The Western India Theatres Ltd vs The Cantonment Board

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 145 of 1955

Decision Date: 16 January 1959

Coram: S.K. Das, P.B. Gajendragadkar, K.N. Wanchoo, M. Hidayatullah

In this matter the petitioner was The Western India Theatres Limited, a public limited company, and the respondent was the Cantonment Board of Poona. The case was decided by the Supreme Court of India on 16 January 1959. The judges who formed the bench were Justice S.K. Das, Justice P.B. Gajendragadkar, Justice K.N. Wanchoo and Justice M. Hidayatullah, with Justice S.K. Das acting as Chief Justice. The judgment is reported in the 1959 volume of the All India Reporter at page 582, in the 1959 Supplement to the Supreme Court Reports at page 63, and is cited in several later reports. The statutory provisions that were examined included section 60 of the Cantonments Act, 1924 (Act 11 of 1924), section 73 of the Bombay Municipal Boroughs Act, 1925 (Bombay Act XVIII of 1925), and section 100 of the Government of India Act, 1935 together with entry 50 of Schedule VII to that Act.

The petitioner, The Western India Theatres Limited, held leases for two cinema houses known as “West End” and “Capitol,” both situated within the Poona cantonment area. By a notification dated 17 June 1948, the Government of Bombay, with the approval of the Governor-General-in-Council, imposed an entertainment tax of ten rupees per show on the petitioner’s cinema houses and a tax of five rupees per show on other cinema houses in the cantonment. The petitioner paid the tax but did so under protest and subsequently instituted suit seeking a declaration that the tax imposed by the respondent was illegal, a permanent injunction restraining the respondent from levying the tax, and a refund of the amount of Rs 45,802 that had been paid. The trial court decreed the suit in favour of the petitioner, but on appeal the High Court reversed the trial court’s decision and dismissed the suit. The legal issue that arose concerned whether the respondent had authority under section 60(1) of the Cantonments Act, read with section 73(xiv) of the Bombay Municipal Boroughs Act, to impose any tax that the Bombay Provincial Legislature could impose on the province. The petitioner argued that although the Provincial Legislature possessed power under section 100 of the Government of India Act, read with entry 50 of Schedule VII, to make laws imposing “taxes on luxuries, including taxes on entertainments, amusements, betting and gambling,” that entry was intended to apply only to taxes on persons who enjoyed the luxuries or entertainments, not on persons who provided them. Consequently, the petitioner maintained that a tax on the cinema houses represented a tax on a profession, trade or calling, which would fall under entry 46 of the Schedule and could not exceed Rs 100 per annum under section 142A of the Government of India Act, 1935, and the constitutional limit of Rs 250 per annum under Article 276(2) of the Constitution.

The Court held that the argument asserting a limitation of Rs 250 per annum under Article 276(2) of the Constitution was to be rejected. It reiterated the well-settled principle that, when interpreting a legislative entry that confers power, the broadest possible meaning consistent with the ordinary sense of the words must be adopted. Accordingly, there was no justification for construing Entry 50 of the Seventh Schedule so as to distinguish between the provider and the consumer of luxuries, entertainments or amusements; both categories were to be regarded as susceptible to taxation. In support of this approach, the Court referred to the decision in Navinchandra Mafatlal v. The Commissioner of Income-tax, Bombay City, reported in 1955 S.C.R. 829. Although an entertainment tax may be characterized as a levy on expenditure, the Court found no basis for limiting Entry 50 to taxes only on monies actually spent on such luxuries, entertainments or amusements. The entry, the Court explained, was concerned with the subjects of luxuries, entertainments and amusements themselves, not with identifying the giver or the receiver as the sole objects of legislation. Consequently, the tax under dispute was distinguished from a tax on a profession, trade or calling; it was a tax imposed on an actual show being presented, irrespective of whether any profession or calling was exercised at the time.

The judgment concerned Civil Appeal No 145 of 1955, filed under a certificate of fitness granted by the High Court of Bombay. The appeal challenged the decree of the Bombay High Court dated 10 February 1953, which had set aside the earlier decree of the Senior Civil Judge, Poona, dated 31 July 1951, in Special Suit No 89 of 1950. The appellant, a public limited company incorporated under the Indian Companies Act 1913, leased two cinema houses known as “West End” and “Capitol” located within the Poona cantonment area, where it screened both foreign and Indian films. On 20 March 1947, the respondent, exercising powers under Section 60 of the Cantonments Act 1924, issued a notice proposing, with prior approval of the Central Government, certain amendments to the Government of Bombay’s General Department Notification No 4160 dated 17 June 1918. The notice indicated that the draft amendments would be considered after 21 April 1947 and invited written objections within thirty days of publication. Counsel for the appellant comprised H D Banaji, R A Gagrat and G Gopalakrishnan, while counsel for the respondent included H N Sanyal, Additional Solicitor-General of India, H J Umrigar and R H Dhebar. The judgment of the Supreme Court was delivered by Chief Justice Das on 16 January 1959, confirming the High Court’s dismissal of the appellant’s suit and awarding costs throughout to the respondent.

