Holding

Section 5(A)(1) of the Tamil Nadu Entertainment Tax Act, as amended, is a valid classification that does not violate Articles 14 or 19(1)(g) and the exemption for open‑air theatres is not discriminatory.

Summary

The Supreme Court examined the constitutional validity of Section 5(A)(1) of the Tamil Nadu Entertainment Tax Act, 1939 (as amended by Act 40 of 1989), which re‑classified cinema theatres within a five‑kilometre ‘belt’ of municipal corporations and special‑grade municipalities from the ‘composition system’ to the ‘admission system’ of tax, while exempting open‑air and temporary theatres. The petitioners argued that the classification was arbitrary, violated Articles 14 and 19(1)(g) of the Constitution, and breached a legitimate expectation based on prior legislative practice. The Court held that the classification was reasonable, had a clear nexus to the object of the legislation, and did not amount to discrimination or an unreasonable restriction on trade; the exemption for open‑air theatres was permissible, and the doctrine of legitimate expectation cannot be used to invalidate a statute. Consequently, the amendment was upheld and the appeals were dismissed.

Issues considered

The classification of theatres based on location (belt vs outside) under Section 5(A)(1) – whether it is reasonable and has nexus with the object of the Act.
Whether the exemption of open‑air and temporary theatres from the admission system is discriminatory.
Whether the amendment violates Article 14 of the Constitution (equality before law/equal protection).
Whether the amendment imposes an unreasonable restriction on the right to trade under Article 19(1)(g).
Whether a legitimate expectation arising from legislative practice can be invoked to strike down the amendment.

Legislation cited

Act 40 of 1989 (Tamil Nadu Entertainment Tax Amendment)
Constitution of Indias. Article 14, s. Article 19(1)(g), s. Article 38
Tamil Nadu Cinema (Regulation) Act
Tamil Nadu Entertainment Tax Act, 1939s. 5(A)(1)
Tamil Nadu Gram Panchayats Act
Tamil Nadu Municipal Corporation Act
Tamil Nadu Municipalities Act

Subjects

Constitutional validityArticle 14Article 19(1)(g)Tax classificationEntertainment taxCinema theatresAdmission systemComposition systemLegitimate expectationEquality before lawIndirect tax

Judgment

A SRINIVASA THEATRE AND ORS. ETC. ETC.
v.
GOVERNMENT OF TAMIL NADU AND ORS. ETC. ETC.

MARCH 12, 1992

B [M. N. VENKATACHALIAH AND B. P. JEEVAN REDDY, JJ.)

Tamil Nadu Entertainment Tax Ac~ 1939: Section SA(l) (As amended
by Act 40 of 1989)--Constitutional validity of.

C Cinema Theatres-Entertainment Tax-Levy on the basis of 'admission
system' and 'composition system'-Classification of theatres for the purpose
of leVJTheatres situated within the Municipal Corporations and Special
Grade Municipalities governed by 'admission system'-Theatres situated in
other local areas of State governed by 'composition system'-Theatres situated
D within the radius of the five kilometers of Municipal Corporations and Special
Grade Municipalities brought over from 'composition system' to 'admission
system '---But temporary and open theatres exempted from 'admission
system'-Held classification of theatres was reasonable and has nexus with
the object of enactment-Held change-over to 'admission system' from 'com-.
position system' is not an unreasonable restriction-Exemption to open and
E temporary theatres held not discriminatory-Section SA(l) held not violative
of Articles 14 and 19(1)(g).

Constitution of India, 1950: Articles 14 and 38.

Expression 'Equality before law' and 'equal protection of laws'-Mear.-
F ing of-Relevance of State's obligation to bring equality as contemplated by
Article 38-Discussed.

Doctrine of legitimate expectatiott-Legitimate expectation based on
legislative practice cannot be invoked for invalidating a legislation.
G The Tamil Nadu Entertainment Tax Act, 1939 provides for levy of
entertainment tax on admission to cinema theatres in the State of Tamil
Nadu. Until 1978 the entertainment tax was levied on the basis of 'admis·
sion system' i.e. on the actual number of tickets sold. In 1978 the Act was
·amended and sections S(A) and 5(8) were introduced. These sections
H introduced the 'composition system' of collection of entertainment tax
164
SRINNASA lHEATRE v. G .. ,TJ~RNMENT 165

under which tax was levied based upon the: gross collection capacity of A
-~
cinema theatres irrespective of the actual number oftickets sold. However,
the newly introduced 'composition system' was not made applicable to the
entire State. While the theatres situated within the Municipal Corpora-
tions of Madras, Madurai, Coimbatore and the Special grade
municipalities continued to be governed by the original system of taxation
B
i.e. 'admission system' the theatres situated in all other local areas of the
y State were governed by the composition system.

