S. C. AGRAWAL, J.

1. These appeals and special leave petition raise common questions relating to the constitutional validity of sections 4 and 5 of the Andhra Pradesh Entertainments Tax Act, 1939 (hereinafter referred to as " the"), as amended by Act 24 of 1984, providing for imposition of entertainment tax in respect of entertainments held in cinema theatres located in the State of Andhra Pradesh.

2. The Act has been enacted to provide for the levy of taxes on amusements and other entertainments. Prior to January 1, 1984, section4 of the provided for levy of entertainment tax at a rate fixed on the basis of percentage of the payment made by a person for admission to any entertainment. In addition, there was a provision in section 4- A for levy of a fixed amount, by way of "show tax", for each show. By Act 58 of 1976, section4-C was introduced in the and section5 of the was substituted. Under section 4-C, it was provided that in respect of entertainments held within the jurisdiction of any local authority whose population did not exceed 25, 000, a tax for every entertainment show would be levied, not on the basis of each payment for admission, but at a certain percentage of the gross collection capacity per show. The percentages for such levy were fixed according to the population of the local authority within the jurisdiction of which the entertainments were held. "Gross collection capacity per show" was defined in the Explanation to section 4-C to mean the notional aggregate of all payments for admission the proprietor would realise per show, if all the seats or accommodation as determined by the licensing authority under the Andhra Pradesh Cinemas (Regulation) Act, 1955, in respect of the place of entertainment are occupied, and calculated at the maximum rate of payments for admission as determined by the said licensing authority. The levy of tax in the manner as prescribed under section 4-C could be dispensed with if the proprietor of the theatre opted for the composition scheme contemplated by section 5 whereunder it was open to a proprietor to enter into an agreement with the prescribed authority to compound the tax payable under section 4-C for a fixed sum which was to be arrived at in accordance with the formula prescribed under section 5. According to this formula, the tax was payable on the basis of a percentage of the gross collection capacity per show for the fixed rounds of shows for the whole year and the number of shows was fixed on the basis of the number of shows exhibited in the previous year. This arrangement continued till December 31, 1983, whereafter the provisions of sections 4, 4- A and 5 were amended by Act No. 24 of 1984.

3. The provisions of sections 4, 4- A and 5, as amended by Act 24 of 1984, were as follows :

"Section 4(1). There shall be levied and paid to the State Government a tax on the gross collection capacity on every show (hereinafter referred to as the entertainments tax) in respect of entertainments held in the theatres specified in column (2) of the table below and located in the local areas specified in the corresponding entry in column (1) of the said table, calculated at the rates specified in the corresponding entry in column (3) thereof.

THE TABLE

Local area Theatre Rate of tax on the gross collection capacity per show

(1) (2) (3)

(a) Municipal corporations (i) Air-conditioned 29 per cent and the Secunderabad (ii) Air-cooled 28 per cent cantonment area and (iii) Ordinary 25 per cent the contiguous area (other than of two kilometres air-conditioned thereof. and air-cooled)

(b) Selection grade (i) Air-conditioned 28 per cent municipalities and (ii) Air-cooled 27 per cent the contiguous area (iii) Ordinary 24 per cent of two kilometres (other than thereof. air-conditioned and air-cooled)

(c) Special grade (i) Air-conditioned 27 per cent municipalities and the (ii) Air-cooled 26 per cent contiguous area of two (iii) Ordinary 23 per cent kilometres thereof. (other than air-conditioned and air-cooled)

(d) First grade (i) Air-conditioned 26 per cent municipalities and the (ii) Air-cooled 25 per cent contiguous area of two (iii) Ordinary 22 per cent kilometres thereof. (other than air-conditioned and air-cooled)

(e) Second grade All categories 21 per cent municipalities and the contiguous area of two kilometres thereof.

(f) Third grade All categories 20 per cent municipalities and the contiguous area of two kilometres thereof.(g) Gram panchayats, (i) Permanent and 20 per cent selection grade gram semi-permanent panchayats, townships (ii) Touring and 19 per cent and any other local temporary areas.

Explanation. - For the purpose of this section and section 5, the term gross collection capacity per show shall mean the notional aggregate of all payments for admission, the proprietor would realise per show, if all the seats or accommodation as determined by the licensing authority under the Andhra Pradesh Cinemas (Regulation) Act, 1955, in respect of the place of entertainment are occupied and calculated at the maximum rate of payments for admission as determined by the said licensing authority.

