Judgment:
M. Jagannadha Rao, J.
1. In this batch of writ petitions the question for consideration is regarding the mode of computation of the benefit conferred on the exhibitors by the various orders of the Government issued under section 19A of the Andhra Pradesh Entertainments Tax Act, 1939 (hereinafter referred to as 'the Act).
2. For the purpose of understanding the point arising in the case, it will he sufficient to refer to the facts in W.P. No. 18126 of 1989. Each petitioner is either proprietor of the theatre or the partner of the firms running the theatres. Each of the petitioners has been paying entertainment tax in accordance with the provisions of section 5(1) of the Act. All the theatres, in the writ petitions, are situated in Vijayawada which is now a municipal corporation. It is not in dispute that as provided in section 5(1) of the Act, the petitioners are liable to pay tax on the gross collection capacity per show multiplied by 22. While the petitioners were thus paying the tax, the Government issued G.O.Ms. No. 349 Revenue (CT.-111) Department dated May 12, 1988, stating that a concession is being given in the tax payable under section 5(1) in respect of 'second run and repeatedly run Telugu pictures (feature films)'. The concession is to be 30 per cent of the tax in the case of feature films whose censor certificate is aged above five years and below ten years and 50 per cent in cases where the said certificate is beyond ten years. The concession is subject to the condition that the person claiming the concession is to furnish adequate proof of having run such feature films. The person has to make an application in the form mentioned in the G.O. and within the period limited there. After the above G.O. came into force, the Commissioner of Commercial Taxes (who is also the Commissioner for Entertainment Tax) issued a circular AA2/1855/88 dated January 30, 1989 and it is this circular that is impugned in the present batch of writ petitions. The Commissioner, after referring to the provisions of G.O.Ms. No. 349 dated May 12, 1988 abovementioned, observed that in the matter of computation of the concession granted by the said G.O., different officers are computing the relief by adopting different methods of calculation. After pointing out the said methods, the Commissioner commanded one of the methods alone for computation and this method was obviously the one most favourable to the Revenue. We shall refer to the details of this computation a little later. Suffice it to say at this stage that on the basis of the abovesaid circular, the concerned Entertainment Tax Officer proceeded to issue show cause notices to the petitioners proposing to make assessments or revised assessments and demanding payment of further amounts. That is how the writ petitions have come to be filed.
3. Under section 5(1) of the Act, an option is given for payment in lieu of tax otherwise payable under section 4. Sub-section (1) of section 5 states that in lieu of tax payable under section 4, in the case of entertainments held in the theatres specified in column (2) of the Table (mentioned in the section) and located in the local areas specified in the corresponding entries in column (1) of the said Table, the proprietor thereof may exercise his option and, subject to such conditions as may be prescribed, pay the amount of tax to the State Government every week, the tax specified in the corresponding entry in column (3) thereof. In the Table given in the said section, column (1) refers to the local authority in whose jurisdiction the theatres are situated, such as (a) municipal corporations, (h) selection grade municipalities, (c) special grade municipalities, (d) first grade municipalities, (e) second grade municipalities, (f) third grade municipalities and (g) gram panchayats, townships, etc. Column (2) of the Table refers to various categories of theatres such as, (i) air-conditioned; (ii) air-cooled; and (iii) ordinary. Column (3) mentions the method by which the amount of weekly tax is to be arrived at. In the case of municipal corporations, such as Vayawada, the amount of tax is 23 per cent of the 'gross collection capacity' per show multiplied by 22, if the theatre is an air-conditioned one. In the case of air-cooled and ordinary theatres, the rate of tax will be 22 per cent and 19 per cent, respectively. The multipliers vary from 22 to 7 depending upon the local authority in which the theatre is located, the class of theatre, and the population of the said local authority. The above position can be easily understood by extracting the relevant provisions of the Table in so far as they are applicable to municipal corporations.