In 1989 the Act was further amended and Sub-section (1) of Section
S(A) of the Act was substituted. By this amendment, the percentage of
,...-- ......,, entertainment tax vis-a-vis the rates of admission in force in corporation c
and special grade municipality areas was reduced from 53% to 40%. At the
same time all the theatres situated within the radius of five kilometers
,..._ from the peripheral limits of such areas (belt) which were hitherto
governed by the composition system were brought over to the admission
system. However, the temporary and open air theatres even though located
in the belt of five kilometers were excluded from this switch-over.
D

The appellants challenged the validity of section S(A)(l) by filing
various writ petitions which were dismissed by a Division Bench of the
Madras High Court.
E
. --< In appeals to this Court, it was contended on behalf of the appellant1'
(1) that the Amendment Act is arbitrary and violative of Article 14 inas-
much as (a) it classifies theatres situated in a local area 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 F
lesser grade municipalities with the theatres in corporation areas and
~
special grade municipalities area and that such a classification has no
relation to the object of the enactment; (2) exemption of temporary and
_;.
open theatres from the 'admission system' of taxation is discriminatory;
(3) the impugned provisions are confiscatory in nature and they constitute
an unreasonable restriction upon the petitioners' fundamental right to G
trade guaranteed by Article 19(1)(g); (4) The petitioners had come to
entertain a legitimate expectation, based on legislative practice, that they
would not be brought over to 'admission system' of taxation.
r
Dismissing the appeals, this Court, H
166 SUPREME COURT REPORTS (1992) 2 S.C.R.

A HELD: 1. The Tamil Nadu Legislature is competent to declare that
the theatres situated within the five kilometer 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. The Act no doubt adopts the local areas declared under the
Tamil Nadu Municipal Corporation Act, Tamil Nadu Municipalities Act
B and Tamil Nadu Gram Panchayats Act as the basis for prescribing the
rate of taxation. But it must be remembered that it was not obligatory upon
the legislature to do so. It could have adopted any other basis. It is only
for the sake of convenience that the existing local areas - convenient
existing units of references - were adopted. it is not a question of power
c but one of convenience. [177C-D]

1.1 The theatres situated within the belt are proximate to the cor-
poration and special grade municipality areas and thus enjoy a certain --(
advantage which the theatres beyond the belt do not. They draw custom
D from within the corporation areas by virtue of their proximity. The cor-
poration areas have a larger percentage of amuent persons than other
areas, who have more money at their disposal. They spend more on
entertainment. The municipal boundary has no significance for them. If
there is a good picture in a theatre situated beyond the municipal corpora-
tion limits they would go and see it. [177H, 178A-B)
E
1.~ The classification or the distinction made between theatres
situated within the belt and the theatres outside the belt is not an un-
reasonable one. The material placed before the Court shows that theatres
.situated within the belt are substantially in the same position as those
F within the corporation or special grade municipality areas, if not better.
The theatres within the belt are akin to and comparable to the theatres
situated within the areas of corporations and Special Grade
Municipalities. Further it is not disputed that the admission system
fetches more revenue to the State. It is precisely for this reason that the
said system is continued in the major cities. It cannot be said that the
G classification has no nexus to the object. [178H, 179A-C)

.,
2. The argument that if the theatres situated within a gram
panchayat or a lesser grade municipality are to be equated with the
theatres within tile corporation and other areas they should also be
H allowed to charge the rates of admission prevalent in corporation areas
SRINIVASA THEATRE v. GOVERNMENT 167

cannot be accepted. Firstly, rates of admission do not merely depend upon A
the category of local areas but also upon the amenities provided in the
theatres. Secondly, the very system of levy in both areas is different. Under
section 4 i.e., ~dmission system the rate of tax was 53% of the admission
charge, which .is now brought down to 40% by the impugned Amendment
Act on the actual number of tickets sold whereas in respect of theatres
B
. ,... governed by composition system, the rate of levy is upon the gross collec·
tion 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. [179F-H, 180A]

Moreover, the petitioners are not suffering any real prejudice. C
Whichever the system of taxation, the amount collected by way of enter·
tainment tax is to be made over to the State. Even under the composition
system, the formula evolved is supposed to represent the amount really
collected by way of entertainment tax. It may be that in a given case or
probably in many cases • the exhibitors may be saving a part of the amount D
collected by way of entertainment tax by paying only the compounded
amount. But it may not necessarily be so. There may be theatres where the
formula may work to their prejudice because of their low occupancy rate.
In any event, the mere fact that an exhibitor is able to save a part of the
tax by paying the compounded amount cannot be treated as a benefit in
law which he is deprived of by following the admission system. [180B-D] E

