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Ismail v. Alwaye Municipality, Alwaye And Others

Kerala High Court
Jun 25, 1975
Judgment
Subsequent
References
CaseIQ
Case Information
CITATION CODES
citation codes
CASE NO.

339 of 1973

Attorney(S)

V.P.Mohankumar

V.Sivaraman Nair

V.Rama Shenoi

V.M.Kurien

P.Raya Shenoi

P.C.B.Menon

M.M.Abdul Khader

K.Vijayan

K.M.Sadrul Annum

K.Chandrasekaran

K.C.Sankaran

S.Narayanan Poti

JUDGES

Chief Justice Mr.P. Govinda Nair

Mr. Justice T. Kochu Thommen

ACTS

(amendment) act, 1972, For short act 7 of 1972,

act, 1963, For short, Act 22 of 1963,

section, S. 2 of act 22 of 1963.

act, 1961 and act 22 of 1963.

s. 2 of act 22 of 1963

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Smart Summary (Beta)

Factual and Procedural Background

This is a common judgment dealing with an original petition and two writ appeals that raise a shared question concerning the quantum of entertainment tax levied under section 3 of the Kerala Local Authorities Entertainments Tax Act, 1961 (referred to in the opinion as the Entertainments Tax Act, 1961), following enactment of the Kerala Additional Tax on Entertainments and Surcharge on Show Tax Act, 1963 (Act 22 of 1963) and its 1972 amendment (Act 7 of 1972). The 1961 Act came into force on 3 July 1961; Act 22 of 1963 came into force on 1 April 1963; and the 1972 amendment came into force on 28 March 1972.

The controversy focused on whether the entertainments tax charged under section 3 of the 1961 Act should be calculated merely on the price of admission (as envisaged by rule 8 of the Kerala Local Authorities Entertainments Tax Rules, 1962) or whether the calculation must include, in the price of admission, the additional tax levied under Act 22 of 1963 (i.e., whether the additional tax itself forms part of the "payment for admission"). A direction (referred to as ext. P-1) issued by the Kodungallur Panchayat to the petitioner in the original petition was challenged; the court considered whether that direction could be quashed or restrained.

The court also considered a procedural question raised in the batch concerning reopening past assessments for the period 11 April 1972 to 23 October 1972, where the petitioner contended that assessments were effectively concluded because returns had been filed and taxes paid, and therefore could not be reopened in the absence of statutory provision permitting reopening.

Legal Issues Presented

  1. Whether, for the purpose of computing entertainments tax under section 3 of the Kerala Local Authorities Entertainments Tax Act, 1961, the "payment for admission" (or "payment of admission") must include the additional tax levied under section 2 of Act 22 of 1963 (i.e., whether the additional tax forms part of the price of admission on which the entertainments tax under the 1961 Act is to be calculated).
  2. Whether a taxing authority may reopen and demand additional tax for the period 11 April 1972 to 23 October 1972 after returns had been filed and taxes paid (i.e., whether assessments for that period, as evidenced by returns and payments, could be reopened in the absence of explicit statutory authority).

Arguments of the Parties

Petitioner's Arguments

  • In O.P. No. 4856 of 1972, the writ applicant contended that the phrase "on each payment of admission" in section 2 of Act 22 of 1963 should not be read to have the same meaning as "payment for admission" defined in section 2(7) of the Entertainments Tax Act, 1961 because Act 22 of 1963 contains no definition of "payment of admission."
  • The petitioner argued that, on established principles of statutory interpretation, the definition in the 1961 Act could not be imported to interpret the charging words in Act 22 of 1963; the petitioner read the latter provision as requiring the entertainments tax under the 1961 Act to be determined first, and then the additional tax under Act 22 of 1963 to be calculated on that amount (i.e., the petitioner submitted that treating the additional tax as part of the payment of admission — and thus including it when computing the entertainments tax under section 3 of the 1961 Act — would be to put the cart before the horse).
  • Separately, Mr. Rama Shenoi, counsel for the petitioner in O.P. No. 4856 of 1972, submitted that assessments for the period 11 April 1972 to 23 October 1972 had been effectively concluded because returns had been filed and taxes paid; there was no provision in the 1961 Act, Act 22 of 1963, or other statute permitting reopening assessments, and therefore the authorities could not demand additional tax for that period.

