Natraj Theatre vs Deputy Commissioner (Entertainment Tax) and Another

Syed Shah Mohammed Quadri, J.—The special appeal and the writ petition raise the same questions of law, so they are clubbed and heard together.

The special appeal is filed against the order of the Deputy Commissioner in Proceedings Rc. No. 1001/87/A6 dated November 26, 1987.

The petitioner filed revision before the Deputy Commissioner (C.T.), Nellore, against the order of the Commercial Tax Officer passed in Agreement No. 64/79-80 dated January 23, 1981 refixing the amount of tax payable u/s 5(1) of the Andhra Pradesh Entertainments Tax Act, 1939 (for short, "the Act"). The liability of the petitioner was fixed u/s 5(1) of the Act for the period from June 26, 1980 to June 25, 1981 at Rs. 720.43 per week. The petitioner reported variation in the gross collection capacity consequent upon reduction in the seating capacity and because of upward revision of rates of admission which are said to have been approved by the Joint Collector, Ongole, the licensing authority. So far as the seating capacity is concerned, the Commercial Tax Officer took the view that the reduction in the seating capacity cannot be taken note of but fixed the gross collection capacity taking into consideration the upward revision in the rates. That order of the assessing authority was questioned in revision by the petitioner u/s 20 of the Act. The revision was, however, dismissed on November 26, 1987. That order was assailed in the special appeal.

Being faced with the situation with regard to the position that the revision itself was not maintainable on the application of the petitioner and therefore the special appeal is incompetent, the petitioner filed the writ petition challenging the validity of the order of the Commercial Tax Officer dated January 23, 1981.

In the counter-affidavit filed by the Commercial Tax Officer, Podili, the facts are not disputed. What is submitted is that during the subsistence of the agreement the petitioner cannot claim that fresh agreement be entered into on the basis of change in the seating capacity as fresh agreement is contemplated only in case of upward revision in the rates of payment of admission of the seating capacity.

Mr. P. Srinivasa Reddy, the learned counsel for the petitioner, submits that having regard to the provisions of rule 33(10) of the A. P. Entertainments Tax Rules, 1939 (for short, "the Rules") and the explanation to section 5(1) of the Act, the Commercial Tax Officer ought to have entered into a fresh agreement on the basis of the gross seating capacity calculated with reference to seating capacity.

The learned Special Government Pleader for Taxes submits that as there can be no upward revision consequent upon the reduction either in the seating capacity or in the rate of admission, therefore the Commercial Tax Officer was right in ignoring the reduction in the seating capacity but applying the enhanced rates of admission to the original number of seats.

The short question that arises for consideration in the writ petition is :

"How the gross collection capacity should be calculated in the case of upward revision in the gross collection capacity when the number of seats are reduced but the rates of payment for admission have been enhanced ?"

The expression "gross collection capacity" for the purposes of section 5 of the Act is defined in the explanation to section 4-C of the Act and it reads as follows :

"Explanation to section 4-C :

For the purpose of this section and section 5, the terms ''gross collection capacity per show'' shall mean the notional aggregate of all payments for admission, the proprietor would realize per show, if all the seats or accommodation as determined by the licensing authority under the Andhra Pradesh Cinemas (Regulation) Act, 1955 (President''s Act 4 of 1955) in respect of the place of entertainment are occupied, and calculated at the maximum rate of payments for admission as determined by the said licensing authority."

It would also be appropriate to note here sub-rules (10) and (11) of rule 33 of the Rules which deal with the determination of gross collection capacity. The said Rules read thus :

"33. (1) to (9)......................

(10) The proprietor of the licensee shall inform the Commercial Tax Officer when there is a change in the gross collection capacity of his place of entertainment by virtue of the upward revision of the rates of admission or of additional accommodation as approved by the competent authority.

(11) Thereupon the Commercial Tax Officer shall vary the fixed sum and the agreements for payment of fixed sum shall be modified accordingly :

Provided that the modified agreement shall be in force for the remaining period of the original agreement."

A plain reading of sub-rules (10) and (11) makes it clear that an obligation is cast on the proprietor or the licensee of the theatre to inform the Commercial Tax Officer of the change in the gross collection capacity of his place of entertainment by virtue of the upward revision of the rates of admission or additional accommodation as approved by the competent authority. On such intimation the Commercial Tax Officer has to vary the fixed sum and the agreements for payment of fixed sums should be modified which should be in force for the remaining period of the original agreement.

Now referring to the explanation to section 5, it may be noted that the gross collection capacity has to be computed for each show in respect of any place of entertainment in existence before April 1, 1976. For that purpose the seating capacity or the accommodation and the maximum rate of payment for admission have to be taken into consideration as on April 1, 1976 or on the date of the agreement, whichever is higher. The freezing date "as on April 1, 1976" was held by the Division Bench of this Court in M. Venkateswara Rao v. B. Narayana Raju (1978) 2 APLJ 442 to be unjustified. If the words "as on April 1, 1976" are eliminated from consideration, then the gross collection capacity has to be computed on the date of agreement having regard to the seating capacity or accommodation and the maximum rate of payment for admission determined by the licensing authority.

In the instant case the reduction in the seating capacity and the increase in the rates of payment for admission were approved by the licensing authority under the Andhra Pradesh Cinemas (Regulation) Act, 1951. If that is done, the number of seats for the fresh agreement, that is, reduced number of seats on the date of the fresh agreement and the enhanced rate of payment for admission will have to be taken into consideration. In this view of the matter, we find that the order impugned in the writ petition is unsustainable in law, it is accordingly quashed. The second respondent is directed to fix the rates on the basis of the reduction in the seating capacity and the enhancement in the rates of payment for admission.

In the result, the special appeal is dismissed and the writ petition is allowed, but, in the circumstances of the case there shall be no order as to costs.

Special appeal dismissed.

Writ petition allowed.