3. Open-air theatres and temporary theatres stand on a different foot-
ing from permanent theatres. They suffer from several disadvantages which
t~ others do not. They are a class apart. If the impugned provision has
treated them as a separate class, no objection can be taken thereto. [181B]
F
4. The theory of legitimate expectation based upon legislative prac-
tice cannot be brought in to defeat or invalidate a legislation. It may at the
most be used against an administrative action, and even there it may not
be an indefeasible right. No case has been brought to the notice of the
Court where a legislation has been invalidated on the basis that it offends G
the legitimate expectation of the persons affected thereby. [181C-FJ

Council of Civil Service Unions and Ors. v. Minister for the Civil
Service, (1985) A.C. 374, referred to.

5. The impugned change-over to the 'admission system' does not H
168 SUPREME COURT REPORTS [1992] 2 S.C.R.

A amount to unreasonable restriction upon the petifloners' fundamental
right to trade. [182A]
>-- -

6. Article 14 of the Constitution enjoins upon the State not to deny
any persons 'Equality before law' or 'the equal protection of laws' within
the territory of India. The two expressions do not mean the same thing
B even if there may be much in common. Their meaning and content has to
be found and determined having regard to the context and scheme of our
Constitution. The word "law" in the former expression is used in a generic
sense • a philosophical sense • whereas the word "laws" in the latter
expression denotes specific laws in force. [173C-E]
c y-
7. Equality before law is a dynamic concept having many facets. One
facet • the most commonly acknowledged .• is that there shall be no
privileged person or class and that none shall be above law. A facet which
is of immediate relevance herein is the obligation upon the State to bring
D about, through the machinery of law, a more equal society envisaged by
the preamble and part IV of our Constitution. For equality before law can
be predicated meaningfully only in an equal society i.e., in a society
contemplated .by Article 38 of the Constitution. [173F-G]

8. The instrument of taxation is not merely a means to raise revenue
E in India; it is, and ought to be, a means to reduce inequalities. It is for this
reason that while ap!Jlyingthe doctrine of classifications ·developed mainly
with reference to and under the concept of "equal protection of laws" •
Parliament is allowed more freedom of choice in the matter of taxation
vis-a-vis other laws. If this be the situation in the case of direct taxes, it
F should be more so in the case of indire~t taxes, since in the case of such taxes
the real incidence is upon some other than upon the person who actually
makes it over to the State, though, it is true, he cannot avoid the liability on )-
the ground that he has not passed it on. In the matter of taxation it is, thus, j_
not a question of power but one of constraints of policy- the interest of
economy, of trade, profession and industry, the justness of the burden, its
G 'acceptability' and other similar considerations. But this does not mean that
taxation laws are immune from attack based upon Article 14. It is only that
parliament and legislatures are accorded a greater freedom and latitude in
choosing the persons upon whom and the situations and stages at which it
can levy tax. Under the Constitution, there is an added obligation upon the
H State to employ the power of taxation-nay, all its powers· to achieve the goal
SRINIVASA TIIEATRE v. GOVERNMENT [JEEVAN REDDY, J.) 169

adumbrated in Article 38. [174C-H, 175A] A
_..J

Gorantia Butchayya Chowdary & Ors. v. The State of A.P. & Ors.,
A.I.R. 1958 A.P. 294; Moopil Nair v. State of Kera/a, ,[1961] 3 S.C.R. 77;
Spences Hotel Pvt. Ltd. v. State of West Bengal, (1991] 2 S.C.C. 154; S.K.

- ....,,,.
Datta, I. T.O. v. Lawrence Singh Ingty, (1968) 2 S.C.R. 165 and Elei Hotel
and Investments Ltd. v. Union of India, (1991) 2 S.C.C. 166, referred to• B

East India Tobacco Co. v. State of A.P., (1963) 1 S.C.R. 404 and
Sanjeev Coke Mfg. Co. v. Bharat Coking Coal Ltd. & Anr., (1983) 1 S.C.R.
1000, cited.
-y
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2004 to c
2012 of 1992.

From the Judgment and order dated 8.10.90 of the Madra~ High
Court in W.P. Nos. 8710/89, 8734/89~ 8736/89, 8751/89, 8748/89, 8735/89,
8749/89, 8727/89 and 8737/89.
D
WITH

Civil Appeal Nos. 2013 to 2021/92, 2022 to 2024/92, 2025, 2026,
2027-2028 and 2029 of 1992.