(2) The amount of tax under sub-section (1) shall be payable by the proprietor on the actual number of shows held by him in a week."

"Section 4-A(1). In addition to the tax under section 4, there shall be levied and paid to the State Government in the case of entertainments held in the local areas specified in column (1) of the Table below, a tax calculated at the rates specified in the corresponding entry in column (2) thereof :

THE TABLE

Local area Rate of tax for every show (1) (2)

(a) Municipal corporations and the Secunderabad Six rupees cantonment area and the contiguous area of two kilometres thereof.

(b) Selection grade, special grade and the first Six rupees grade municipalities and the contiguous area of two kilometres thereof.

(c) Second grade and third grade municipalities Four rupees and the contiguous area of two kilometres thereof.

(d) Gram panchayats, selection grade gram Two rupees panchayats, townships and any local areas.

(2) The tax leviable under sub-section (1) shall be recoverable from the proprietor.(3) The provisions of this Act other than sections 4, 6 and 13 shall, so far as may be, apply in relation to the tax payable under sub-section (1) as they apply in relation to the tax payable under section 4."

"Section 5(1). In lieu of the tax payable under section 4, in the case of the entertainments held in the theatres specified in column (2) of the table below and located in the local areas specified in the corresponding entry in column (1) of the said table, the proprietor thereof may, at his option and subject to such conditions as may be prescribed, pay the amount of tax to the State Government every week as specified in the corresponding entry in column (3) thereof :

THE TABLE

Local area Theatre Amount of tax

(1) (2) (3)

(a) Municipal corporations (i) Air-conditioned 24 per cent of the and the Secunderabad gross collection cantonment area and capacity per show the contiguous area multiplied by 22. of two kilometres (ii) Air-cooled 23 per cent of the thereof. gross collection capacity per show multiplied by 22. (iii) Ordinary 20 per cent of the (other than gross collection air-conditioned capacity per show and air-cooled) multiplied by 22.

(b) Selection grade (i) Air-conditioned 23 per cent of the municipalities and gross collection the contiguous area capacity per show of two kilometres multiplied by 22. thereof. (ii) Air-cooled 22 per cent of the gross collection capacity per show multiplied by 22. (iii) Ordinary 19 per cent of the (other than gross collection air-conditioned capacity per show and air-cooled) multiplied by 22.

(c) Special grade (i) Air-conditioned 22 per cent of the municipalities gross collection and the contiguous capacity per show area of two multiplied by 21. kilometres thereof. (ii) Air-cooled 21 per cent of the gross collection capacity per show multiplied by 21. (iii) Ordinary 18 per cent of the (other than gross collection air-conditioned capacity per show and air-cooled) multiplied by 21.(d) First grade (i) Air-conditioned 21 per cent of the municipalities gross collection and the contiguous capacity per show area of two multiplied by 21. kilometres thereof (ii) Air-cooled 20 per cent of the gross collection capacity per show multiplied by 21. (iii) Ordinary 17 per cent of the (other than gross collection air-conditioned capacity per show and air-cooled) multiplied by 21.

(e) Second grade All categories 16 per cent of the municipalities gross collection and the contiguous capacity per show area of two multiplied by 21. kilometres thereof.

(f) Third grade All categories 15 per cent of the municipalities and gross collection the contiguous area capacity per show of two kilometres multiplied by 17. thereof.

(g) Gram panchayats, (i) Permanent and 15 per cent of the selection grade semi-permanent gross collection gram panchayats, capacity per show townships and any multiplied by 14. other local areas. (ii) Touring and 14 per cent of the temporary. gross collection capacity per show multiplied by 7.

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, as on the date when the proprietor is permitted to pay tax under this section shall be taken into account.

(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.

(3) Any proprietor who opts to pay tax under this section shall apply in the prescribed form to the prescribed authority to be permitted to pay the tax under this section.(4) On being so permitted, such proprietor shall pay the tax for every week as specified in sub-section (1).

(5) The option permitted under this section shall continue to be in force till the end of the financial year in which such option is permitted.

