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An estimated 5-minute read

Gujarat’s Withdrawal of Tax Exemption to a Film on Homosexuality: The Doctrine of “Unconstitutional Conditions”

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Yesterday, the Supreme Court admitted the State of Gujarat’s appeal against a decision of the High Court of Gujarat, which had set aside the Gujarat State Tax Commissioner’s denial of tax exemption to the film “The Colour of Life“. The Gujarat government grants a 100% entertainment tax exemption to Gujarati colour films produced after 1997. This exemption is, however, withheld from films “depicting evil customs, blind faith, sati, dowry and such “social evils,” and those “against national unity”.” “The Colour of Life” depicts the “sufferings of the homosexual prince”, and was refused tax exemption by the State Tax Commissioner. This decision was quashed by the Gujarat High Court, which held that it violated the filmmaker’s right to freedom of expression. The case was appealed, and the Supreme Court had passed an interim order denying tax exemption to the film.

Although the Supreme Court has only admitted the appeal, the filmmaker had pointed out that it effectively kills the film. This is because the time between admission of an appeal and the end of the final hearing is often a matter of years. In the meantime, the stay will continue to operate. Effectively, therefore, if the filmmaker cannot afford to pay the entertainment tax, the film will not be shown, whichever way the Supreme Court might decide the case. One of the most problematic aspects of our judicial system is precisely that delays ensure the effective victory of the party that has the upper hand in the status quo. In this case, the status quo is effectively a creation of the Supreme Court’s interim order, and if there is indeed a curtailment of the filmmaker’s free speech rights, then the Supreme Court is responsible for it – even if there is no financial decision yet.

It might, however, be argued that the interim order was justified, because there is no prima facie violation. The power to tax – and the power to grant exemptions from tax – is a State function. There is no prior entitlement or right to a tax exemption. Rather, it is in the form of a privilege. Withdrawing the privilege is a discretionary act by the government, and does not give rise to any constitutional claim.

It is in this context, however, that we must consider the doctrine of “unconstitutional conditions.” This doctrine originated in the United States, and holds that “the government may not require a person to give up a constitutional right in exchange for a discretionary benefit conferred by the government, even if the government is not obligated to provide the benefit in the first place.” Take the 2013 judgment of the Supreme Court in Agency for International Development vs Alliance for Open Society International. A US law provided for government funds to organisations combating HIV/AIDS worldwide. The Act also provided that no funds “may be used to promote or advocate the legalization or practice of prostitution,” and no funds may be used by an organization “that does not have a policy explicitly opposing prostitution.” In other words, in order to be eligible for government funds under the Act, organisations would have to refrain from promoting the legalisation of prostitution, and would also have to explicitly oppose prostitution.

The Supreme Court held that these provisions violated the First Amendment. The Court’s analysis was in two steps. First, the Court asked whether, if the government the impugned provisions were in the form of a direct regulation – i.e., the government compelling people to support its point of view on prostitution – it would be unconstitutional. The answer to that was clearly in the affirmative, since “the government is prohibited from telling people what they must say.” The next question was whether “whether the Government may nonetheless impose that requirement as a condition of federal funding.” Here, the Court drew a crucial distinction: between “conditions that define the limits of the Government spending program—those that specify the activities Congress wants to subsidize—and conditions that seek to leverage funding to regulate speech outside the contours of the federal program itself.” The distinction is a tricky one, but consider the following hypothetical: government may set up a fund for the promotion of Hindi literature. English writers cannot complain that this violates their rights, since the government is entitled to “specify the activities… it wants to subsidise.” In Agency for International Development, however, there was something more. As the Court pointed out, the case was “not about the Government’s ability to enlist the assistance of those with whom it already agrees. It is about compelling a grant recipient to adopt a particular belief as a condition of funding.”

In India, the unconstitutional conditions doctrine was adopted by Justices Mathew and Chandrachud in the 9-judge bench decision in Ahmedabad St Xavier’s College vs State of Gujarat. The judges observed:

“The doctrine of “unconstitutional condition” means any stipulation imposed upon the grant of a governmental privilege which in effect requires the recipient of the privilege to relinquish some constitutional right. This doctrine takes for granted that ‘the petitioner has no right to be a policeman’ but it emphasizes the right he is conceded to possess by reason of an explicit provision of the Constitution, namely, his right “to talk politics”. The major requirement of the doctrine is that the person complaining of the condition must demonstrate that it is unreasonable in the special sense that it takes away or abridges the exercise of a right protected by an explicit provision of the Constitution… though the state may have privileges within its control which it may withhold, it cannot use I a grant of those privileges to secure a valid consent to acts which, if imposed upon the grantee in invitum would be beyond its constitutional power.”

This, it will be noted, is substantively similar to the American doctrine. Let us now apply it to the case at hand. It is submitted if the government was to directly impose the restrictions contained in its tax-exemption policy, it would violate Article 19(1)(a) because of over-breadth. “Evil customs”, “blind faith” and things “against national unity” go beyond the 19(2) restrictions of “public order”, “decency or morality” (as interpreted in Ranjit Udeshi and Aveek Sarkar), and “security of the State” The Tax Commissioner’s stated justification for disallowing the exemption – that it would create “friction” in society – certainly goes far beyond Article 19(2). According to the second step of the argument, the conditional exemption is clearly not defining the boundaries of the state’s funding assistance program, but amounts to “compelling… an [exemption] recipient to adopt a particular belief as a condition of funding.”

Consequently, the denial of tax exemption to The Colour of Life – and arguably, the government’s exemption policy – imposes an unconstitutional condition upon filmmakers, and falls foul of the fundamental right to the freedom of speech under Article 19(1)(a). It might be too late in the day to save The Colour of Life, but a positive decision on merits might help in creating a more speech-protective doctrine for the future.

Original author: gautambhatia1988

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