Holding

The theatre tax and its classification based on annual rental value are constitutionally valid and not arbitrary, and the delegation of taxing power to the Mahapalika is permissible.

Summary

The petitioners, owners of cinema halls in Lucknow, challenged the theatre tax imposed by the Lucknow Nagar Mahapalika under Sections 172 and 2(77) of the U.P. Nagar Mahapalika Adhiniyam, 1959, arguing that the statute unlawfully delegated legislative power to the Mahapalika and that the classification of cinemas based on annual rental value was arbitrary and violative of Article 14 of the Constitution. The tax, initially Rs.5 per show for cinemas with annual rental value above Rs.10,000 and Rs.3 for those below, was later increased to Rs.25 and Rs.20 respectively. The Supreme Court examined whether the delegation of taxing power was unconstitutional and whether the rental‑value classification bore a reasonable nexus to the purpose of providing special civic amenities at cinema locations. Relying on precedents such as Gopal Narain and Western India Theatres cases, the Court held that the delegation was permissible because the Mahapalika could levy tax only for purposes specified in the Act and that the classification was a rational measure reflecting the size, quality and location of the cinema premises. Consequently, the petitions were dismissed with costs.

Issues considered

The constitutionality of Section 172(2) of the U.P. Nagar Mahapalika Adhiniyam, 1959, on the ground of undue delegation of legislative power.
Whether the classification of cinemas based on annual rental value for fixing theatre tax rates violates Article 14 of the Constitution.
Whether the theatre tax imposed by the Nagar Mahapalika is within the scope of its statutory and constitutional powers.

Legislation cited

Constitution of Indias. Article 14, s. Article 285
U.P. Nagar Mahapalika Adhiniyam, 1959s. 172, s. 2(77)

Subjects

Theatre taxMunicipal taxationDelegation of legislative powerClassification of taxpayersArticle 14U.P. Nagar Mahapalika ActConstitutional law

Judgment

A DARSHAN LAL MEHRA AND 23 OTHERS
v.
UNION OF INDIA AND OTHERS

AUGUST 4, 1992

B [KULDIP SINGH AND K. RAMASWAMY, JJ.)

U.P. Nagar Mahapalika Adhiniyam, 1959-Sections 172, 2(77j-
Tlteatre tax under Lucknow Nagar Mahapalika Theatre Tax Rules, 1965-
Fixing rate of tax on the basis of annual rental value of Cinemas-Wltether
C arbitrary or violative of Article 14 of the Constitution of India, 1950.

The proposal of the Nagar Mahapalika, Lucknow to levy theatre tax,
@ Rs.S per cinema show held in a building assessed on annual rental value
of Rs. l~,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
D 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
E 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 of more than Rs.
10,000 and Rs. 20 per show on all class II cinemas with annual rental value
-
F of Rs. 10,000 or less.

The theatre tax imposed by Nagar Mahapalika; Allahabad was chal-
lenged before the High Court under Article 226 of the Constitution of
India. A Single Judge of the High Court dismissed the writ petition. Appeal
G 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
H Judge of the High Court, following the judgment in Niranjan Lal Bhargava
704
DARSHAN MEHRA v. U.0.1. 705

~-.-..( Tmst case, dismissed the second appeal filed by him. A
About 20 days after the dismissal of the regular second appeal by ,
.the High Court, the petitioners ~led a Write Petition No.35Un6 in the '
High Court challenging the imposition of theatre tax. The said petition is
still pending before the High Court.
,B
The petitioners - the cinema owners/lessees in these Writ petitions
under Article 32 or the Constitution or 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

-
abdicated its function by delegating the essential legislative powers upon
t~e Nagar Palikas to levy all or any of the taxes enumerated in the Section;
c
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.
D,
Dismissing the writ petitions of the cinema ownen/lessess, 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/ E
theatres are situate4. 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 Hable to pay the
same is determined by inviting objections, which are finally considered and
decided by the State Government. (709 F-H]
F
~ 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] G

~
' Gopal Narain v. State of Uttar Pradesh and Anr., (1964) 4 S.C.R. 869
" and The Western India Theatres Limited v.Municipa/ 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 H
706 SUPREME COURT REPORTS {1992] 3 S.C.R.