(6) It shall be lawful for the prescribed authority to vary the amount of tax payable by the proprietor under sub-section (1) during the period of option permitted under this section at any time, if there is an increase in the gross collection capacity per show in respect of the place of entertainment by virtue of an upward revision of the rate of payment for admission therein or of the seating capacity or accommodation thereof or where the local area in respect of which permission is granted is upgraded or if it is found for any reason that the amount of tax has been fixed lower than the correct amount.

(7) Every proprietor who has been permitted to pay the tax under this section shall intimate to the prescribed authority forthwith such increase in the gross collection capacity per show in respect of the place of entertainment, failing which it shall be open to the prescribed authority by giving fifteen days notice to cancel the option so permitted.

(8) Where a proprietor fails to pay the amount of tax on the due date, such amount of tax shall be recoverable with interest calculated at such rate as may be prescribed.

(9) The amount of tax due under this section shall be rounded off to the nearest rupee and for this purpose, where such amount contains part of a rupee consisting of paise, then if such part is fifty paise or more it shall be increased to one rupee and if such part is less than fifty paise, it shall be ignored."

4. As a result of the said amendments, the earlier mode of levy of tax on the basis of a percentage of each payments for admission prescribed in section 4 was replaced by a mode similar to that provided in section 4-C, i.e., on the basis of a prescribed percentage of the gross collection capacity per show. In the table appended below sub-section (1) of section 4 rates were fixed on the basis of a percentage of the gross collection capacity per show varying with the category of the local area in which the theatre was situated as well as on the nature of the theatre, viz., air-conditioned, air-cooled or ordinary (other than air-conditioned and air-cooled) or permanent, semi-permanent including touring and temporary theatres. In the explanation to sub-section (1) of section 4, the term "gross collection capacity per show" was defined in the same terms as in the explanation to section 4-C, to mean the full collection per show if all the seats in the theatre are occupied. In sub-section (2) of section 4, it was specifically provided that the amount of tax under sub-section (1) shall be payable by the proprietor on the actual number of shows held by him in a week. Section 5 gave an option to the proprietor to pay a weekly consolidated amount irrespective of the number of shows actually held by him and the said amount was fixed on the basis of the prescribed number of shows per week. The number of shows varied with the nature of the theatre as well as the category of the local area in which it was situate. In section 4-A, a fixed amount was leviable by way of show tax on each show.A number of writ petitions were filed in the High Court to challenge the validity of sections 4, 4- A and 5 of the, as amended by Act 24 of 1984. The said writ petitions were decided by a Division Bench of the High Court by judgment dated July 19, 1984 [Reported as Alankar Theatre v. Entertainment Tax Officer 1991 (82) STC 417 (AP)] [LQ/TelHC/1984/126] .

5. The constitutional validity of the provisions was challenged on three grounds, viz. :

(i) the levy of entertainment tax on the basis of gross collection capacity without reference to the actual amount collected or the actual number of tickets sold or the number of persons admitted was ultra vires the legislative power conferred on the State Legislature under entry 62 of List II of the Seventh Schedule;

(ii) section 4 was hit by article 14 of the Constitution inasmuch as by treating unequals as equals, it gave rise to discrimination amongst different theaters situate within the same local area; and

(iii) the levy of entertainment tax under section 4 being expropriatory amounts to an unreasonable restriction on the right guaranteed to the petitioners by article 19(1)(g) of the Constitution, and was not saved by clause (6) of article 19.