In this case the respondent issued a notice on 20 March 1947 stating that, exercising powers granted by section 60 of the Cantonments Act, 1924, it would consider certain amendments after 21 April 1947 and invited written objections within thirty days of the notice’s publication. One of the proposed amendments concerned a “V-Tax on Entertainments” and listed the following rates: Rs 5-0-0 per drama show, Rs 10-0-0 per cinema or talkie show, Rs 20-0-0 per circus show, Rs 100-0-0 per day for a horse-race meeting, and Rs 20-0-0 per day for an amusement park, with the tax to be levied at Rs 10-0-0 per show for the West End and Capitol Talkies and at Rs 5-0-0 per show in all other cases. The Cinematograph Exhibitors Association of India lodged objections to these proposals. The Cantonment Executive Officer of Poona, by a letter dated 8 July 1947, informed the association’s secretary that the association’s objection had been forwarded to the Government of India in original together with the respondent’s proposals and that the Defence Department of the Government of India had approved the entertainments tax by means of Notification No 1463 dated 7 May 1947. Subsequently, on 17 June 1948 the Government of Bombay issued a notification declaring that, superseding all earlier notifications on the same subject, the Governor-in-Council, with the prior sanction of the Governor-General-in-Council, was pleased to impose certain taxes in the Poona Cantonment effective from 15 July 1948. Among the taxes imposed were the “V-Tax on Entertainments” with the following rates: Rs 10-0-0 per cinema or talkie show for the West End, Rs 5-0-0 per show for the Capitol and all other cases, Rs 2-0-0 per circus show, Rs 100-0-0 per day for horse-race meetings, and Rs 20-0-0 per day for an amusement park. The appellant paid the tax under protest and, about 19 April 1950, instituted suit No 89 of 1950 in the Court of the Civil Judge, Senior Division, Poona, seeking a declaration that the levy, collection or recovery of the tax by the respondent was illegal and invalid, a permanent injunction restraining the respondent from imposing the tax, a refund of Rs 45,802-0-0 representing the total tax paid, together with costs, interest on the judgment and any other relief the court deemed appropriate. By its judgment dated 31 July 1951 the trial court decreed the plaintiff’s suit in full. The respondent appealed the judgment to the High Court, which by its judgment and decree dated 10 February 1953 allowed the appeal, dismissed the appellant’s suit and awarded costs throughout to the respondent. Nevertheless, the High Court granted the appellant a certificate of fitness for appeal to this Court, and consequently the present final appeal was filed.

The Court observed that throughout the period relevant to this appeal the respondent operated under the Cantonments Act, 1924 (Act 11 of 1924). Section 60 of that Act provided that the Board could, with prior sanction of the local Government, impose in any Cantonment any tax that, under any enactment then in force, might be imposed in any municipality of the province in which the Cantonment lay, and that any tax imposed under this provision would become effective from the date of its notification in the official gazette. Shortly after the Cantonments Act was enacted, the Bombay Municipal Boroughs Act, 1925 (Bom. XVIII of 1925) came into force, authorising municipal boroughs in the province of Bombay to levy taxes. Consequently, the Court held that the respondent’s authority to levy and collect taxes under the Cantonments Act was co-extensive with the powers granted to the borough municipalities under the Bombay Municipal Boroughs Act, 1925. The Court then referred to Section 73 of the Municipal Boroughs Act, which enumerated the taxes that a municipality could impose, stating that, subject to any general or special orders of the Provincial Government and to the provisions of sections 75 and 76, a municipality might impose, for the purposes of the Act, any of the following taxes, including “any other tax (not being a toll on motor vehicles and trailers, save as provided by section 14 of the Bombay Motor Vehicles Tax Act, 1935) which under the Government of India Act, 1935, the provincial Legislature has power to impose in the province.” The pivotal question, therefore, was whether the provincial Legislature of Bombay possessed the authority to impose the particular tax that was the subject of the appeal. Under section 100 of the Government of India Act, 1935 read with entry 50 in Schedule VII to that Act, the provincial Legislature was empowered to make laws concerning “taxes on luxuries, including taxes on entertainments, amusements, betting and gambling.”