Respondent's Arguments

The opinion does not contain a detailed account of the respondents' legal arguments.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Ismail v. The Commissioner, Mattancherry Municipality (1960) 11 KLR 456 Held that the entertainments tax payable under the Entertainments Tax Act, 1961 is a payment for a purpose connected with an entertainment and thus falls within the definition of "payment of admission" in section 2(7) of the 1961 Act. The court treated this decision as establishing that entertainments tax under the 1961 Act is part of "payment for admission" and stated that this position had been repeatedly decided and was not open to argument in the present proceedings.
Ismail v. Commissioner, Mattancherry Municipal Council (1963) KLT 1080 (Full Bench) Affirmed the view that entertainments tax under the 1961 Act falls within "payment of admission" as defined in section 2(7). The court relied on this affirmation to reinforce that the question was settled in the High Court's decisions.
Municipal Council, Kottayam v. K. Mahadeva Iyer (1970) KLT 577 (Full Bench of five judges) Reiterated the same legal view that entertainments tax under the 1961 Act is included in "payment of admission." The court cited this later full bench decision to show consistent authority within the High Court for the same proposition.
M/s Liberty Talkies and Others v. State of Gujarat and Another (1971) II S.C.W.R. 388 (Supreme Court) Held that "payment for admission" includes entertainments duty chargeable under the Entertainments Duty Act, 1923 (Bombay); analogous statutory provisions were observed to be similar to the Kerala provisions. The court relied on this Supreme Court decision to support the proposition that the additional tax and entertainments duty can be regarded as part of the payment of admission; the decision was also relied on in addressing the issue of whether closed assessments could be reopened once returns and payments were accepted.
J. K. Kapur etc. v. State of Gujarat and Others AIR 1974 S.C. 1996 (Supreme Court) Addressed the principle that, where returns have been filed and payments accepted (or assessed), there is no provision to reopen closed assessments; whether the levy falls under different sub-sections is immaterial to the question of whether assessments are concluded. The court applied this principle to hold that assessments for the period in question (11 April 1972 to 23 October 1972), where returns and payments had been made and accepted, could not be reopened and no additional tax could be demanded for that period.

Court's Reasoning and Analysis

The court's analysis proceeded in the following steps, drawing closely on the statutory language and on authoritative precedent:

  1. Preliminary determination on established meaning of "payment for admission": The court began by noting prior decisions of the High Court (Ismail v. Commissioner and subsequent full bench decisions) and the Supreme Court (Liberty Talkies) that consistently held that the entertainments tax under the 1961 Act is a "payment for a purpose connected with an entertainment" and therefore falls within the statutory definition of "payment of admission" in section 2(7) of the 1961 Act. On this basis the court considered that the matter was not open for re-argument.
  2. Interpretation of section 2 of Act 22 of 1963: The court examined the precise wording of section 2 of Act 22 of 1963, which imposes an additional tax "on each payment of admission ... which is subject to the levy of entertainments tax under s. 3 of the said Act [1961]." The petitioner had urged that because Act 22 does not define "payment of admission," the definition in section 2(7) of the 1961 Act could not be imported, and that the statutory wording required calculation of the entertainments tax first and then the additional tax.
  3. Rejection of the petitioner's interpretive submission: The court rejected the petitioner's contention. It reasoned that if the entertainments tax under the 1961 Act is itself a payment connected with an entertainment (as earlier authorities hold), then the additional tax levied under Act 22 of 1963 — being expressly linked by section 2 to payments of admission that are subject to the 1961 Act levy — must also be regarded as a payment connected with the entertainment. Consequently, the additional tax forms part of the "price" or "payment of admission" and must be included when determining the quantum of entertainments tax under section 3 of the 1961 Act.
  4. Statutory cross-reference compels import of the 1961 definition: The court emphasized that section 2 of Act 22 of 1963 specifically refers to entertainments subject to levy under section 3 of the 1961 Act; for the purpose of applying that charging section (s. 3), the court found it necessary to import the meaning of "payment of admission" from section 2(7) of the 1961 Act.
  5. Conclusion on the direction ext. P-1 and writ challenges: On this interpretive basis the court held that the direction issued by the Kodungallur Panchayat (ext. P-1) was in accordance with the relevant statutory provisions (the 1961 Act and Act 22 of 1963) and therefore the court was unable to grant the prayer to quash that direction or to restrain the panchayat from collecting tax on that basis.
  6. Treatment of related writ appeals: The court agreed with the reasoning of Viswanatha Iyer J. in the earlier High Court decision (O.P. No. 3900 of 1972) and dismissed writ appeal nos. 274 of 1973 and 339 of 1973.
  7. Separate reasoning on reopening assessments: In relation to the petitioner's contention that assessments for 11 April 1972 to 23 October 1972 had been closed and could not be reopened, the court relied on the Supreme Court authorities (notably Liberty Talkies and J.K. Kapur) to the effect that where returns were filed and payments accepted, assessments may be deemed assessed and paid, and the state cannot later reopen concluded assessments to levy tax which had escaped. Applying those principles, the court concluded there was no justification for claiming any additional tax from the petitioner for the stated period.
  8. Relief granted and costs: Accordingly, the court directed that no amount by way of additional tax for the period 11 April 1972 to 23 October 1972 would be demanded from the petitioner in O.P. No. 4856 of 1972, thereby allowing that petition to this limited extent. The court directed the parties to bear their respective costs.

