SRI VENKATESWARA PICTURE PALACE Vs. ENTERTAINMENT TAX OFFICER

JUDGEMENT

(1.) ALL these three petitioners raised a common question of law challenging the similar impugned proceedings dt. 11.11.1999 under the similar set of facts, hence, they are being disposed of by a common judgment. All these three theatres situated at Sangareddy 3rd Grade Municipality. The petitioners opted to pay tax under Section 5(1) of A.P. Entertainment Tax Act, 1939. The option of the petitioner for payment of tax under Section 5(1) was accepted and they were permitted to pay the amount of tax under Section 5 for the period from 27.3.1998 to 26.3.1999 by proceedings dated 30.3.1998 and for the period from 27.3.1999 to 26.3.2000 permit dated 19.5.1999. When the first permit was granted on 30.3.1998, Sangareddy Municipality was III grade Municipality, and therefore, permits were granted calculating the tax payable as III grade Municipality as per item "f" of "THE TABLE" to Section 5(1).

(2.) THE Government by orders in G.O.Ms. No. 581 MA & UD Department dated 5.11.1998 declared Sangareddy III Grade Municipality as I Grade Municipality with immediate effect in exercise of its powers conferred by Subsection (22) of Section 2 of the A.P. Municipalities Act 1965 read with first proviso to Rule 3 of A.P. Municipalities (Gradation of Municipal Councils and Nagar Panchayat) Rules, 1975 and the said orders have been published in the A.P. Gazette. Pursuant to the said orders of the Government upgrading the Sangareddy Municipality from III Grade to I Grade with effect from 5.11.1998, the permits issued to the petitioners on 30.3.1998 and 19.5.1999 fixing the weekly slab of entertainment tax amount and show tax applicable for III Grade Municipality has been revised since Sangareddy Municipality was upgraded to I Grade Municipality with effect from 5.11.1998 and issued revised permits

(3.) THE contention of the learned counsel for the petitioners that the notification issued by the Government is under Section 2(22) of A.P. Municipalities Act, but not under Section 389A of the said Act, and therefore, the tax cannot be revised, is not acceptable for the reason that Sangareddy was already a III -Grade Municipality. Section 389A applies only if a local area consisting of village or town is declared as notified area for the purpose of application of A.P. Municipalities Act. For instance if an area covered by Gram Panchayat or Gram Panchayats is declared as notified area for the purpose of application of the provisions of the Municipalities Act in the notified area, Section 389A is attracted. Once a particular area is already a Municipality, Section 389A of the A.P. Municipality Act has no application, but only Section 2(22) of the Municipalities Act is applicable and depending upon the income of the particular Municipality, the Government declares the grade of the Municipality from time to time. The grade of Municipality is determined by a notification issued under Section 2(22) of A.P. Municipalities Act. If the income of any Municipality is more than Rs. 30.00 lakhs but less than Rs. 50.00 lakhs, it can be declared as a I -Grade Municipality. Accordingly, the Government in exercising its powers under Section 2(22)(iii) declared the Sangareddy as I -Grade Municipality. The Explanation -II to Section 4(1) of Entertainment Tax Act, also makes it clear that any local area declared as notified area and equated with that of a particular grade of Municipality under Section 389A of the A.P. Municipalities Act, the notified area shall be deemed to be a Municipality of the same grade to which the notified area is equated. Sangareddy which was already a Municipality was upgraded in accordance with Section 2(22) of A.P. Municipalities Act and to such a situation, the Explanation -II of Section 4(1) has no relevance or application. Irrespective of a notification under Section 389A of A.P. Municipalities Act, an already existing Municipality can be upgraded in exercise of powers under Section 2(22). The petitioners have therefore to pay the rate of tax applicable to I -Grade Municipalities as the local authority of Sangareddy Municipality is upgraded to I -Grade from III -Grade Municipality.