The Table------------------------------------------------------------------------Local authority Theatre Amount of tax(1) (2) (3)------------------------------------------------------------------------(a) Municipal corpora- (i) Air-conditioned 23% of the gross colle-tions and the tion capacity per showSecunderabad can- multiplied by 22.tonment area. (ii) Air-cooled 22% of the grosscollection capacityper show multipliedby 22.(iii) Ordinary (other 19% of the grossthan air-condi- collection capacitytioned and air- per show multipliedcooled. by 22.(b) to (g) .......................------------------------------------------------------------------------
4. The explanation to section 5(1) reads as follows :
'Explanation. - For the purposes of computing the gross collection capacity per show in respect of any place of entertainment the maximum seating capacity or accommodation and the maximum rate of payment for admission determined by the licensing authority under the Andhra Pradesh Cinemas (Regulation) Act, 1955 (President's Act 4 of 1955) as on the date when the proprietor is permitted to pay the tax under this section shall be taken into account.'
5. Sub-section (2) of section 5 reads as follows :
'Section 5(2). The amount of tax under sub-section (1) shall be payable by the proprietor irrespective of the actual number of shows held by him in a week.'
6. The subsequent sub-sections of section 5 prescribe the procedure by which the proprietor has to apply for fixation of the gross collection capacity and for payment, so that the tax may be assessed and paid. Section 19A which deals with the power of exemption in respect of tax payable under section 5 reads as follows :
'Section 19A. Power to exempt tax payable under section 5. - The State Government may, by notification in the Andhra Pradesh Gazette, and for reasons to be specified therein, exempt, whether prospectively, or retrospectively, any proprietor or class of proprietors from the payment of the amount of tax referred to in sub-section (1) of section 5 or any part thereof subject to such conditions and restrictions as they may deem fit to impose and may in like manner vary or cancel such notification.'
7. It is under the aforementioned section that the G.O.Ms. No. 349 dated May 12, 1988, has been issued by the Government. The subject of the said G.O. is the 'reduction in the entertainment tax in respect of the second run and repeated run Telugu pictures (feature films)'. The preamble to the G.O. states that in a seminar on 'Development of the Film Industry conducted by the Andhra Pradesh State Film Development Corporation in 1988, it was requested that the commission that was already in force should be increased in respect of entertainment tax payable in respect of 'feature films' from the existing 20 per cent reduction to 30 per cent in respect of films which are above five years old and below ten years old and to further increase the concession up to 50 per cent for films which are ten or more years old. It is further stated that the Government has decided to allow the concession as set out above. The operative part of the G.O. reads as follows :
'Now, therefore, in exercise of the powers conferred by section 19A of the Andhra Pradesh Entertainments Tax Act, 1939 (Act 10 of 1939), the Governor of Andhra Pradesh in supersession of the notification issued with G.O. Ms. No. 972, Revenue (CT.-III) Department, dated the 5th October, 1987 and published at pages 1-4 of the Andhra Pradesh Gazette, Part 1, Extraordinary dated the 12th October, 1987, hereby directs that the amount of the entertainment tax payable under section 4 or 5 of the Act on the actual number of shows held with the second run and repeated run Telugu pictures (feature films) be reduced, with effect from the 1st April, 1988, by -
(a) 30 per cent after the expiry of 5 years and before the completion of 10 years from the date of issue of censor certificate; and
(b) 50 per cent after the completion of 10 years from the date of issue of censor certificate subject to the following conditions and restrictions namely :
(1) The theatre shall screen 'second run and repeated run Telugu pictures (feature films)' for the show;
Note. - For this purpose the term second run and repeated run Telugu pictures (feature films)' means 'any Telugu picture (feature film) after the expiry of 5 years from the date of issue of censor certificate'.
(2) The burden of proof shall be on the proprietor claiming the 30 per cent or 50 per cent (as the case may be) reduction in the amount of the entertainment tax payable that the theatre screened the 'second run and repeated run Telugu pictures' (feature films) during the show.
Note. - .....................................................'
8. From the aforesaid G.O., it is clear that the reduction of 30 per cent (or the case may be 50 per cent) is with reference to the amount of entertainment tax payable under section 5 of the Act and on the 'actual number' of shows held with the second run and repeated run Telugu pictures (feature films).