A.K. Ganguli, K. Parasaran, B.R.L. Iyenger, Mrs. Nalini Chidam-
E
baram, A.V. Rangam, A.T.M. Sampath, Prubir Choudhary, M.N. Krish-
naman~ K.P. Sunder Rao and G. Srinivasan for the Appellants.

R. Mohan and V. Krishnamoorthy for the Respondents.
F
The following Judgment of the Court was delivered by
..,,
B.P. JEEVAN REDDY, J. Heard learned counsel for the petitioners
.-A- and the respondents .

Leave granted.
G
These appeals are preferred by the writ petitioners in a batch of writ
petititons which were dismissed by a Division Bench of the Madras High
Court by its common judgment and order dated 8th October, 1990. Ques-
'\ tions 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 H
170 SUPREME COURT REPORTS (1992] 2 S.C.R.

A of 1992 arising from writ petition No. 8748 of 1989 (filed by Raja Theatre,
represented by it licencee-Parasuram Petty, village, Madurai).

Tamil Nadu Entertainment Tax Act, 1939 provides for levy of enter-
tainment tax on admission to cinema theatres, among others. The rates of
admission to cinema theatres in the States of Tamil Nadu are prescribed
B under the Tamil Nadu Cinema (Regulation) Act and the rules made
thereunder. Different rates of admission are prescribed depending upon
the locality in which the theatre is situated and the amenities provided
therein. Entertainment Tax is prescribed at a particular percentage of the
rate of admission, which percentage again differs from locality to locality.
C Entertainment Tax, thus, constitutes a component of the total amount
charged for admission to a cinema theatre.

Until the year 1978, entertainment tax was collected on the actual
number of tickets sold. The owners/exhibitors of cinema theatres were
D required to make over the actual amount of entertainment tax collected by
them for each show to the Government. With a view to simplify the
collection of tax, Section 5(A) and 5(B) were introduced by the 1978
Amendment Act. These Sections, introduced a new and substitute method
of collection of entertainment tax based upon the gross collection capacity
of a cineme theatre. A formula was devised to determine the tax payable
E per show or per week, as the case may be. Gross collection capacity meant
the total amount that would be collected by a cinema theatre if all the seats
therein are filled. But inasmuch as no cinema theatre can expect to have
its full capacity filled for each show on each day of the month, a reasonable
figure was adopted and the tax payable per show determined. If the
F exhibitor opted to pay the tax every week, he was entitled to exhibit any
.number of .shows in the week not exceeding 28 shows. This.system, which
may be called 'composition system', for the sake of convenience, dispensed
with the requirement of verification of the number of tickets sold for each
show in each cinema theatre. It appears to be convenient to theatre-owners
G as well since they are relieved of the botheration of submitting returns and
establishing their correctness. However, this method was not made ap-
. plicable to the entire State. The theatres situated within the Municipal
Corporations of Madras, Madurai, Coimbatore and the special grade
municipalities continued to be governed by the original system of taxation, --y
which may for the sake of convenience be called 'admission system'.
H Theatres situated in all other local areas of the States are governed by the
SRINIVASA THEATRE v. GOVERNMENT [JEEVAN REDDY, J.] 171

composition system. A
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 enter-
tainment tax vis-a-vis the rates of admission in force in corporation and
special grade municipality areas was brought down from 53% to 40%. At
the same time, all the theatres situated within the radius of five kilometers B
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 kilometer '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 C
one or the other such 'belt'. The theatre concerned in writ petition No.8748
to 1989 is situated in village Parasuram Petty and was governed by com-
position system but since it falls within the five kilometer 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 5(A),
and in particular, by virtue of the two provisos appended to Sub-section D
5(A) (i). However, the temporary (tourist) and open air theatres even
though located in the belt are excluded from this switch-over.

Petitioner-appellants impugned the validity of Section 5(A)(i) on
several grounds all of which have been negatived by the High Court. E
S/Sri B.R.L. Iyengar, K. Parasarn and Sampath urged the following
contentions before us:

1. The Act classifies the theaters in the State with reference to their
location i.e., with reference to the local areaa wherein they are situated. F
The theatres situated within the municipal corporaton limits are subjected
to a higher rate of tax than the theatres situated in the selection grade
municipalities. Similarly, the theartres situated within the area of selection
grade municipalities are subjected to a higher rate of tax than the theatres
situated in the first grade municipalities and so on. This classification is an
eminently reasonable one. Even the rates of admission prescribed under
Tamil Nadu Cinema {Regulation) Act and rules recognize this distinction.
By virture of the impugned amendment, however, several theatres situated
within panchayat towns, village panchayats and other lesser grade
municipalities, which theatres were hitherto enjoying the benefit of com-
position system are suddenly deprived of the said beneficial system and H
172 SUPREME COURT REPORTS [1992) 2 S.C.R.

