3 SCR 77. But as observed by this Court in East India Tobacco Company v. State of Andhra Pradesh [1962] 13 STC 529; [1963] 1 SCR 404 in deciding whether a taxation 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 (Venkatachaliah, J.): "It is now well-settled that a very wide latitude is available to the Legisla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances 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 circumstances which the court may ultimately find and more 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." (Sanjeev Coke Manufacturing Company v. Bharat Coking Coal Ltd. [1983] 1 SCR 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 five kilometre 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? It is true that the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ows the mushroom growth of theatres just outside the limits of the Erode special grade municipality which lie within the five kilometre belt. The daily collection of Bharati theatre which is in the five kilometre 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 corporations 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 kilometre 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 population, whereas in the theatres within the five kilometre belt, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quated 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 of admission prevalent in corporation areas. We are not impressed. Firstly, rates of admission do not merely depend upon the category of local area 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 per cent of the admission charge, which is now brought down to 40 per cent 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-whether it is 27 per cent or any other percentage-is 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... So far as open-air theatres are concerned, it is stated by the respondents that there are only two such theatres in the entire State. It is not the case of the petitioners' that any such theatre is located in any of the belts concerned herein. Even otherwise, open-air theatres and temporary theatres stand on a different footing from permanent theatres. They suffer from several disadvantages which the other do not. They are a class apart. If the impugned provision has treated them as a separate class, no objection can be taken thereto. Another argument urged by Sri Parasaran is that the petitioners had come to entertain a legitimate expectation based upon legislative practice that they would not be brought over to admission system. Factually speaking, we must say that no such legislative practice has been brought to our notice. Prior to 1978, all the theatres all over the State were governed by admission system alone. Even after introduction of sections 5-A and 5-B it was made applicable to several local areas in two stages, i.e., in 1978 and 1982. Indeed by Amendment Act 20 of 1983 and 48 of 1986 certain local areas governed by sections 5-A and 5-B were removed from their purvie ..... 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