Shrikrishna Shaligram Gupte and Others vs Municipal Committee

Kaul, C.J.—This is an application made under Article 226 of the Constitution by six persons three of whom are the proprietors and the remaining three partners in six different firms which carry on business of showing cinematograph films for profit within the limits of Ujjain Municipality. It is averred that two taxes imposed recently by Ujjain Municipality are ultra vires of the powers of the Municipal Committee, Ujjain, and the applicants pray that the Committee be restrained by a writ of mandamus from enforcing the orders relating to these taxes.

The material facts which are not disputed are as follows:

Under the law in force in Gwalior State (whereof Ujjain formed part) prior to its integration with Madhya Bharat the Nagar Sabha (Municipal Committee) Ujjain had the power to impose an entertainment tax. This tax could be imposed "on all those public entertainments which are displayed for a fee or on receipt of a payment." u/s 52, Gwalior Municipalities Act, such a tax could be imposed on "Cinemas". An entertainment tax was levied on all cinema houses under the said Law at the following rates:

(i) For every ticket upto 0-4-0 0 0-6

(ii) " " " from 0-4-0 upto 0-8-0 0-1-0

(iii) " " " from 0-8-0 upto 1-0-0 0-2-0

(iv) " " " above 1-0-0 0-4-0

By an order dated 30-6-1951 issued under the signature of Executive Officer of the Municipality Ujjain purporting to act under an order of the Government conveyed by letter No. 319 of 26-5-1951 the entertainment tax above referred to was enhanced as follows:

For every ticket upto 0 4-0 0-0-9

" " " from 0-4-0 upto 0-8-0 0-1-6

" " " frem 0-8-0 upto 1-0-0 0-3-0

" " " above 1-0-0 0-6-0

On 4-5-1951 the six firms who are the applicants before us were served with notices by the Nagar Sabha Ujjain intimating the imposition of a performance tax at the rate of Rs. 5/- for each show.

It is contended on behalf of the applicants that both these taxes were ultra vires of the powers of the Municipal Committee. A rule nisi was issued to the Municipal Committee, Ujjain to show cause against the application. By a written reply filed on behalf of the Ujjain Municipality in response to the rule, it was contended "that the enhanced entertainment tax was imposed after full compliance with the formalities of the Law prescribed under the Gwalior Municipalities Act". With regard to the "performance tax", it was urged "that the imposition of a performance tax is also permitted by the provisions of the Constitution. This tax was also imposed - in compliance with the formalities of the Law, prescribed under the Gwalior Act. The Ujjain Municipality is, however, now advised that the performance tax cannot exceed the limit laid dpwn by Article 276, Clause (2) and to that extent theopponent Municipality is ready and willing to grant redress to the Petitioners".

I will take up the question relating to what has been referred to in para. (3) of the application as a "performance tax". On 3-1-1950 a notification was issued by the Ujjain Municipal Committee which ran as follows:

Ujjain nagar ki sima men pradarshit hone wale khelori per panch rupayya fi khel tax lagayya hai.

u/s 52 Gwalior Municipalities Act, any Municipal Committee established in the Gwalior State could with the previous sanction of the Government impose any of the taxes mentioned in that section for the purposes of the said Act. Clause (J) of the Section authorises an imposition of an entertainment tax. This tax could under the Section be imposed on all public entertainments given on receipt of any fee or payment. Among the entertainments mentioned in that clause by way of illustrations we find that there is specific mention of cinemas. It cannot be disputed that the Gwalior Municipalities Act, Samvat 1993, continued in force under the provisions of the Regulation of the Government Ordinance No. 1 promulgated by the Raj Pramukh of Madhya Bharat and later till 25-1-1950 by Section 4 of the Regulation of Government Act. Subsequent to that date it continues in force in the territories to which it applies under the provisions of Article 372 of the Constitution. It was admitted before us that the previous sanction of the Government had been obtained by the Ujjain Municipal Committee for levying this tax. Thus on the face of it there is nothing which would show that the tax was illegally imposed.

It was contended, however, by the learned Counsel for the Petitioners that it was not a tax on a "profession" nor one on ''a trade'' but a tax on income which could be imposed only by the Parliament and hence it was illegal. I am clear that the argument is without substance. Under entry 60 of List II of the Seventh Schedule of the Constitution of India a State Government is authorised to legislate with regard to ''Taxes on professions, trades, callings and employments". Under Entry 62 it can legislate with regard to "Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling". Even though the tax in question be not a tax on profession or trade it is a trade on a calling. "Calling" according to Oxford Dictionary signifies persons ''following a particular business''. This is a tax payable by a person who follows the business of showing cinematograph films for profils. As such it was permissible for the State to legislate with regard to such a tax. This was done by the Gwalior Municipalities Act under which (see Section 52(j)) such a tax could be imposed on all public entertainments displayed for a fee or on receipt of some payment. The argument that it was a tax on income is met by Article 276 of the Constitution which lays down that:

Notwithstanding anything in Article 246, no Law of the Legislature of the State relating to taxes for the benefit of the State or of a Municipality, District Board, Local Board or other local authority therein in respect of professions, trades, callings or employments shall be invalid on the ground that it relates to tax on income.

