IMPORTANT POINT
Proviso to Section 3A(1), of the U.P. Entertainments and Betting Tax Act, 1979, which allows centrally air cooled/air conditioned Cinema houses not receiving any grant-in-aid from Government an extra charge towards maintenance is not violative of Article 14 of the Constitution of India.

Headnote:Uttar Pradesh Entertainments and Betting Tax Act, 1979-Proviso to Section 3A(1)-Constitutional validity of-Section 3A enabling Cinema houses which are centrally air cooled/air conditioned to collect R1 extra charges over and above admission fee towards maintenance-Extra charge excluded from entertainment tax-Proviso to sub-section provided that Cinema houses receiving grant in aid from State under any incentive scheme not entitled to realise extra charge-Challenge to proviso as violative of Article 14 on ground of invidious discrimination by artificial classification of Cinema houses-Challenge untenable-Cinema owners not receiving grant-in-aid from Govt. formed a class by themselves and distinction from those Cinema owners who do not receive grant-in-aid-Classification had nexus with object sought to be achieved by Section 3A-Proviso to Section 3A(1) valid.
       Held : Article 14 does not prohibit reasonable classification of persons, objects and transactions by the Legislature for the purpose of attaining specific ends. To satisfy the test of permissible classification, it must not be "arbitrary, artificial or evasive" but must be based on some real and substantial distinction bearing a just and reasonable relation to the object sought to be achieved by the Legislature. (Para 11)
       The Legislature gaining wisdom from historical facts, existing situations, matters of common knowledge and practical problems and guided by considerations of policy must be given a free hand to devise classes to whom to tax or not to tax, to whom to exempt or not to exempt and to whom to give incentives and lay down the rates of taxation, benefits or concessions. In the field of taxation if the test of Article 14 is satisfied by generality of provisions the Courts would not substitute judicial wisdom for the legislative wisdom. (Para 12)
       In the case at hand it will be seen that at the point of time when the impugned provision was enacted, that is in the year 1992, there existed two classes of cinema owners: one, those who were receiving grant-in-aid under some incentive scheme enunciated by the State Government; and two, such cinema owners as were not receiving such grant-in-aid. It will be seen that the grant-in-aid schemes promulgated by the State Government were temporary schemes having a life span of three to five years which extended incentive depending on the population of the place where the cinema house was situated. It can be said, as was the plea raised before the High Court and also submitted by the learned Standing counsel for the State of U.P. before us, that the incentive was available on a staggered scale depending on the size of population catered to by the cinemas situated in rural areas. The incentive was by way of grant-in-aid equivalent to certain percentage of the quantum of entertainment tax collected by the cinema owner for the State Government. As a condition precedent to the entitlement for such grant-in-aid the cinema owners were subjected to a disability of not charging the fee for admission beyond a ceiling i.e. Rs. 2.50, later on revised to Rs. 5. Such cinema owners formed a class by themselves different and distinct from those cinema owners who were not receiving any grant-in-aid under an incentive scheme and/or were free to charge fee for admission without any restriction as to upper limit, i.e., their fee for admission to entertainment could be more than Rs. 2.50 or Rs. 5. Such classification is clear, well-defined and real. The object sought to be achieved was to encourage the cinema owners in boosting entertainment facilities available to the people. This was achieved by providing grant-in-aid under an incentive scheme to one class of cinema owners and by permitting recovery of certain amount by way of charges for maintenance to such another class of cinema owners as were not receiving any grant-in-aid. Thus it cannot be said that the classification had no nexus with the object sought to be achieved. (Para 13)
       If the benefit conferred by the impugned amendment was made general, i.e., available to all the cinema owners then the cinema owners operating in rural area would have secured double benefit-one by way of grant-in-aid and other by way of recovering maintenance charges from the cinema-goers exempt from payment of entertainment tax and there is nothing wrong in the Legislature having chosen not to confer such double benefit on the cinema owners already enjoying benefit of an incentive scheme of the State Government. Moreover, it cannot be lost sight of that the incentive schemes releasing the grant-in-aid were optional. There was no compulsion on the cinema owners to opt for the incentive scheme and have the grant-in-aid released to them. Such option was available at the commencement of the scheme and remained available throughout. Such of the cinema owners as felt that the fixation of Rs. 2.50 or Rs. 5 as a ceiling on fee for admission was not beneficial to them and they would stand to benefit by opting out from the incentive scheme and availing the benefit of recovering charges for maintenance conferred by the 1992 amendment were always and at any time free to do so. The impugned provision of the Act is, therefore, not violative Article 14 of the Constitution. (Para 13)

