Corporation of Calcutta v. Liberty Cinema

This case asks a simple exam-style question: is the cinema licence levy under Section 548(2) of the Calcutta Municipal Act, 1951 a fee or a tax? The Supreme Court said it is a tax. Why? Because the levy did not match any direct, special service to the licence holder. The Court also held that the power given to the Corporation to fix the levy was not excessive delegation, and the increase did not unreasonably restrict business under Article 19.

1. Is the levy under Section 548(2) a tax or a fee?
2. Does the delegation to fix the amount suffer from excessive delegation or violate Article 19(1)(f) & (g)?

• Court prefers a reading that sustains validity.
• Tax: compulsory exaction without direct quid pro quo.
• Fee: payment for a specific service; reasonable correlation needed.
• Delegation okay if there is clear guidance; no naked, unguided power.
• Article 19(1)(f), (g) rights are subject to reasonable restrictions by law.

The Supreme Court upheld the Corporation’s levy and reversed the High Court. The levy is in substance a tax, as no direct, special service to the licence holder was shown. Delegation was valid because the Act set out the purpose and scope. The increase in amount was significant but not so high as to be an unreasonable restriction under Article 19(1)(f) and (g).

• No sufficient quid pro quo → levy = tax, not fee.
• Guided municipal purpose → no excessive delegation.
• Quantum increase alone does not make a levy unreasonable under Article 19.

This case draws a clean line between a fee and a tax for municipal levies. It also shows how courts test delegation to local bodies and how Article 19 reasonableness is applied when rates increase.

• Fee vs Tax test: look for a real, special service link.
• Delegation: needs purpose and limits; not micromanagement.
• Article 19: high rates ≠ per se unreasonable.

Mnemonic: “CINEMA = TAX” — CIty levy, NEed no service link, MAndate guided.

1. Spot the quid pro quo—absent here → tax.
2. Check the guidance—Act’s purpose → valid delegation.
3. Test reasonableness—rise alone not enough under Art. 19.

Quid pro quo (Fee)

A real link between payment and a specific service.

Excessive Delegation

When law gives unguided, arbitrary power to fix levies.

Reasonableness (Art. 19)

Limits must not be arbitrary or destructive of business.