A placed on par with the theatres situated in corporation areas and special
grades municipalities for no other reason than that they happen to fall
within the five, kilometer radius of such areas. The result is that in a
village/municipality abutting a municipal corporation area, while some
theatres are governed by the composition systems, the other theatres
(which happen to fall within the 'belt') are governed by a different systems,
B namely admission system. This invidious distinction, amounting to hostile
discrimination, has been brought about for no valid reason. Having
adopted the gradation of the local area as the basis for method of taxation,
rate of tax and all other purposes, there is no justification to treat some of
the theatres situated in some of these areas differently. Indeed, the very
c creation and concept of 'belt' is impermissible.

2. The Amendment Act is arbitrary, unreasonable and violative of
Article 14 inasmuch as (a) it classifies theatres situted in a local area into
two categories subjecting one such situated in a category to a hostile
treatment;
D
(b) it equates the theatres situated in village panchayats and village
town-ships and other lesser grade municipalities with the theatres in cor-

E
poration 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 war 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.
F
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 l
theatre concerned in writ petition No. 8748 of 1989 is governed by and
G 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 the said corporation area. This
is a dear case of hostile discrimination.

H 4. The petitioners had come to entertain a legitimate expectati?n,
SRINIVASA THEATRE v. GOVERNMENT [JEEVAN REDDY, J.] 173

based on legislative practice, that they would not be treated on par with A
the theatres situated in municipal corporation and special grade
municipality areas and had adjusted their affairs accordingly. The sudden
change brought about by the impugned Act has dealt a severe blow to them
and has put their vary continued existence in peril.

5. The impugned provisions are confiscatory in nature. They con- B
stitute an unreasonable restriction upon the fundamental right to trade
guaranteed to them by Article 19(1)(g) of the Constitution of India.

Article 14 of the Constitituion enjoin upon the State not to deny to
any person 'Equality before law' or 'the equal protection of laws' within C
the territory of India. The two expressions do not mean the same thing
even if there may be much.in common. Section 1 of the XIV Amendment
to the U.S. Constitution uses only the latter expression whereas the Irish
Constitution (1937) and the West German Constitution (1949) use the
expression "equal before law" alone. Both these expressions are used
together in the Universal Decl_aration of Human Rights, 1948, Article 7 D
whereof says "All are equal before the law and are entitled without any
discrimination to equal protection of the law." While ascertaining the
meaning and content of these expression, however, we need not be con-
strained by the interpretation placed upon them in those countries though
their relevance is undoubtedly great. It has to be found and determined E
having regard to the context and scheme of our €onstitution. It appears to
us that the word "law" in the former expression is used in a generic sense-a
philosophical sense-whereas the word "law'' in the latter expression denotes
specific laws in force.

Equality before law is a dynamic concept having many facets. One F
facet-the most commonly acknowledged-is that there shall be no previleged
person or class and that none shall be above law. A facet which is of
immediate relevance herein is the obligation upon the State to bring about,
through the machinery of law, a more equal society envisaged by the
preamble and part IV of our Constitution. For equality before law can be G
predicated meaningfully only in an equal society i.e., in a society con-
templated by Article 38 of the Constitution, which reads:

y "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 H
174. SUPREME COURT REPORTS [1992] 2 S.C.R.

A a social, economic and political, shall inform all the institutions
of the national life. r -