Holding and Implications

Core Rulings:

  • The direction ext. P-1 issued by the Kodungallur Panchayat is upheld as being in accordance with the Entertainments Tax Act, 1961 and Act 22 of 1963; the petition to quash that direction is refused.
  • Writ appeal nos. 274 of 1973 and 339 of 1973 are dismissed.
  • No additional amount of tax may be demanded from the petitioner in O.P. No. 4856 of 1972 for the period 11 April 1972 to 23 October 1972; O.P. No. 4856 is allowed to that extent.
  • The parties are directed to bear their respective costs.

Implications

Direct consequences for the parties (as stated in the opinion):

  • The Kodungallur Panchayat may continue to collect entertainments tax calculated by treating the additional tax under Act 22 of 1963 as forming part of the payment of admission for purposes of calculating the entertainments tax under section 3 of the 1961 Act.
  • The petitioner in O.P. No. 4856 is protected from demands for additional tax for the period 11 April 1972 to 23 October 1972 on the reasoning that assessments for that period were treated as concluded by the filing of returns and payment.

The opinion does not state that it establishes any novel legal principle beyond applying and following existing High Court and Supreme Court authorities; accordingly, the decision's effect is described in the opinion in terms of its direct effect on the parties rather than as creating a new precedent.

Show all summary ...

1. A common question arises for decision in the original petition and the two writ appeals and we propose to deal with them by a common judgment. The question relates to the quantum of the entertainment tax that has to be levied under s. 3 of the kerala local authorities entertainments tax act, 1961 after the passing of the kerala additional tax on entertainments and surcharge on show tax, Act, 1963 and the kerala additional tax on entertainments and surcharge on show tax (amendment) act, 1972. The kerala local authorises entertainments tax act, 1961, Hereinafter referred to as the entertainments tax act, 1961, Came into force on 3rd july 1961 and the kerala additional tax on entertainments and surcharge on show tax act, 1963, For short, Act 22 of 1963, On 1st april 1963. The kerala additional tax on entertainments and surcharge on show tax (amendment) act, 1972, For short act 7 of 1972, Came into force on 28th march 1972.

2. It has been a matter of controversy as to whether the entertainments tax charged by s. 3 of the entertainments tax act, 1961 should be calculated on the price of admission as envisaged by r. 8 of the kerala local authorities entertainments tax rules, 1962 or whether it should be calculated on the price of admission as envisaged by r. 8 of the kerala local authorities entertainments tax rules, 1962 or whether it should be calculated on the pries of admission as envisaged in that rule plus the tax payable under the act. The relevant sections to be considered for this purpose are s. 2 (7) and 3 of the entertainments tax act, 1961 and we shall extract those sections:

"2 (7) 'payment for admission' includes (a) any payment made by a person who having been admitted to one part of a place of entertainment, Is subsequently admitted to another part thereof, For admission to which a payment involving a tax or a higher rate of tax is required;

(b) any payment for seats or other accommodation in a place of entertainment; and

(c) any payment for any purpose whatsoever connected with an entertainment which a person is required to make as a condition of attending or continuing to attend the entertainment in addition to the payment, If any, For admission to the entertainment.