6. Relying upon the decisions of this Court in Western India Theatres Ltd. v. Cantonment Board 1959 (S2) SCR 63, Y. V. Srinivasamurthy v. State of Mysore 1959 AIR(SC) 894 and State of Bombay v. R. M. D. Chamarbaugwala 1957 AIR(SC) 699, the High Court has held that the State Legislature was competent to levy the impugned tax under entry 62 of List II of the Seventh Schedule to the Constitution since the said head of legislative power empowers imposition of tax upon entertainments and amusements and not on the persons entertained or the persons provided amusement and it has be paid by the person who provides the entertainment or amusement. The High Court further held that so long as the tax levied retains the character of entertainment tax, the Legislature is competent to adopt such basis or such measure, or such method of levy, as it thinks appropriate. The High Court rejected the contention that the only method in which Legislature can levy the entertainment tax is that prescribed in the old section 4, i.e., on the basis of the payment of admission. The challenge on the ground of article 14 was negatived by the High Court on the view that wide discretion is allowed to the Legislature in the matter of classification and in the matter of selection of persons to be taxed and that the two-fold classification made by section 4 could not be said to be either discriminatory or arbitrary much less could it be said that it metes out hostile discrimination to certain theatres. The High Court also observed that since it was not possible to predicate absolute equality between two theatres, and also because the situation and economics of each theatre are different, it is impossible to expect, or call upon the Legislature to evolve such classification which would meet every conceivable case and which would not result in prejudice even to a single theatre. It was observed that different rates have been prescribed for different local areas and for different types of theatres, i.e., ordinary, air-cooled and air-conditioned and the Legislature took note of the fact that the rate of occupancy in villages will be lower compared to towns, and similarly, in bigger towns there will be greater rate of occupancy, and finally in cities, the rate of occupancy would be even higher and it could not be said that this expectation was unrealistic, or so unreasonable as to call for interference by the court. As regards the challenge based on article 19(1)(g), the High Court has taken note of the letter dated July 26, 1983, addressed by the Andhra Pradesh Film Chamber of Commerce, to the honourable Chief Minister of Andhra Pradesh wherein the exhibitors not only asked for introduction of a slab system all over the State but also suggested the rates of tax which suggestion was accepted by the Government with certain modifications varying from 2 to 4 per cent over the rates suggested by the association. The High Court observed that the rates of tax that were prescribed under section 4 based on an average expected occupancy rate of less than 50 per cent to 66 per cent, could not be said to be either unreasonable or expropriatory. The High Court, however, held that the agreements which had already been entered into by the proprietors of cinema theatres under section 5, as it stood prior to January 1, 1984, would be effective and valid for the period for which they were entered into. The High Court has also observed that merely because the form for exercise of option, as contemplated under sub-section (3) of section 5, had not been prescribed, it could not be said that section 5 had not come into operation or was unenforceable and that it was open for the proprietor to send an intimation on an ordinary paper and the authority would be bound to treat it as proper intimation. The High Court rejected the contention that section 5 was discriminatory inasmuch as it did not provide for reduction of the composition amount in case of reduction of seating capacity of a theatre, during the period of one year for which the option was exercised although under sub-section (6) of section 5 the provision had been made for enhancement of the composition amount in case the seating capacity/accommodation or the rates of payment for admission were enhanced. The High Court observed that section 5 was only optional and no one was compelled to be governed by it or to opt for the composition scheme contained in section 5 and that according to the said scheme the option once exercised was in force till the end of the financial year in which such option was permitted and that if a person opts to be governed by section 5 he does so with his eyes open and he must be deemed to have accepted all the conditions and features of the scheme and it was not open to him to say that he would avail of the beneficial provisions of the scheme, while rejecting those features which are not advantageous to him.

7. C.A. Nos. 4642 to 4647 of 1984, 193 to 221 of 1985, 222 of 1985, 223 of 1985, 224 to 228 of 1985, 229, 232 to 234 of 1985, 1468 of 1985 and 1469 and 1470 of 1985 have been filed against the said decision of the High Court dated July 19, 1984 [See 1991 (82) STC 417 (AP)] [LQ/TelHC/1984/126] . C.A. Nos. 5722 of 1985, 1527 of 1986, and SLP (C) No. 3127 of 1985 have been filed against the decision of the High Court dated August 7, 1984 which is based on the earlier decision dated July 19, 1984 [See 1991 (82) STC 417 (AP)] [LQ/TelHC/1984/126] and similarly C.A. Nos. 1858 of 1992 and 4798 of 1989 are directed against the decisions dated February 12, 1986 and March 30, 1989, based on the earlier decision dated July 19, 1984 [See 1991 (82) STC 417 (AP)] [LQ/TelHC/1984/126] .During the pendency of these appeals, the was amended by A.P. Act 23 of 1988 and A.P. Act 16 of 1991 whereby the Tables below sections 4, 4- A and 5 were substituted and sub-section (6-A) was inserted in section 5 whereby provision was made for reduction of the amount of tax payable by the proprietor during the financial year if there is a reduction in the seating capacity or in the accommodation of the place of entertainment at any time during the period of six months commencing from the 1st day of April and ending with 30th day of September or from the 1st day of October and ending with 31st day of March of any financial year.

