Luxury tax collected by hotelier treated as trading receipt and assessed as business income under the Tamil Nadu levy.

Luxury tax collected by a hotelier under the Tamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act, 1981 was treated as part of the hotelier's trading receipts and assessable as business income. The statutory liability to pay the tax rested on the hotelier, even though collection from occupants was permitted, and the occupant was not directly liable to assessment or demand. The Act also treated the tax as payable by the proprietor even if not collected from customers. On that basis, the amount retained its character as business receipt, and the collection arrangement did not amount to diversion of income by overriding title or make the hotelier a mere collecting agent.

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Issues: Whether luxury tax collected by the hotelier under the Tamil Nadu Tax on Luxuries in Hotels and Lodging Houses Act, 1981 formed part of the assessee's trading receipts and was liable to be assessed as business income.

Analysis: The statutory scheme placed the liability to pay luxury tax squarely on the hotelier, even though the hotelier was permitted to collect the amount from occupants. The occupant was not directly liable to assessment or demand under the Act. The Act also contemplated that where the hotelier failed or neglected to collect the tax, the tax would still be payable by the proprietor as if it had been collected. On that footing, the amount received from customers for occupation of the room, whether shown separately or included in the room charge, retained its character as part of the hotelier's receipts. The arrangement did not amount to diversion of income by overriding title, nor did it make the hotelier a mere collecting agent of the Government.

Conclusion: The luxury tax collected by the assessee was correctly treated as a trading receipt and was assessable as business income, against the assessee and in favour of the Revenue.

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