3. General provision regarding the levy of the tax and the rate of tax. Any local authority may levy a tax (hereinafter referred to as the entertainment tax) at a rate not less than ten per cent and not more than twenty - five per cent on each payment for admission to any entertainment. "

construing these sections it was ruled by this court in ismail v. The commissioner, Mattancherry municipality (1960) 11 klr. 456 that the entertainments tax payable under the entertainments tax act, 1961 will be a payment for a purpose connected with an entertainment coming within the expression 'payment of admission' in s. 2 (7) of the entertainments tax act, 1961. This position has been affirmed by a full bench of this court in ismail v. Commissioner, Mattancherry municipal council 1963 klt. 1080. There is a later full bench of five judges of this court in municipal council, Kottayam v. K. Mahadeva iyer 1970 klt. 577 wherein the same view has been taken. The question thus having been decided by this court repeatedly, We do not consider that the matter is now open to argument. Further, The supreme court has taken the same view in m/s liberty talkies and others v. State of gujarat and another (1971) ii s. C. W. R. 388 wherein it has been clearly laid down that payment for admission will include entertainments duty chargeable under the entertainments duty act, 1923, Bombay. The relevant sections of that statute are similar to the sections of the statute that we have to consider. Therefore the matter is not arguable before the high court.

3. We have to consider now the effect of act 22 of 1963. The relevant section of this statute with which we are concerned is s. 2 which runs as follows:

"2. Levy of additional tax on entertainments notwithstanding anything contained in the kerala local authorities entertainments tax act, 1961 (act 20 of 1961), With effect on and from the commencement of this act, On each payment of admission to any entertainment which is subject to the levy of entertainments tax under s. 3 of the said act there shall be levied an additional tax on entertainments calculated at the following rates, Namely

table:#1

4. Act 22 of 1963 does not define 'payment of admission' or 'payment for admission' though s. 2 uses the words'on each payment of admission'. Counsel on behalf of the writ applicant in o. P. No. 4856 of 1972 contended before us that whatever may be the justification for holding that the payment of tax under the entertainments tax act, 1961 is a payment for a purpose connected with an entertainment and therefore amounting to a payment of admission according to the definition in s. 2 (7) of the entertainments tax act, 1961 there is no justification for attributing the same meaning to the words 'on each payment of admission' in s. 2 of act 22 of 1963 in the absence of any definition of the expression 'payment of admission' in act 22 of 1963. It was submitted that the definition in the entertainments tax act, 1961 cannot, On well - established principles and norms of interpretation be applied for the purpose of understanding the scope and ambit of the expression'on each payment of admission' in s. 2 of act 22 of 1963. Further, Counsel urged that the latter part of s. 2 of act 22 of 1963 where it speaks of

"where such payment (inclusive of the amount of entertainments tax levied under the kerala local authorities entertainments tax act, 1961)"
clearly indicates that without reference to act 22 of 1963, The amount of entertainments tax to be levied under the entertainments tax act, 1961 will have to be first determined before the additional tax payable under act 22 of 1963 is determined. It was therefore stressed before us that the determination of the additional tax payable under act 22 of 1963 for finding out the entertainments tax payable under the entertainments tax act, 1961, Would be putting the cart before the horse, And that such a procedure is unwarranted by the wording of the charging section, s. 2 of act 22 of 1963. We have carefully examined the question and we are unable to accept these submissions. s. 2 of act 22 of 1963 specifically speaks of 'payment of admission' to any entertainment which is subject to the levy of entertainments tax under s. 3 of the entertainments tax act, 1961. So the question is whether the additional tax payable under act 22 of 1963 has to be taken into account for determining the payment of admission for the purpose of calculating the entertainments tax payable under the entertainments tax act, 1961 applying the definition of the 'payment of admission' and the charging section, S. 3 of the entertainments tax act, 1961. If the entertainment tax payable under the entertainments tax act, 1961, Is a payment for a purpose connected with an entertainment, We fail to see how it would be possible to say that the additional tax payable under act 22 of 1963 is not a payment connected with the entertainment. If such payment of the additional tax under act 22 of 1963 is also a payment for a purpose connected with an entertainment, Such payment will form part of the price or part of the payment of admission and will have to be taken into account for determining the quantum of the entertainments tax payable under the entertainments tax act, 1961. We feel compelled to come to such a conclusion in view of the specific reference to the charging section, S. 3 of the entertainments tax act, 1961 and for the purpose of applying that charging section, We have necessarily to import the meaning of the words 'payment of admission' which has been defined in s. 2 (7) of the entertainments tax act, 1961.

5. The direction issued by ext. P - 1 produced along with o. P. No. 4856 of 1972 by the kodungallur panchayat to the petitioner in the original petition therefore is in accordance with the provisions in the relevant statutes, The entertainments tax act, 1961 and act 22 of 1963. We are therefore unable to grant the prayer for quashing this direction or to restrain the panchayat from collecting the tax on the basis of that direction.