A 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 entertaiment. The amusement in a
building is affected by all those factors which are taken into consideration
while faxing the annual rental value of the building. Higher rental value in
relati«!n to a cinema house shows that it has better accommodation, better
B
situation and better facilities for amusement and entertainment. The
higher annual value is indicative of a better quality cinema house, as
compa>'ed 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-7118]
c
The Western India Theatres Ltd. v. The Cantonment Board, Poona, -
Cantonment, (1959) Supp (2) S.C.R. 63, followed.

Niranjan Lal Bhargava Trns~ Allahabad v• .state of U.P. and others,
(1972) All LJ. 279, approved.
D
ORIGINAL JURISDICTION : Writ Petition (Civil) Nos. 2426-2449
""'·
of 1980.

(Under Article 32 of the Constitution of India).

E M.S. Ganesh for the Petitioners. 'y
Darshan Lal Misra, Ms. A. Subhashini, Ms. Sho~ha Dikshit and P.K.
Pillai for the Respondents.

The Judgment of the Court was delivered by
-
F
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.

Sections 172 and 2(77) of the U.P. Nagar Mahapalika Adhiniyam
G 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
r ----
thereof and of Article 285 of the Constitution of India, the
H Mahapalika shall impose the following taxes, namely :

•
DARSHAN MEHRA v. U.0.1. [KULDIP SINGH, J.] 707

(a) Property taxes, A
(b) ...........................

(c) ···························
(2) In addition to the taxes specified in sub-section (1), the B
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 traoes, callings and professions and holding of
public or private appointments;
c
- (b) ......................

(c) ..................... .

(d) ......................

(e) ......................

(f) ..................... .
(g) ...............•......

- (h) ......................

(i) a th~atre tax; and
E

- G) any other tax which the State Legislature has the power
under the Constitution of India to impose in the State.
F
(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 G
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 ente~tainments. H 1

I

I
708 SUPREME COURT REPORTS [1992) 3 S.C.R.

A Sub-Section (1) of Section 199 of the Act requires the Nag~
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
B Mahapalika to draft the rules in that 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 objec-
tions so received and to re-publish the draft rules in case any change is
C made therein as a result of such consideration. After considering all the
objections the 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
D 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
E as soon as they are made and shall be subject to such modifications as the
legislature may make during the session they are so laid.

The proposal of the Nagai' Mahapalika, Lucknow to levytheatre tax,
@ Rs.5 per cinema show held in a building assessed on annual rental value
F 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 act.
The rules called The Lucknow Nagar Mahapalika Theatre Tax Rules were
framed and enforced with effect from December 15, 1965 and thereafter
G 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
H class II cinemas wilh annual rental value of Rs. 10,000 or less.
DARSHAN MEHRA v. U.0.1. [KULDIP SINGH, J.] 709

At this stage we may notice the fact that the theatre tax imposed by A
Nagar Mahapalilca Allahabad was challenged by the cinema exhibitors
before the Allahabad High Court by way of a writ petition under Article
2~ of the Constitution of India. The grounds of attack were substaintially
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 B
learned Single Judge was dismissed by a Division Bench consisting of RS.
Pathak and H. Swarup, JJ. The judgment rendered by the Division Bench
of the High Court is reported as Niranjan Lal Bhargava Trnst, Allahabad
v. State of U.P. & others, (1972) All LJ. 279.

Gulu Thadani, petitioner No.6 before us challenged the initial im- C

- position 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 Tntst case, dismissed the second appeal filed by
Gulu Thadani on November 27, 1976. On December 17, 1976, about 20 I)
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 E
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 F

- to impose the taxes mentioned 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 the Mahapalikas only for implementing those
purposes and for no other purpos.e. The Mahapalilcas have to provide
special civic amenities at the places where cinemas/theatres are situated. G
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 H;
710 SUPREME COURT REPORTS [1992) 3 S.C.R.

A 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 hy the judgments of this Court, in Gopal Narain v. State of Uttar
B 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.

C 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,
D 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 Theatres 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 dis-
E criminatory treatment by imposing higher rate of tax, was answered as
under: y

-
"It may not be unreasonable or improper if a higher tax is
imposed on the shows given by a cinema house which contains
F 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 cir-
G cumstances, 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
H factors which relate to the enjoyment of the building. The theatre tax is
DARSHAN MEHRA v. U.0.1. [KULDlP SINGH, J.] 711

levied as a tax on amusement and entertainment. The amusement in a 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
I
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,
B
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 C

- Rs. 1000 to be paid by each petitioner.

V.P.R. Petitions dismissed.

-