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[Delegation of taxing powers on local bodies – effacement, discrimination]
The relevant provisions of the U.P. Nagar Mahapalika Adhiniyam, 1959 reads:
Section 2.: Definitions – In this Act unless there be something repugnant in the subject or
context –
(77) ‘theatre tax’ means a tax on amusement or entertainments.
“172. Taxes to be imposed under this Act.- (1) For the purposes of this Act and subject to the
provisions thereof and of Article 285 of the Constitution of India, the Mahapalika shall
impose the following taxes, namely,-
(a) property taxes,
(2) In addition to the taxes specified in sub-section (1) the Mahapalika may for the purposes
of this Act and subject to the provisions thereof impose any of the following taxes, namely,-
(a) a tax on trades, callings and professions and holding of public or private
appointments;
(i) a theatre tax; and
(j) any other tax which the State Legislature has the power under the
Constitution of India to impose in the State:
(3) The Mahapalika taxes shall be assessed and levied in accordance with the provisions of
this Act and the rules and bye-laws framed thereunder.
(4) Nothing in this section shall authorise the imposition of any tax which the State
Legislature has no power to impose in the State under the Constitution of India.”
Sub-section (1) of Section 199 of the Act required the Nagar Mahapalika to make a
preliminary proposal specifying the tax which it desired to impose under Section 172(2) of
the Act, the persons or class of persons to be made liable, the amount or rate leviable for each
such person or class of persons and any other information which the Government required. It
further required the executive committee of the Nagar Mahapalika to draft the rules in that
respect which were finally to be framed by the State Government. The draft rules were to be
published in the prescribed manner to enable the affected public to file objections. Section
200 of the Act made it obligatory for the Nagar Mahapalika to consider the objections so
received and to re-publish the draft rules in case any change was made as a result of such
consideration. After considering all the objections the draft rules were finalised by the Nagar
Mahapalika and forwarded to the State Government along with the objections. Section 201 of
the Act empowered the State Government to reject, modify or to accept the proposed rules.
Under Section 202 of the Act it was only after the rules were finalised by the State
Government that the Nagar Mahapalika could pass a special resolution imposing the tax from
the date to be specified. Under Section 203 the special resolution was to be sent to the
Government and the tax was to be imposed on the publication of the resolution in the
Government Gazette. Section 540(4) of the Act provided that all rules made under the Act
shall be laid for not less than 14 days before each House of the State Legislature as soon as
they were made and they were subject to such modifications as the legislature might make
during the session they were so laid.
The proposal of the Nagar Mahapalika, Lucknow to levy theatre tax, @ Rs 5 per cinema show
held in a building assessed on annual rental value of Rs 10,000 or more and @ Rs 3 per
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cinema show held in a building assessed on annual rental value of less than Rs 10,000, was
accepted by the State Government by following the procedure laid down under the Act. The
rules called The Lucknow Nagar Mahapalika Theatre Tax Rules were framed and enforced
with effect from December 15, 1965 and thereafter the tax was levied with effect from June 1,
- The rate of tax was increased from time to time and finally by a notification dated
October 30, 1979 published in the U.P. Government Gazette dated October 31, 1979 the
theatre tax was enhanced to Rs 25 per show on all Class I cinemas with annual rental value of
more than Rs 10,000 and Rs 20 per show on all Class II cinemas with annual rental value of
Rs 10,000 or less.
KULDIP SINGH, J. – 7. The learned counsel for the petitioners has contended that Section
172(2) of the Act is unconstitutional because the legislature has abdicated its function by
delegating the essential legislative powers upon the Nagar Palikas to levy all or any of the
taxes enumerated in the section. According to him the said power is unguided and
uncanalised. We do not agree with the learned counsel. Section 172(2) of the Act authorises
the Mahapalikas to impose the taxes mentioned therein, “for the purposes of this Act”. The
obligations and functions cast upon the Mahapalikas are laid down in various provisions of
the Act. The taxes under Section 172(2) of the Act, therefore, can be levied by the
Mahapalikas only for implementing those purposes and for no other purpose. The
Mahapalikas have to provide special civic amenities at the places where cinemas/theatres are
situated. So long as the tax has a reasonable relation to the purposes of the Act the same
cannot be held to be arbitrary. The rate of tax to be levied and the persons or the class of
persons liable to pay the same is determined by inviting objections which are finally
considered and decided by the State Government. There is no force in the argument that the
legislature has abdicated its function to the Mahapalikas. The tax is levied in accordance with
the statutory rules framed by the State Government and the said rules are laid before each
House of the State Legislature for not less than 14 days and are subject to such modifications
as the legislature may make during the session they are so laid. We, therefore, reject the
contention raised by the learned counsel for the petitioners. - The second contention raised by the learned counsel for the petitioners is that the
classification of cinemas on the basis of annual rental value for the purpose of fixing the rate
of tax is arbitrary and as such is violative of Article 14 of the Constitution of India. According
to him the classification has no nexus with the objects sought to be achieved. We do not
agree. In Western India Theatres Ltd. v. Cantonment Board, Poona Cantonment [AIR 1959
SC 582], the Cantonment Board, Poona imposed entertainment tax on cinemas. Rs 10 per
show was levied on the two cinemas of Western India Theatres Ltd. and Rs 5 per show in
other cases. The argument raised before this Court to the effect that the Cantonment Board
had singled out the two cinema houses for discriminatory treatment by imposing higher rate
of tax, was answered as under:
“It may not be unreasonable or improper if a higher tax is imposed on the shows given by a
cinema house which contains large seating accommodation and is situate in fashionable or
busy localities where the number of visitors is more numerous and in more affluent
circumstances than the tax that may be imposed on shows given in a smaller cinema house
containing less accommodation and situate in some localities where the visitors are less
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numerous or financially in less affluent circumstances, for the two cannot, in those
circumstances, be said to be similarly situate.” - The annual rental value under the Act indicates the extent of the accommodation, its
quality, the locality in which it is situated and other factors which relate to the enjoyment of
the building. The theatre tax is levied as a tax on amusement and entertainment. The
amusement in a building is affected by all those factors which are taken into consideration
while fixing the annual rental value of the building. Higher rental value in relation to a cinema
house shows that it has better accommodation, better situation and better facilities for
amusement and entertainment. The higher annual value is indicative of a better quality
cinema house as compared to a cinema house which has a lesser annual rental value. We are,
therefore, of the view that there is nothing unreasonable or improper in classifying the cinema
houses on the basis of annual rental value. The learned counsel for the petitioners has not
raised any other point before us. The writ petitions are dismissed with costs.
The delegation of legislative power which is arbitrary or the exercise of delegated legislative
power may be quashed. The students may read: Dwarka Prasad v. State of U.P., AIR 1954
SC 224 and Delhi Transport Corpn. v. Delhi Transport Corpn. Mazdoor Congress, AIR 1991
SC 101.