8. The learned counsel appearing for the appellants have assailed the constitutional validity of sections 4 and 5 on two grounds, viz., (1) that the impugned provisions do not fall within the ambit of the legislative power conferred on the State Legislature under entry 62 of List II of the Seventh Schedule of the Constitution; and (2) that the impugned provisions were violative of the right to equality guaranteed under article 14 of the Constitution inasmuch as they treated unequal as equals by imposing tax at a uniform rate on a particular class of cinema theatres irrespective of their location and occupancy.

9. While considering the question as to legislative competence of the State Legislature, it is necessary to bear in mind that the impugned provisions provide for imposition of a tax and a tax has two distinct elements, viz., subject of the tax and the measure of the tax. The subject of the tax is the person, thing or activity on which the tax is imposed, and the measure of the tax is the standard by which the amount of tax is measured. The competence of the Legislature to enact a law imposing a tax under a particular head of the legislative List has to be examined in the context of the subject of the tax. If the subject of the tax falls within the ambit of the legislative power conferred by the head of legislative entry, it would be within the competence of the Legislature to impose such a tax. It is, therefore, necessary to examine the scope of the legislative entry, viz., entry 62 of List II, which is invoked in support of the competence of the State Legislature to impose the tax and ascertain whether the subject of the tax imposed by the impugned provisions falls within the ambit of the said entry. Entry 62 of List II is as follows:

"62. Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling."

10. The said entry is in pari materia with entry 50 of the Provincial List in the Seventh Schedule to the Government of India Act, 1935. Construing the said entry, this Court, in the Western India Theatres Ltd. v. Cantonment Board 1959 (S2) SCR 63, has rejected the contention that the entry contemplates a law imposing taxes on persons who receive or enjoy the luxuries or the entertainments or the amusements and has held :

"..... The entry contemplates luxuries, entertainments and amusements as objects on which the tax is to be imposed ..... The entry, as we have said, contemplates a law with respect to these matters regarded as objects and a law which imposes tax on the act of entertaining is within the entry whether it falls on the giver or the receiver of that entertainment."
(page 69)

In that case, the Cantonment Board had imposed entertainment tax of Rs. 10 per show on the cinema houses of the appellant in the said appeal and Rs. 5 per show on others. Upholding the said imposition this Court has held :

"..... It is a tax imposed on every show, that is to say, on every instance of the exercise of a particular trade, calling or employment. If there is no show, there is no tax ... The impugned tax is a tax on the act of entertainment resulting in a show."
(pages 69-70)

11. Similarly, in Y. V. Srinivasamurthy v. State of Mysore 1959 AIR(SC) 894, upholding the provisions of the Mysore Cinematograph Shows Tax Act, 1951, enacted under the Constitution, which authorised levy of tax on cinematograph shows at rates prescribed in a rising prescribed in a rising scale according to the seating accommodation and the cities where the cinematograph show was held, this Court following the decision in Western India Theatres case 1959 (S2) SCR 63 held that the said Act was validly enacted in exercise of the legislative power conferred by entry 62 of List II.