9. After the issuance of the earlier G.O.Ms. No. 349 dated May 12, 1988, it appears that certain questions arose with regard to the implementation of the aforementioned G.O. These aspects have been examined by the Commissioner for Entertainment Tax and thereupon he issued the impugned circular dated January 80, 1989. In that circular, he pointed out that several officers have sought for clarification in regard to the implementation of the said G.O. and referred to the following example in order to highlight the point raised by various officers :
'For example, an air-conditioned theatre in a municipal corporation which has opted for payment of tax under section 5(1) of the Andhra Pradesh Entertainments Tax Act, pays a slab rate of tax according to the gross collection capacity of the theatre per show, multiplied by the fixed number of shows prescribed under that section, i.e., 22 shows per week. In other wards, even if an exhibitor failing under this category screens the maximum number, i.e., 28 shows envisaged in G.O.Ms. No. 174 dated May 10, 1988 even then for the purpose of computation of entertainment tax, only 22 shows are to he taken into consideration under section 5(1) of the Andhra Pradesh Entertainments Tax Act. If that exhibitor screened during a particular week 16 normal shows which are not eligible for any concession and 12 second run shows which are eligible for the concession contemplated in G.O.Ms. No. 349 dated May 12, 1988, the question arises as to how the tax concession should be computed in accordance with the above referred scheme.'
10. Having framed the above question, the Commissioner further pointed out in the circular that,
'some officers are computing the relief by deducting the 12 second run shows from out of the prescribed 22 shows. Some other officers are computing the relief by restricting the concession only to six shows (22-16), even though the exhibitor has screened 12 such second run shows.'
11. Having mentioned the various methods for computation that were being adopted by the officers as stated above, the Commissioner finally observed as follows :
'The concession envisaged under G.O.Ms. No. 349 dated May 12, 1988, is only to off-set any possible loss to the exhibitor on account of running old Telugu pictures from out of the slab rate prescribed under section 5(1). Therefore, in determining the weekly slab rate, the concerned officers should confine the concession only to the extent of the difference between the number of shows on the basis of which the slab rate is to be calculated under section 5(1) and the number of normal shows run by the exhibitor during the relevant week.
12. The above G.O. has been given retrospective effect from April 11, 1986, and hence officers may scrutinise carefully the claims for any relief with reference to these instructions.
13. All the Deputy Commissioners (C.T.) are requested to ensure that these instructions are implemented immediately and if any refunds have already been given, steps may be taken to revise the orders of the Entertainment Tax Officers suitably.'
14. In other words, the Commissioner approved the following method : Where there are 16 normal shows and 12 second run shows, the position according to the circular is that relief of the concession is to be given only for six shows (22-16), even though the exhibitor has screened 12 such second run shows. It may be noted here that the figure 22 is the multiplier to be applied as per the Table to section 5(1).
15. The learned counsel for the writ petitioners, Sri S. Satyanarayana Prasad and Sri T. Veerabliadrayya, have contended firstly that the Commissioner of Entertainment Tax is not vested with any authority to issue the abovesald circular. Secondly, they contended that the above method of computation evolved by the Commissioner of Entertainment Tax runs counter to the intention behind G.O.Ms. No. 349 dated May 12, 1988, issued by the Government. According to the learned counsel, the G.O. specifically states that the concession is to he given to the 'actual number' of second run shows and, therefore, the circular must be treated as running contrary to the said G.O. when it directs benefit of concession to be given not for all the second run shows but only to some of them as mentioned in the circular.
16. On the other hand, it is contended by Sri M. Ramayya, the learned Government Pleader, that the Commissioner is entitled to issue the circular to his subordinate officers and that the computation mentioned in the circular is the proper method of granting benefit under G.O.Ms. No. 349 dated May 12, 1988. He points out whatever may be the concession given to the actual number of second run pictures exhibited, there is no provision in the abovesaid G.O.Ms. No. 349 to the effect that in respect of the normal shows that are run by the theatres, the total number thereof should not be taken into account. He points out that if the argument of the petitioners is to be accepted and concession is to be given for all the actual second run shows, there will he corresponding reduction in the number of normal shows and if only the reduced number of normal shows are thus to be taken into account for arriving at the tax payable, such a procedure would run counter to the express provisions of section 5(1) of the Act.