JUDGMENT

R.C. Lahoti, J.-This order shall govern the disposal of a bunch of appeals grouped into three and arising in the backdrop of events stated hereinafter.

2. The Uttar Pradesh Entertainments and Betting Tax Act, 1979 (U.P. Act No. 28 of 1979) was enacted and came into force in the State of U.P. on August 16, 1981. It introduced the levy of the entertainment tax payable at a certain percentage on all payments for admission to any entertainment. Entertainment as defined in the interpretation clause includes cinematograph exhibitions amongst others. With a view to encouraging cinema construction the State of Uttar Pradesh extended a scheme of grant-in-aid for permanent cinema houses constructed within a specified period through a Government Order dated 17th September, 1983. Permanent cinema houses constructed under the scheme depending on the population of the areas/towns wherein they were constructed were allowed grant-in-aid equivalent to 100%, 75%, 50% respectively for the first, second and third year of construction in the areas/places having the population of more than 20,000 but less than 1,00,000. In the areas/places having population of less than 20,000 the amount of grant-in-aid was equivalent to 100%, 75%, 50% respectively for the first two years, the third year and the fourth year of construction. There were a few conditions attaching with the entitlement to the benefit of the grant-in-aid. The conditions relevant for our purpose were: (i) that the grant-in-aid shall be admissible only to such cinema houses which fixed their maximum entrance rates inclusive of tax at not more than Rs. 2.50; (ii) that the District Magistrate shall permit the grant-in-aid after providing the licence in the proforma enclosed with the Government Order; and (iii) that the permission shall be effective after the cinema owner signed the agreement contemplated by the scheme. The scheme was extended from time to time with effect from 21st July, 1986, and 18th July, 1989. The phraseology and tenor of all such subsequent schemes is more or less similar to the scheme of the year 1983 excepting that under the schemes of the years 1986 and 1989 the benefit was available to such permanent cinema houses as fixed admission rate at not exceeding Rs. 5/-.

3. The U.P. Cinemas and Taxation Laws Amendment Act, 1989 (U.P. Act No. 12 of 1989) introduced Section 3-A in the body of the main Act which by an overriding effect over other provisions of the Act authorised the proprietor of a centrally air-cooled or centrally airconditioned cinema to realise, subject to prior permission of the District Magistrate, an extra charge of 10 paise and 25 paise respectively over and above the admission fee during the period commencing on the 15th day of March and ending on the 15th day of September every year which amount was not to be taken into account for calculating the entertainment tax if the same was spent for providing the air-cooling or air-conditioning facility, as the case may be. The abovesaid Section 3A was further amended by Act No. 14 of 1992. Section 3A in its amended from along with the proviso appended to sub-section (1), which proviso is the bone of contention, is reproduced hereunder:-

"(3-A. Extra (charges for maintenance of cinema and) air-cooled and air-conditioned facility.-[(1) Notwithstanding anything contained in this Act, the proprietor of a cinema may realise from the person making payment for admission to an entertainment in such cinema,-

(a) an extra charge of (one rupee) which shall be utilised for maintenance of the cinema premises;

(b) in case of a centrally air-cooled or centrally air-conditioned cinema a further extra charge of twenty five paise and sixty paise for air-cooling or air-conditioning facility respectively during the period commencing on the fifteenth day of March in any year and ending on the fifteenth day of October next following:

Provided that the proprietor of a cinema receiving grant-

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1999 Supreme(SC) 1558

Cases Referred (1)