12. In the instant case, we find that prior to the enactment of Act 24 of 1984, section 4 provided for levy of entertainment tax on the basis of each payment for admission to the cinema theatre and under section 4-C, in respect of entertainments held within the jurisdiction of a local authority whose population did not exceed 25, 000 the tax was levied on the basis of the prescribed percentage of the gross collection capacity per show. In other words, there were two modes for levy of the tax, one on the basis of the actual number of persons admitted to each show and the other on the basis of the percentage of the gross collection capacity per show. As a result of the amendments introduced by Act 24 of 1984, the system for levy of tax on the basis of number of persons actually admitted to each show was dispensed with and the tax was to be levied on the basis of the percentage of the gross collection capacity per show and different percentages were prescribed depending on the type of the theatre and the nature of the local area where it was situated. Under section 5, an option was given to pay a tax on the basis of the prescribed percentage fixed for a fixed number of shows in a week irrespective of the number of shows actually held. It is not disputed that the tax as it was being levied prior to January 1, 1984, i.e., before the amendment of section4 by Act 24 of 1984, was a tax on entertainment falling within the ambit of entry 62 of List II. The question is whether the alteration in the said mode of levy of tax by Act 24 of 1984 has the effect of altering the nature of the tax in a way that it has ceased to be a tax on entertainments and falls beyond the field of legislative competence conferred on the State Legislature by entry 62 of List II. In our view, the said question must be answered in the negative. The fact that instead of tax being levied on the basis of the payment for admission made by the persons actually admitted in the theatre it is being levied on the basis of the gross collection capacity per show calculated on the basis of the notional aggregate of all the payments for admission which the proprietor would realise per show if all the seats or accommodation in respect of the place of entertainment are occupied and calculated at the maximum rate of payments for admission, would not, in our opinion, alter the nature of the tax or the subject matter of the tax which continues to be a tax on entertainment. The mode of levy based on "per payment for admission" prescribed under section4(1) prior to amendment by Act 24 of 1984 necessitated enquiry into the number of shows held at the theatre and the number of persons admitted to a cinema theatre for each show and gave room for abuse both on the part of proprietor as well as other officers incharge of assessment and collection of tax. The mode of levy or measure of the tax prescribed under section 4(1), as substituted by Act 24 of 1984, is a more convenient mode of levy of the tax inasmuch as it dispenses with the need to verify or enquire into the number of persons admitted to each show and to verify the correctness or otherwise of the returns submitted by the proprietor containing the number of persons admitted to each show and the amount of tax collected.rior to the enactment of Act 24 of 1984, tax was leviable on the basis of either of the two modes under section 4(1) and 4-C. On an examination of the rates prescribed under both the modes, the High Court found that under the system of consolidated levy prescribed under section 4-C, the proprietor could break even if the average rate of occupancy was 40 per cent. As regards the rates prescribed under sections 4 and 5 as amended by Act 24 of 1984, the High Court has observed that the said rates are based on an average expected occupancy rate of less than 50 per cent or 66 per cent depending upon the area in which the theatre is situated. This would mean that the entertainment tax that would be collected over and above the average occupancy rate would constitute the profit of the proprietor. In the circumstances, it cannot be said that the adoption of the system of consolidated levy in section4(1) as amended by Act 24 of 1984 alters the nature of tax and it has ceased to be a tax on entertainments.

13. It has been urged that since both the modes of levy of tax were prevalent prior to the enactment of Act 24 of 1984, an option should have been given to the proprietor of a cinema theatre to choose between either of the two modes and that under the impugned provisions the choice is confined to two modes of assessment under the same system of consolidated levy based on the gross collection capacity per show, one on the basis of gross collection capacity per show under section 4(1) and other on the basis of gross collection capacity per show for a prescribed number of shows per week under section 5. We find no substance in this contention. Once it is held that tax on entertainment could be levied by either of the two modes, viz., per payment of admission or gross collection capacity per show, it is for the Legislature to decide the particular mode or modes of levy to be adopted and whether a choice should be available to the proprietor of the cinema theatre in this regard. The Legislature does not transgress the limits of its legislative power conferred on it under entry 62 of List II if it decides that consolidated levy on the basis of gross collection capacity per show shall be the only mode for levy of tax on entertainments.We are, therefore, unable to accept the contention urged on behalf of the appellants that the impugned provisions contained in sections 4 and 5 as amended by Act 24 of 1984 are ultra vires the legislative power conferred on the State Legislature under entry 62 of List II.

14. The challenge to the impugned provisions on the basis of article 14 is grounded on the principle that discrimination would result if unequals are treated equally and reliance is placed on the decision of this Court in Kunnathat Thathunni Moopil Nair v. State of Kerala 1961 (3) SCR 77. It has been urged that under section 4, as substituted by Act 24 1984, a uniform rate has been prescribed for cinema theatres of a particular class situate in different parts of the same local area although the average rate of occupancy in the cinema theatres located in different parts of the same local area is not the same and a cinema theatre which is located in the central part of the local area would have better rate of occupancy as compared to a theatre located in a remote part and further that the occupancy in the theatre depends on various other factors which have not been taken into account. We find it difficult to accept this contention.