(2) The State shall, in particular, strive to minimise the ine-
qualities in income, and endeavour to eliminate inequalities, in
status, facilities and opportunities, not only amongst individuals
B 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
c 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 94p 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
D the reason that while applying the doctrine of classification-developed
mainly with reference to and under the concept of "equal protection of
laws"-Parliament is allowed more freedom of choice in the matter of
taxation Vis-a-vis other laws. If this be the situation in the case of direct
taxes, it should be more so in the case of indirect taxes, since in the case
of such taxes the real incidence is upon some other than upon the pe~son
E who actually makes it over to the State, though, i~ is true, he cannot avoid
the liability on the ground that he has not passed it on. In the matter of
taxation it is, thus, not a question of power but one of constraints of
policy-the interests of economy, of trade, profession and industry, the
justness of the burden, its 'acceptability' and other similar considerations.
F We do not mean to say that taxation laws are immune from attack based
upon Article 14. It is only that parliament and legislatures are accorded a
greater freedom and latitude in choosing the persons upon whom and the
situations and stages at which it can levy tax. We are not unware that this
greater latitude has been recogtiised in VSA and UK even without resort-
ing to the concepts of 'equality before law' or "the equal protection of
G laws" -as something that is inherent in the very power of taxation and it has
been accepted in this country as well. (See in this connection the decision
of Subba Rao, CJ., (as he then was) in Gorantia Butchayya Chowdary &
Ors. v. The State of A.P. & Ors., 1958 A.P. 294, wh~re the several US and
English decisions have been carefully analysed and explained). In the
H context of our Constitution, however, there is an added obligation upon the
SRINIVASA THEATRE v. GOVERNMENT [JEEVAN REDDY, J.] 175

-~ State to employ the power of taxation-nay, all its powers-to achieve the goal A
adumbrated in Article 38.

The decisions of this court on the above aspect are legion, starting
from Moopil Nair v. State of Kera/a, [1961) 3 SCR 77. One of the latest
decisions is in Spences Hotel Pvt. Ltd. v. State of West Bengal, [1991] 2
S.C.C. 154 wherein almost all the earlier decisions of this court on this B
aspect have been referred to and discussed. To bring out the principle, it
would be sufficient if we refer to two of them namely S.K Datta, l.T.O. v.
Lawrence Singh Ingty, [1968] 2 S.C.R. 165 and Elel Hotel and Investments
Ltd. v. Union of India, [1991] 2 S.C.C. 166. In the former case, this court
observed: - C
"It is not in dispute that taxation laws must also pass the test
of Art. 14. '.fhat has been laid down by this Court in Moopil
Nair v. State of Kera/a, [1961] 3 S.C.R. 77. But·as observed by
this Court in East India Tobacco Co. v. State of Andhra
Pradesh, [1963] 1 S.C.R. 4040, in deciding whether a taxation D
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 une- E
qually, 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." F

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
1
the legislature in the matter of classification of objects, persons G
and things for purposes of taxation. It must need to be so,
having regard to the complexities involved in the formulation
of a taxation policy. Taxation is not now a mere source of raising
money to defray expenses of government. It is a recognised fiscal
tool to achieve fiscal and social objectives. The differentia of H
176 SUPREME COURT REPORTS [1992) 2 S.C.R.

A classification presupposes and proceeds on the premise that it
distinguishes and keeps apart as a distinct class hotels with
higher economic class hotels with higher economic status
reflected in one of the indicia of such economic superiority.
The presumption of constitutionality has not been dislodged by
the petitioners by demonstrating how even hotels, not brought
B into the class, have also equal or higher chargeable receipts
and how the assumption of economic superiority of hotels to
which the Act is applied is erroneous or irrelevant."

We shall now proceed to examine the contentions before us in the
c light of the above principles, but before we do that we think it appropriate
to remind ourselves of the following dictum :

" ... in the ultimate analysis, we are not really to concern our-
selves with the hollowness or the self-condemnatory nature of
D the statements made in the affidavits filed by the respondents
to justify and sustain the legislation. The deponents of the
affidavits filed into Court may speak for the parties on whose
behalf they swear to the statement. They do not speak for the
Parliament. No one may speak for the Parliament and Parlia-
ment is neverbefore the Court. After Parliament has said what
E is intends to say, only the Court may say what the Parliament
meant to say. None else. Once a statute leaves Parliament
House, the Court's is the only authentic voice which may echo
(interpret) the Parliament. This the Court will do with refer-
ence to the language of the statute and other permissible aids.
F The executive Government may place before the court their
understanding of what Parliament has said or intended to say
or what they think was Parliament's object and all the facts and
circumstances which in their view led to the legislation. When
they do so, they do not speak for Parliament. No Act of
1
Parliament may be s~ruck down because of the understanding
G or misunderstanding of Parliamentary intention by the execu-
tive government or because their (the Government's) spokemen
do not bring out relevant circumstances 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
H by affidavits filed on behalf of the State, but by all the relevant
SRINNASA THEATRE v. GOVERNMENT [JEEVAN REDDY, J.] 177
~
circumstances which the court may ultimately find and more A
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." (SOnjeev Coke Manufacturing
...,, Company v. Bharat Cooking Coal Ltd. & Anr., [1983) 1 S.C.R.
1000 at 1029).
B