17. It may be pointed out that the stand taken by the petitioners as well as the stand taken by the respondents suffer from a misunderstanding of the relevant provisions contained in section 5(1) of the Act and also G.O.Ms. No. 349 dated May 12, 1988. We have already set out the relevant provisions earlier.
18. It will be noted that there is no reference to any particular number of shows in the Table in section 5(1). All that is mentioned in the Table in section 5(1) is that the amount of tax is to be at a certain percentage of gross collection capacity per show multiplied by certain factor. For example, in respect of municipal corporation and the Secunderabad cantonment area, the Table states that so far as air-conditioned theatres are concerned, the amount of tax is to be calculated as follows :
'23 per cent of the gross collection capacity per show multiplied by 22.'
19. It is, therefore, to be noticed that the figure 22 [for that matter any other factor mentioned in column (3) of the Table] cannot and should not be understood as making a reference to any particular number of shows in a week. It should also be noted that under section 5(1), the tax payable is a weekly tax. In other words, while an exhibitor could screen 28 shows in a week as per the approval given by the Government, the Legislature thought it fit to fix a particular multiplier for various local authorities for the purpose of arriving at the 'weekly tax' payable by the proprietors of the theatres, irrespective of the actual number of shows held within the ceiling of 28. The reduction contemplated by G.O.Ms. No. 349 dated May 12, 1988 or G.O.Ms. No. 972 dated October 8, 1987, which preceded the abovesaid G.O. must obviously be related to the weekly tax that can be so payable under section 5(1) of the Act.
20. The circular of the Commissioner proceeds on the basis that section 5(1) when it prescribes the multiplier of 22, is referring to 22 shows. Likewise, the learned counsel for the petitioners have also proceeded on the basis that six shows (28 - 22) are exempted by virtue of the provisions of section 5(1) of the Act itself and that the future benefit granted by G.O.Ms. No. 349 dated May 12, 1988 or the earlier G.O. is referable to all the second run shows screened within the alleged limit of 22 shows. In our view, both the Commissioner as well as the petitioners have proceeded on a wrong understanding of the provisions of the Act as well as of the G.O. for the reasons already given. If the interpretation placed by the Commissioner and the respondents is accepted it would lead to the result that if an exhibitor screens 6 or less of second run shows, he would not get any benefit at all. This would lead to an anomaly and would run counter to the intention of the G.O. that the old pictures actually shown, irrespective of the number, should get the benefit of the tax concession. Likewise, if the petitioners' contention is to be accepted, it will result in tax not being computed on all the actual number of normal shows run in the theatre for, according to the petitioners, the actual number of normal shows has to he reduced if necessary for giving benefit in respect of all the actual number of second run shows out of 22 shows.
21. In our view, the proper method of reconciling the mandatory provisions of section 5(1) and the concession granted under the G.Os. is to be proceeded on the basis that the multiplier mentioned in the Table in section 5(1) is not to be treated as having any reference to the number of shows. It is a notional multiplier applicable in each local area for the purpose of arriving at the weekly tax payable. The tax so arrived at is a 'weekly tax' covering not merely 22 shows but all the 28 shows. Even in a case the multiplier is 7, the tax arrived at by using the said multiplier is a tax for the entire week for all the shows that could be held within a week. In our view, the proper method of computation is to find out the proportion each category of shows (i.e., normal shows and concessional shows), bear to the total number of shows actually exhibited during the week. In other words, if the total number of actual run shows is 28 and 16 shows are normal shows and 12 shows are concessional or second run shows, the tax payable is to be arrived at proportionately as follows : Let us assume that 23 per cent of the gross collection capacity of the theatre multiplied by 22 is Rs. 6,000. That will be the weekly tax payable if all the 28 shows are normal shows. In a case where 16 are normal shows and 12 shows are concessional or second run shows the tax payable for the 16 shows will be :
16-- x 6000 = 3428.6028In respect of the 12 second run shows, the tax will be :12 70----- x 6000 x ----- = 1800.0028 100(assuming 30 per cent is the tax concession given in such cases).
