Darshan Lal Mehra and Ors. Vs. Union of India (UOI) and Ors.

Facts

The imposition of "theatre tax" by the Nagar Mahapalika, Lucknow is challenged by the cinema owners/lessees in these petitions under Article 32 of the Constitution of India (COI). The proposal to levy theatre tax under Section 172(2) of the U.P. Nagar Mahapalika Adhiniyam, 1959 (the Act) at Rs. 5/- per cinema show held in a building assessed on annual rental value of Rupees 10,000/- or more and at 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 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 published in the U.P. Government Gazette 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.

This decision 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. 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.

Key Takeaways for Students

Legal Issue

1. Whether 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?
2. Whether 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?

Holding

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 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. There is no force in the argument that the Legislature has abdicated its function to the Mahapalikas. The tax is levied in accordance with the statutory rules framed by the State Government.

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 levied as a tax on 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. The learned Counsel for the petitioners has not raised any other point before us.

Final Decision Petition Dismissed

Ratio

The theatre tax is levied as a tax on 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.