We shall first examine whether it was not competent for the Tamil
Nadu Legislature to declare that the theatres situated within the fiv!!
'Y kilometer radius (belt) of the municipal corporation areas and the areas of
special grade municipalities shall be subjected to the same method of c
taxation as the theatres situated within the said area ? It is true that the
r 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 obligatory upon the legislature to do so. It
D
could have adopted any other basis. It is only for the sake of convenience
that the existing local areas, convenient existing units of reference, were
adopted. It is not a question of power but one of the convenience. There
was nothing precluding the legislature to have declared in the very first
instance (i.e. at the· time of 1978 Amendment Act) that the admission
~
system was to continue in force now only in the corporation areas but also E
in five kilometer radius (belt) abutting each of those areas. The only
question then would have been, as not it is, whether such a course brings
about an unreasonable classification or whether it amounts to treating
unequals on a uniform basis.
F
.. It is urged for the appellants that as a result of creation of such belts,
..... theatres situated in a given local areas, be it a 'gram panchayat or a lesser
grade municipality, are getting categorised into two classes-those which
happen to fall within the belt and those outside. The former are obliged to
follow the admission system whereas the latter continue to enjoy the facility
of composition system. This is undoubtedly true as a fact but the question G
is whether such a classification, brought about by the impugned provisions
of the Act, is unreasonable and un-related to the object underlying the
Y
enactment? It cannot be denied that the theatres situated within the belt
are proximate to the corporation and special gracle municipality areas anct
thus enjoy a certain aavantage which the theatres beyond the belt do not. H
178 SUPREME COURT REPORTS [1992] 2 S.C.R.

A They draw custom from within the corporation areas by virtue of their
proximity. The corporation areas have a larger percentage of affluent
persons than other areas, who have more money at their disposal. They
spend more on entertainment. The municipal boundary has no significance
from them. If there is a good picture in a theatre situated beyond the
municipal corporation limits they would go and see it. This is not a mere
B surmise. The respondents have given a concrete instance which is also
referred to in the judgment of the High Court. A sketch drawn in respect
of Erode town alongwith the daily collection particulars of a theatre,
Bharati theatre, situated in the belt abutting the said town was placed
before the High Court. On a consideration of the same, the High Court
c has observed:
"The sketch produced by the respondents shows the mushroom
growth of theatres just outside the limits of the Erode Special
Grade Municipality which lie within the five kilometer belt. The
daily collection of Bharati theatre which is in the five kilometer
D
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
E the theatres in the respective corporation 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
F 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 kilometer 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
G population, whereas in the theatres within the five kilometer belt, mostly
first run pictures are exhibited and there is considerable floating popula-
tion. It is also submitted by the respondents that a number of housing
colonies have sprung up just outside the corporation limits and the limits
of Special Grade Municipalities, the inhabitants whereof patronise theatres
i
within the belt. All this shows that the classification or the distinction made
H between theatres situated within the belt and the theatres outside the belt
SRINIVASA THEATRE v. GOVERNMENT (JEEVAN REDDY, J.] 179

is not an unreasonable one. It also establishes that the theatres within the A
belt are akin to and comparable to the theatres situated within the areas
of corporation and Special Grade Municipalities. It is not disputed that the
admission system fetches more revenue to the State. It is precisely for this
reason that the said system is continued in the major cities. It cannot be
said that the classification has no nexus to the object.
B
It is then argued that the theatres situated within a village panchayat
or a lesser Grade Municipality cannot be equated with the theatres situated
within the corporation areas or for that matter those situated within the
areas of Special Grade Municipalities merely by virtue of the fact that they
abut the latter areas. The material referred to above does, however, estab- c
lish that the theatres situated within the belt are substantially in the same
position as those within the corporation/special grade municipality areas,
if not better. We may also mention that the concept of belt is not a novel
one. In adjoining Andhra Pradesh, this concept has been in force since
quite a few years earlier to its introduction in Tamil Nadu.
D
It is then argued that while equating the theatres situated within the
belt with the theatres situated within the corporation areas, the rates of
admission for the theatres in the belt are retained at the original level. (As
stated hereinabove, rates of admission are prescribed under the Tamil
Nadu Cinema (Regulation) Act and the rules and orders made thereunder. E
Different rates of admission are prescribed for theatres situated in different
categories of local areas and also having regard to the amenities provided
therein). The petitioners grievance is that theatres situated within a gram
panchayat or a lesser grade municipality, as the case may be, are permitted
only the rates of admissible for that local areas, and that even after they F
are equated 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 tiot impressed, Firstly, G
rates of admission do not merely de~end upon the category of local are a
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% of the admission charge, which is now
brought down to 40% by the impugned Amendment Act on the actual
number of tickets sold whereas in respect of theatres governed by composi- H
180 SUPREME COURT REPORTS (1992] 2 S.C.R.
).- -
A tion system, the rate of lery-whether it is 27% 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 of
admission. It is not submitted by the petitioners that any of them has -,·
B applied and have been refused. The contention, therefore, is unacceptable.
We may also mention in this connection that the petitioners are not
suffering any re~ prejudice. Whichever the system of taxation, the amount
collected by way of entertainment tax is to be made over to the State. Even
under the composition systems, the formula evolved is supposed to repre-
c sent the amount really collected by way of entertainment tax. It may be that
in a given case or probably in many· cases-the exhibitors may be saving a
part of the amount collected by way of ~ntertainment tax by paying only
the compounded amount. But it may not necessarily be so. There may be
theatres where the formula may work to their prejudice because of their
D low occupancy rate. In any event, the mere fact that an exhibitor is able to
save a part of the tax by paying the compounded amount cannot be treated
· as a benefit in law which he is deprived of by following the admission
system.