Reference was made in the course of argument to the definition of the expression ''performance'' found in, the Madhya Bharat Public Amusements and Entertainments Act. According to that definition, the expression ''performance'' as used in the said Act does not include cinematograph exhibition. It is difficult to follow the relevancy of the definition given in the said Act to the matter before us. The definition of the expression ''performance'' as given in that Act is as expressly stated therein for the purposes of that Act and cannot legitimately be referred to in determining the question of the validity of a tax imposed by the Ujjain Municipality levying a sum by way of performance tax on every show within the limits of the said Municipality. That a tax on a cinema show can be imposed under the provisions of Section 52 (j) Gwalior Municipalities Act, can on the language of the section admit of no doubt Any reference to the definition of the term ''performance'' in any other Act is irrelevant.

Reference has been made earlier to Article 275. of the Constitution, Clause (2) of the said Article runs as follows:

The total amount payable in respect of any one person to the State or to any one Municipality, district Board, local board or other local authority in the State by way of taxes on professions, trades, callings and employments shall not exceed two hundred and fifty rupees per annum.

It is clear, therefore, that thOugh Article 276 lays down a tax imposed by a State for the purpose of a Municipality on a calling shall not be invalid on the ground that it relates to a tax on income, every Legislation relating to such a tax cannot ignore the provisions of Clause (2) of the said Article. There must be something either in the language of such Legislation or in the circumstances or manner of the imposition of the tax which makes it clear that the liability of one person to pay taxes on professions, traces and callings to any one Municipality shall not exceed the sum of rupees two hundred and fifty per annum. It was frankly conceded by the learned Advocate General who appeared for the Ujjain Municipality that the imposition of the said, performance tax under consideration was open, to this criticism; In the absence of any such restriction as is contemplated by Article 276, Clause (2), the Notification, under which the tax in question, has been imposed makes a person liable to pay sums far exceeding Rs. 250/- per annum. To take a concrete illustration, if any one of the applicants before us displays in his cinema house one or more shows for one hundred days in a year he will be liable to pay Rs. 500/- under the said Notification. That the tax in question was open to this criticism was further admitted in the return filed on behalf of the Ujjain Municipality, I hold therefore that the Notification by which the performance tax in question was imposed invalid.

I will next turn to the other tax the validity of which was challenged by the present Petitioners. It was admitted that under the Law in force in Gwalior State prior to its integration with Madhya Bharat the Municipal Committee of Ujjain was authorised to impose a tax on entertainments and that it had imposed a tax on entertainments given in cinema houses at the rates mentioned in para 3 of this judgment. By an order dated 30-6-1951 issued over the signature of the Executive officer of Ujjain Municipality the said entertainment tax was enhanced as stated in para 4 of this judgment. It is contended that the enhancement was illegal. I have found it somewhat difficult to follow the argument advanced on this part of the case. It is not disputed that the Ujjain Municipality had the authority to (sic) impose a tax on entertainments u/s 52, Gwalior Municipalities Act. On 25-1-1950 this was an existing Law as defined in Article 366(10) of the Constitution. All existing Laws have as already stated been continued to force under Article 372 of the Constitution. Clearly therefore if the Municipal Committee could impose a tax at the rate mentioned in para 3 of this judgment before 25-1-1950. If this was so, there appears to be no valid ground for holding that it could not impose the same tax at a higher rate since the Constitution came into force.

It was faintly argued that the Act (Gwalior Municipalities Act) "could not apply to future taxation after the Constitution came into force". I frankly confess that I am unable to appreciate the force of this contention. If the said Act was an existing Law on 25-1-1950 and has continued to be in force since, it cannot be contended with any show of reason that Chough it could validly impose a tax before 26-1-1950 it cannot do so under the same provisions since that date.

Another argument advanced before us in connection with these taxes was that the scheme of Section 52, Gwalior Municipalities Act contemplates delegated Legislation which is not permitted under the Constitution. I am clear that Section 52, Gwalior Municipalities Act, is not an instance of delegated Legislation. It lays down clearly that with the previous sanction, of the Government a Municipal Committee can impose an entertainment tax. Thus the legislation to impose a tax was enacted by the proper law making authority. What was left to the Municipality was only the determination of the conditions and the circumstances in which the tax could be imposed. Even this was made subject to the previous approval of the Government. This may be an instance of, "conditional legislation" but is not one of delegated legislation. Apart from that it would appear that this was an existing law which has continued in force by virtue of Article 372 of the Constitution, and its validity cannot be challenged on such a ground as put forward by the learned Counsel. I am of opinion, therefore, that the enhancement of the rate of the tax referred to in paras. 2 and 4 of the application is valid and its legality is not open to any objection.

With regard to the performance tax as already stated this tax is not valid inasmuch as it ignores the provisions of Article 276(2) of the Constitution and I would accordingly direct the Municipal Committee to refrain from levying the said performance tax.

V.M. Mehta, J.

I agree.