Counsel for the appellant argued that the tax being challenged did not fall within entry 50 at all. According to counsel, entry 50 contemplated a law that imposed taxes on persons who actually received or enjoyed the luxuries, entertainments or amusements, and therefore a law made under that entry could not validly tax persons who merely provided such luxuries, entertainments or amusements, because those providers themselves did not receive or enjoy any luxury, entertainment or amusement but simply engaged in their profession, trade or calling. Counsel further maintained that the impugned law was in fact one that related to the matters listed in entry 46, namely taxes on professions, trades, callings and employments, and consequently the tax could not exceed Rs. 100 per annum under section 142A of the Government of India Act, 1935 and Rs. 250 per annum under Article 276(2) of the Constitution.

Article 276 paragraph 2 of the Constitution was raised as a basis for contesting the tax, but the Court could not accept that argument as sound. The Court referred to its earlier decision in Navinchandra Mafatlal v. The Commissioner of Income Tax, Bombay City, which, following several preceding judgments, held that entries in the legislative list must not be read in a narrow or restricted sense and that each general word should be understood to include all ancillary or subsidiary matters that can fairly and reasonably be said to be encompassed by it. It has become settled law that when construing an entry that confers legislative power, the widest possible construction, based on the ordinary meaning of the words, must be applied. Accordingly, there is no justification for interpreting the words “taxes on luxuries or entertainments or amusements” in entry 50 as having a limited meaning that would restrict the operation of the law to tax only those persons who receive the luxuries, entertainments or amusements. The entry treats luxuries, entertainments and amusements as the objects on which the tax may be imposed, and therefore the tax may just as appropriately fall on the provider as on the recipient of those objects. Although economists often describe an entertainment tax as a tax on expenditure, and it becomes a tax on expenditure when imposed on the receiver, there is no authority to hold that entry 50 contemplates only a tax on money spent for luxuries, entertainments or amusements. The entry, as explained, contemplates legislation concerning these matters as objects, and a law that imposes a tax on the act of entertaining falls within the entry whether the tax is levied on the giver or the receiver of the entertainment. Moreover, the impugned tax is not a tax imposed for the privilege of carrying on any trade or calling; it is a tax imposed on every show, that is, on each instance of exercising the particular trade, calling or employment. If no show occurs, no tax is due. By contrast, a lawyer who pays a fee to obtain a licence does so for the privilege of having the right to practice the profession, regardless of whether he actually practices; that tax is for the privilege of the profession. The tax in question, however, is a tax on the act of entertainment that results in a show. Consequently, the Court concluded that section 73 is a law relating to the matters enumerated in entry 50 and not to entry 46, and that the Bombay legislature possessed ample authority to enact this law. The only other point raised before the Court was…

The Court examined the contention that the notification breached the equal protection clause of the Constitution because it singled out the appellant’s cinema houses for a higher levy of ten rupees per show, while other cinema houses were subjected to a lower levy of five rupees per show. It recalled that the meaning, scope and effect of Article 14 have been exhaustively interpreted by this Court in the precedents of Budhan Choudhury v. State of Bihar and Shri Rama Krishna Dalmia v. Justice S. R. Tendolkar, and therefore the proper test for discrimination was already well established. The record showed that, before the trial court, the appellant neither raised an issue nor produced any evidence indicating the existence of other cinema houses situated in circumstances comparable to its own premises. The Court observed that it would not be unreasonable or improper for the legislature to impose a higher tax on a cinema house that possesses a large seating capacity, is located in a fashionable or heavily trafficked locality, and attracts a greater number of affluent patrons, as compared with a smaller cinema situated in a less busy area where audiences are fewer and less financially well-off; under such factual distinctions the two establishments cannot be described as similarly situated. Nevertheless, the trial court possessed no material upon which it could determine whether a real discrimination occurred in the particular facts of this case, and the present Court likewise found no basis to reach a contrary conclusion. The Court recognised that the appellant might, in a future proceeding, adduce evidence establishing the presence of other similarly situated cinema houses and thereby demonstrate discriminatory treatment, but in the present suit the appellant failed to discharge the evidential burden placed upon it. Consequently, on the material before the Court, it was impossible to hold that any factual discrimination existed, and the appeal was dismissed with costs.