Reference in this connection may also be made to the position
E obtaining in Andhra Pradesh as is evidenced by the Judgment in writ ).;.
petition No. 6404 of 1986 and batch dated 19th July, 1984 which is now
pending appeal in this court. In that State, the exhibitors are opposing the
composition system. They want the admission system to continue. We need
not go into the precise reason why the exhibitors in Andhra Pradesh are
F opposing the composition system or why the Tamil Nadu exhibitors are
opposing the admission system. Suffice it to say, that composition system
~
is only a substitute system and the formula evolved thereunder is supposed
--4.
to represent approximately the true amount colle~ted by an exhibitors by
way of entertainment tax. Under both the systems, the entertainment tax
collected from the cinegoer has to be made over to the State. May be that
G the composition system is more convenient in the sense that it obviates
keeping of records, establishing their correctness and so on and so forth.

Yet another argument urged is that while bringing all the theatres
1
located in the belt to the admission system, the impugned provision has
H exempted the open-air theatres and temporary theatres from such change-
SRINIVASA TIIEATRE v. GOVERNMENT [JEEVAN REDDY, J.] .181

over. This is said to be a discriminatory action. We cannot agree. So far as A
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
B
impugned provisions 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 c
~ that they would not be brought over to admission system. Factually speak-
ing, 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 Section S(A) and S(B)
it was made applicable to several local areas in two stages i.e., in 1978 and D
1982. Indeed by Amendment Act 20/83 and 48/86 certain local areas
governed by Section S(A) and S(B) were removed from their purview and
brought back to admission system. The entire experiment has been spread
over a period of only about 14 years. We cannot say that this period is
sufficient to establish, what may be called, a 'legislative practice'.· Even
E
otherwise, we are not satisfied that the said theory can be brought in to
defeat or invalidate a legislation. It may at the most be used against an
..... administrative action, and even there it may not be an indefeasible right.
No case has been brought to our notice where a legislation has been
invalidated on the basis that it offends the legitimate expectation of the
persons affected thereby. We may in this connection refer to the decision F
of the House of Lords in Council of Civil SeTVice Unions and Ors. v. Minister
for the Civil Service, (1985) A.C. 374, wherein this theory is referred to. In
~ this case, the staff of Government Communications Headquarters
..i....
(G.C.H.Q.) had the right to unionisation. By an order made by the Govern-
ment this right to unionisation was taken away insofar as the employees of G
G.C.H.Q. are concerned. The Union questioned the same. It was held by
the House of Lords that though the Unions had a legitimate expectation
that before barring them for unionisation they would be consulted, the
security considerations put forward by the Government, over-ride the right
~
of the petitioner's to prior consultation. H
.y

182 SUPREME COURT REPORTS • [1992) 2 S.C.R.

A \f.·e are also not impressed by the argument that the impugned
change-over amounts to unreasonable restriction upon the petitioners'
fundamental right to trade. Whichever the system, the exhibitor's liability
is only to make over the tax collected by him to the State. We have referred
hereinbefore to material placed before the court, which shows that the
theatres situated within the belts are in no way differently situated than the
B theatres located within the corporation areas. It may also be noted that all
has been done by the impugned provision is to bring back these theatres
to admission system, by which they were governed prior to 1978 Amend-
ment.

C For all the above reasons, these appeals fail and are dismissed. No
order as to costs.

T.N.A. Appeals dismissed.

..