15. Article 14 enjoins the State not to deny to any person equality before the law or the equal protection of the laws. The phrase "equality before the law" contains the declaration of equality of the civil rights of all persons within the territories of India. It is a basic principle of republicanism. The phrase "equal protection of laws" is adopted from the Fourteenth Amendment to the U.S. Constitution. The right conferred by article 14 postulates that all persons similarly circumstanced shall be treated alike both in privileges conferred and liabilities imposed. Since the State, in exercise of its governmental power, has, of necessity, to make laws operating differently on different groups of persons within its territory to attain particular ends in giving effect to its policies, it is recognised that the State must posses the power of distinguishing and classifying persons or things to be subjected to such laws. It is, however, required that the classification must satisfy two conditions, namely, (i) it is founded on an intelligible differentia which distinguishes those that are grouped together from others; and (ii) the differentia must have a rational relation to the object sought to be achieved by the. It is not the requirement that the classification should be scientifically perfect or logically complete. Classification would be justified if it is not palpably arbitrary. [See : In re Special Courts Bill, 1978 1979 (2) SCR 476 at pages 534 to 536]. If there is equality and uniformity within each group, the law will not be condemned as discriminative, though due to some fortuitous circumstance arising out of a peculiar situation some included in a class get an advantage over others, so long as they are not singled out for special treatment. [See : Khandige Sham Bhat v. Agricultural Income-tax Officer 1963 (3) SCR 809 [LQ/SC/1962/287] at page 817].Since in the present case we are dealing with a taxation measure it is necessary to point out that in the field of taxation the decisions of this Court have permitted the Legislature to exercise an extremely wide discretion in classifying items for tax purposes, so long as it refrains from clear and hostile discrimination against particular persons or classes. [See : East India Tobacco Company v. State of Andhra Pradesh 1962 (13) STC 529 (SC) at page 534; 1963 (1) SCR 404 [LQ/SC/1962/150] , at page 411, P. M. Ashwathanarayana Setty v. State of Karnataka 1988 (S3) SCR 155 at page 188, Federation of Hotel & Restaurant Association of India v. Union of India 1989 (74) STC 102 (SC) at page 126; 1989 (2) SCR 918 [LQ/SC/1989/300] at page 949, Kerala Hotel & Restaurant Association v. State of Kerala 1990 (77) STC 253 (SC) at page 264; 1990 (1) SCR 516 [LQ/SC/1990/101] at page 530 and Gannon Dunkerley & Co. v. State of Rajasthan 1993 (88) STC 204 (SC) at page 236; 1993 (1) SCC 364 [LQ/SC/1992/817] at page 397].

16. Reference, in this context, may also be made to the decision of the U.S. Supreme Court in San Antonio Independent School District v. Rodrigues 1973 (411) US 1 at page 41, wherein Justice Stewart, speaking for the majority has observed :

"No scheme of taxation, whether the tax is imposed on property, income or purchases of goods and services, has yet been devised which is free of all discriminatory impact. In such a complex arena in which no perfect alternatives exist, the court does well not to impose too rigorous a standard of scrutiny lest all local fiscal schemes become subjects of criticism under the equal protection clause."

17. Just as a difference in the treatment of persons similarly situate leads to discrimination, so also discrimination can arise if persons who are unequals, i.e., differently placed, are treated similarly. In such a case failure on the part of the Legislature to classify the persons who are dissimilar in separate categories and applying the same law, irrespective of the differences, brings about the same consequence as in a case where the law makes a distinction between persons who are similarly placed. A law providing for equal treatment of unequal objects, transactions or persons would be condemned as discriminatory if there is absence of rational relation to the object intended to be achieved by the law.

18. In Kunnathat Thathunni Moopil Nair v. State of Kerala 1961 (3) SCR 77 [LQ/SC/1960/334] , this Court was dealing with a law providing for imposition of uniform land tax at a flat rate without having regard to the quality of the land or its productive capacity. The law was held to be violative of article 14 of the Constitution on the ground that lack of classification had created inequality.