6. The same question arises in writ appeal no. 274 of 1973 which is from the judgment in o. P. No. 3900 of 1972 rendered by viswanatha iyer j., Who disposed of that petition along with wo other original petitions, O. P. Nos. 2469 of 1972 and 4674 of 1972. The appeal from the judgment in o. P. No. 2469 of 1972 is writ appeal no 339 of 1973 and we are told that no appeal has been filed from the judgment in o. P. No. 4674 of 1972 we are in respectful agreement with the reasoning of the learned judge in dismissing these petitions which is in accordance with what we have stated above. It follows that writ appeal nos. 274of 1973 and 339 of 1973 have to be dismissed.

7. The only other question that is mooted for our consideration in this batch of cases is the submission made by mr. Rama shenoi, Counsel for the petitioner in o. P. No 4856 of 1972 that in any view of the matter, There is no justification for reopening the assessments to tax which have been effected in the case of the petitioner in the writ application for the period from 11th april 1972 to 23rd october 1972. His submissions were that when returns have been filed by the petitioner in the original petition and when taxes have been paid, It must be deemed that there have been assessments made by the taxing authority, Namely panchayat and that there being no provision in the entertainments tax act, 1961, Or in act 22 of 1963 or for that matter in any other statute for reopening the assessments, This assessment for and up to the period of 23rd october 1972 must stand and necessarily therefore no additional tax or additional amounts by way of tax can be claimed by the petitioner in o. P. No. 4856 of 1972 for the period from 11th april 1972 to 23rd october 1972. This submission is fully supported by the decision of the supreme court in m/s liberty talkies and others v. State of gujarat and another (1971) ii s. C. W. R. 388 in which shah c. J, Observed as follows:

"till january ii, 1962, The proprietor acted pursuant to the memorandum dated march 18,1960 issued by the collector and collected the duty and paid it over. The government of gujarat later advised that the method of collection notified by the collector was not the correct method. But the act contains no provision for reopening assessments already made. When pursuant to return by the proprietor, Payments were made and accepted under s. 4 (2) (b), The tax may be deemed to be assessed and paid, And the state cannot thereafter reopen the concluded assessments and seek to levy tax or duty which has escaped."

8. The same is the position even if the levy of tax is under s. 4 (1) of the act has been ruled by another decision of the supreme court in j. K. Kapur etc. V. State of gujarat and others air. 1974 s. C. 1996. In para. 7 of the judgment, Krishna iyer j., Observed as follows:

7. Counsel for the state contends that the provisions applicable to the present case in s. 4 (1) and not s. 4 (2) (b), As fell for decision in liberty talkies (1971) 3 s. C. R. 398. May be technically, The provisions are perhaps different. Even so. It is indisputable that there is no provision in the act for reopening closed assessments and our enquiry must be focused on the fact of assessment being concluded or not. Whether it comes under s. 4 (1) or s. 4 (2) is immaterial for this purpose. Under s. 4 (1) stamps have to be affixed to the tickets. Returns have to be made periodically which will indicate to the authority concerned the total number of persons admitted to the entertainment, The value of stamp used etc. On the basis of this return and on such enquiry the authorities deem fit to make by way of inspection at the time of the show or otherwise, They either accept the payment already made by way of use of stamps or they make fresh demands. In the present case it has been pointed out already by us that officers concerned had the returns before them of the tax collections and of the persons who had been admitted to the shows but on account of a wrong impression about the meaning of the statute the respondents kept quiet. Long later demands were made when they awakened to the new interpretation which happens to be the correct interpretation. To accept the payments made by use of stamps from april 1957 to april 1962, After the returns were sent to the relevant authorities, Is in our view sufficient to imply assessment and payment. "

9. Issac j., In the judgment in o. P no. 1221 of 1971 from which writ appeal no. 335 of 1973 has come up before us has referred to the earlier decision of the supreme court in liberty talkies v. State of gujarat (1971) ii s. C. W. R. 388 and has reached the same conclusion.

10. We do not think there is any justification whatever in claiming any amount by way of tax from the petitioner in o. P. No. 4856 of 1972 for the period from 11th april 1972 to 23rd october 1972. We would therefore direct that no amount by way of tax in addition to what has been paid by the petitioner for the period from 11th april 1972 to 23rd october 1972 will be demanded by the respondent in o. P. No. 4856 of 1972. To this extent, We allow o. P. No. 4856 of 1972.

11. We direct the parties to bear their respective costs.

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