The total tax payable would he Rs. 5,228.60.
22. It is possible that in certain cases the proprietor has not run all the 28 shows in a week. In such an event the tax has to be worked out on the basis that the weekly tax is payable in respect of 24 shows and the method of computation will he as follows : Let us assume that 23 per cent of gross collection capacity multiplied by 22 as per section 5(1) is Rs. 6,000. Let us also assume that out of 24 shows 16 shows are normal shows and 8 shows are second run or concessional shows. The tax payable in respect of 16 normal shows would be :
16----- x 6000 = 400024Again the tax payable in respect of the remaining 8 second run shows(assuming that they have a concession of 30 per cent of the weeklytax) will be :8 70---- x 6000 x ---- = 140024 100The total tax will be Rs. 5,400.
23. Thus, the weekly tax determined under section 5(1) shall be allocated proportionately to the normal and concessional shows exhibited during the week.
24. In our view, if the above method of computation is adopted, there would not be any conflict between the provisions of the Act and the scheme of the G.O. and both can work harmoniously in their respective spheres.
25. It is, however, argued for the petitioners that by following the above method, the six shows which are totally exempted under the Act are also being taken into consideration by adopting the denominator. In our view, this contention again proceeds on a misapprehension of the provisions of section 5(1). The section merely prescribes a particular multiplier or factor for the purpose of assessing the 'weekly tax'. Even if a multiplier of 22 or 7 is adopted, the tax arrived at under section 5(1) is a weekly tax applicable for all the 28 shows and not merely for 22 or 7 shows, as the case may be. Once the tax under section 5(1) is a weekly tax and not on the number of shows, there can, in our view, be no objection for taking 28 in the denominator and in our view that is the proper method of computation of the tax. We may also point out that in the counter-affidavit filed by the Assistant Commissioner (Legal) on behalf of the respondents, examples (A) and (B) have been worked out : (I) according to the Commissioner's circular and (II) according to what the respondent thought was the writ petitioners' method. The examples which we have given as the right method of calculation, correspond to the method adopted under heading 'II. Computation of remissioners' contention'. We would like to make it clear that the assumption of the respondents that the petitioners' mode of computation was as mentioned in the counter is not correct. In fact the petitioners want higher relief by claiming concessional rate to he applied for all the second run pictures (within 22) even at the expense of excluding some of the normal shows from the tax net, as has been done by some of the Entertainment Tax Officers initially. Why we are referring to this part of the counter is to make it clear that though example (B) is not the method suggested by most of the petitioners, that method is the method which has appealed to us as being accurate. Therefore, we hold that the Commissioner's circular in so far as it prescribes a different method of computation than what we have specified above is incorrect. The impugned circular will not, therefore, be given effect to. Instead, the procedure mentioned above shall be adopted while making assessments/reassessments or in demanding the tax for the periods governed by G.O.Ms. No. 349 Revenue (CT.-II) dated May 12, 1988 or similar G.Os. preceding the same.
26. It has been argued for the petitioners that no reassessment should be made in respect of assessments which have already been made on the petitioners. We do not propose to go into the abovesaid question. If the petitioners are aggrieved by any further action that may be taken by the respondents they can pursue their remedies under the Act. But, both parties are bound by the method of computation as we have indicated herein.
27. The contention regarding the competency of the Commissioner to issue the circular, though initially raised before us, was not pursued further when it was pointed out to the learned counsel that the correct method of calculation has to he gone into in any case in the writ petitions irrespective of the competency of the Commissioner to issue the circular.
28. The writ petitions are partly allowed to the extent indicated above. In the circumstances, there will be no order as to costs. Advocate's fee Rs. 250 in each.
29. Writ petitions partly allowed.