19. The said decision in K. T. Moopil Nairs case 1961 (3) SCR 77 [LQ/SC/1960/334] has been explained by this Court in Jalan Trading Co. (Private) Ltd. v. Mill Mazdoor Sabha 1967 (1) SCR 15 [LQ/SC/1966/146] , in the context of challenge to the validity of section10 of the Payment of Bonus Act, 1965, providing for payment of a minimum bonus of 4 per cent by all industrial establishments irrespective of the fact whether they were making profit. This Court held that the judgment in Moopil Nairs case 1961 (3) SCR 77 [LQ/SC/1960/334] has not enunciated any broad proposition that when persons or objects which are unequals are treated in the same manner and are subjected to the same burden or liability discrimination inevitably results. It was observed:

"...... It was not said by the court in that case that imposition of uniform liability upon persons, objects or transactions which are unequal must of necessity lead to discrimination. Ordinarily it may be predicated of unproductive agricultural land that it is incapable of being put of profitable agricultural use at any time. But that cannot be so predicated of an industrial establishment which has suffered loss in the accounting year, or even over several years successively. Such an establishment may suffer loss in one year and make profit in another."
(page 35)

It was further observed :

".... Equal treatment of unequal objects, transactions or persons is not liable to be struck down as discriminatory unless there is simultaneously absence of a rational relation to the object intended to be achieved by the law."
(page 36)

20. The limitations of the application of the principle that discrimination would result if unequals are treated as equal, in the field of taxation, have been pointed out by this Court in Twyford Tea Co. Ltd. v. State of Kerala 1970 (3) SCR 383 [LQ/SC/1970/8] , wherein tax at a uniform rate was imposed on plantations. Hidayatullah, C.J., speaking for the majority, while upholding the tax, has observed :

"..... It may also be conceded that the uniform tax falls more heavily on some plantations than on others because the profits are widely discrepant. But does that involve a discrimination If the answer be in the affirmative hardly any tax direct or indirect would escape the same censure for taxes touch purses of different lengths and the very uniformity of the tax and its equal treatment would become its undoing. The rich and the poor pay the same taxes irrespective of their incomes in many instances such as the sales tax and the profession tax, etc."
(pages 389-390)

It was further observed :

"........ The burden is on a person complaining of discrimination. The burden is proving not possible inequality but hostile unequal treatment. This is more so when uniform taxes are levied. It is not proved to us how the different plantations can be said to be hostilely or unequally treated. A uniform wheel tax on cars does not take into account the value of the car, the mileage it runs, or in the case of taxis, the profits it makes and the miles per gallon it delivers. An Ambassador taxi and a Fiat taxi give different outturns in terms of money and mileage. Cinemas pay the same show fee. We do not take a doctrinnaire view of equality."
(pages 393-94)

21. In the instant case, we find that the Legislature has prescribed different rates of tax by classifying theatres into different classes, namely, air-conditioned, air-cooled, ordinary (other than air-conditioned and air-cooled), permanent and semi-permanent and touring and temporary. The theatres have further been categorised on the basis of the type of the local area in which they are situate. It cannot, therefore, be said that there has been no attempt on the part of the Legislature to classify the cinema theatres taking into consideration the differentiating circumstances for the purpose of imposition of tax. The grievance of the appellants is that the classification is not perfect. What they want is that there should have been further classification amongst the theatres falling in the same class on the basis of the location of the theatre in each local area. We do not think that such a contention is well-founded.In relation to cinema theatres it can be said that the attendance in the various cinema theatres within a local area would not be uniform and would depend on factors which may vary from time to time. But this does not mean that cinema theatres in a particular category of local area will always be at a disadvantage so as to be prejudicely affected by a uniform rate as compared to cinema theatres having a better location in the same local area. It is, therefore, not possible to accept the contention that the impugned provisions are violative of right to equality guaranteed under article 14 of the Constitution on the basis that unequals are being treated equally.

22. Another contention that has been urged on behalf of the appellants is that while provision was made under sub-section (6) of section 5 of for enhancement of the amount of tax in the event of increase in the amount of gross collection capacity, there was not corresponding provision for reduction for the amount of tax in the event of reduction in the gross collection capacity. The said provision for enhancement contained in sub-section (6) of section 5 relates to the cases where the proprietor of a cinema theatre opts for payment of weekly consolidated amount. Since the proprietor has the option to opt for the said scheme he cannot complain that the scheme suffers from inequality on account of absence of a corresponding provision for reduction of amount of tax. In any event the said grievance has now been removed by the introduction of sub-section (6-A) in section5 by amendments introduced in the by A.P. Act 23 of 1988 and A.P. Act 16 of 1991.

23. In the result, we find no merit in these appeals and the special leave petition and they are accordingly dismissed. The parties are, however, left to bear their own costs.

24. Appeals and special leave petition dismissed.