IMPORTANT POINT
Karnataka State Legislature is competent to enact law to levy tax under Entry 62 List II of Seventh Schedule of the Constitution on admission of cars/motor vehicles inside the Driver-in-Theatre. Hence High Court was wrong in holding that sub-clause (v) of Clause (i) of Section 2 of the Karnataka Entertainment Tax Act is ultra vires.

Headnote:Constitution of India-Entry 62 of List II 7th Schedule-Tax on Luxuries, entertainment, amusement, betting and gambling-Karnataka Entertainment Tax Act-Section 2(1)(v)-Entertainment tax on the admission of cars/motor vehicles inside the Drive-in-Theatre-Karnataka High Court struck it down in writ petition on being beyond the legislative competence of the State Legislature-Whether correct? (No)-Appeal allowed-Case Law discussed.
       Held : Entry 62 of List II of Seventh Schedule empowers the State Legislature to levy tax on luxuries, entertainment, amusements, betting and gambling. Under Entry 62, the State Legislature is competent to enact law to levy tax on luxuries and entertainment. The incidence of tax is on entertainment. Since entertainment necessarily implies the persons entertained, therefore, the incidence of tax is on the person entertained. Coming to the question whether the State Legislature is competent to levy tax on admission of cars/motor vehicles inside the Drive-in-Theatre especially when it is argued that cars/motor vehicles are not the persons entertained. Section 3 which is charging provision, provides for levy of tax on each payment of admission. Thus, under the Act, the State is competent to levy tax on each admission inside the Drive-in-Theatre. The challenge to the levy is on the ground that the vehicle is not a person entertained and, therefore, the levy is ultra vires. It cannot be disputed that the car or motor vehicle does not go inside the Drive-in-Theatre of its own. It is driven inside the Theatre by the person entertained. In other words the person entertained is admitted inside the Drive-in Theatre along with the car/motor vehicle. Thereafter the person entertained while sitting in his car inside the auditorium views the film exhibited therein. This shows that the person entertained is admitted inside the Drive-in-Theatre along with the car/motor vehicle. This further shows that the person entertained carries his car inside the Drive-in-Theatre in order to have better quality of entertainment. The quality of entertainment also depends on with what comfort the person entertained has viewed the cinema films. Thus, the quality of entertainment obtained by a person sitting in his car would be different from a squatter viewing the film show. The levy on entertainment varies with the quality of comfort with which a person enjoys the entertainment inside the Drive-in-Theatre. In the present case, a person sitting in his car or motor vehicle has luxury of viewing cinema films in the auditorium. It is the variation in the comfort offered to the person entertained for which the State Government has levied entertainment tax on the person entertained. The real nature and character of impugned levy is not on the admission of cars or motor vehicles, but the levy is on the person entertained who takes the car inside the theatre and watches the film while sitting in his car. We are, therefore, of the view that in pith and substance the levy is on the person who is entertained. Whatever be the nomenclature of levy, in substance, the levy under heading "admission of vehicle" is a levy on entertainment and not on admission of vehicle inside the Drive-in-Theatre. As long as in pith and substance the levy satisfies the character of levy, i.e "entertainment", it is wholly immaterial in what name and form it is imposed. The word "entertainment" is wide enough to comprehend in it, the luxury or comfort with which a person entertains himself. Once it is found there is a nexus between the legislative competence and subject of taxation, the levy is justified and valid. We, therefore, find that the State legislature was competent to enact sub-clause (v) of clause (i) of Section 2 of the Act. We accordingly hold that the impugned levy is valid. (Para 12)
       For the aforesaid reasons, we are of the view that the High Court fell in serious error in holding that sub-clause (v) of clause (i) of Section 2 of the Act is ultra vires Entry 62 of List II of Seventh Schedule. (Para 13)
       Held finally, consequently, this appeal deserves to be allowed. The judgment under appeal is set aside. The writ petition shall stand dismissed. The appeal is allowed. There shall be no order as to costs. (Para 14)

JUDGMENT

V.N. Khare, J.-This appeal is directed against the judgment of the Karnataka High Court passed in the writ petition filed by the respondent herein whereby sub-clause (v) of Clause (i) of Section 2 of the Karnataka Entertainment Tax Act (hereinafter referred to as the Act ) was struck down as being beyond the legislative competence of the State Legislature.

2. The respondent herein, is the owner and proprietor of a Drive-in-Theatre in the outskirts of Bangalore city wherein cinema films are exhibited. It is alleged that the Drive-in-Theatre is distinct and separate in its character from other cinema houses or theatres. The Drive-in-Cinema is defined under Rule 111-A of Karnataka Cinemas (Regulation) Rules 1971 (hereinafter referred to as the Rules ) framed in exercise of the powers conferred on the State Government under Regulation 22 of the Karnataka Cinemas (Regulation) Act, 1964. The definition of Drive-in-Cinema runs as under:

" Drive-in-Cinema means a cinema with an open-air theatre premises into which admission may be given normally to persons desiring to view the cinema while sitting in motor cars. However, where an auditorium is also provided in a drive-in-cinema premises, persons other than those desiring to view the cinema while sitting in motor cars can also be admitted. Such drive-in-cinemas may have a capacity to accommodate not more than one thousand cars."

The Drive-in-Theatre of the respondent with which we are concerned here is a cinema with an open-air-theatre into which admissions are given to persons desiring to see cinema while sitting in their motor cars taken inside the theatre. The Drive-in-Theatre has also an auditorium wherein other persons who are without cars, view the film exhibited therein either standing or sitting. The persons who are admitted to view the film exhibited in the auditorium are required to pay Rs.3/- for admission therein. It is not disputed that the State Government has levied entertainment tax on such admission and the same is being realised. However, if any person desires to take his car inside the theatre with a view to see the exhibition of the films while sitting in his car in the auditorium, he is further required to pay a sum of Rs.2/- to the proprietor of the Drive-in-Theatre. The appellant-State in addition to charging entertainment tax on the persons being entertained, levied entertainment tax on admission of cars inside the theatre. This levy was challenged by the proprietors of the Drive-in-Theatres by means of writ petitions before the Karnataka High Court which were allowed and levy was struck down by a single Judge of the High Court. The said judgment was affirmed by a Division Bench of that Court. It was held, that the levy being not on a person entertained (i.e. Car/Motor vehicle), the same was ultra vires. After the aforesaid decision, the Karnataka Legislature amended the Act by Act No.3 of 1985. By the said amendment, sub clause (v) was added to Clause (i) of Section 2 of the said Act. Simultaneously, Sections 4A and 6 of the Act were also amended. After the aforesaid amendments, the appellant herein, again levied entertainment tax on admission of cars into Drive-in-Theatre. This levy was again challenged by means of a petition under Article 226 of the Constitution and the said writ petition was allowed, and as stated above, the High Court struck down sub-clause (v) to Clause (i) of Section 2 of the Act.

3. Learned counsel appearing for the appellant urged that insertion of sub-clause (v) of Clause (i) of Section 2 of the Act is a valid piece of legislation and after its insertion and amendment of Section 6 and Section 4A of the Act, the appellant-State was competent to levy and realise the entertainment tax on the admission of cars/motor vehicles inside the Drive-in-Theatre. Learned counsel urged that in pith and substance, the levy is on the person entertained and not on the admission of cars/motor vehicles inside the Drive-in-Theatre.

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2001 Supreme(SC) 467

Cases Referred (7)