Luxury tax on air-conditioned spaces upheld as constitutional under state law. No discrimination found.

The Court upheld the constitutionality of the luxury tax imposed under the West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972. It determined that the tax on air-conditioned floor space was within the state's legislative competence and not ultra vires the Constitution. Additionally, the Court found that the flat rate of luxury tax did not amount to discrimination under Article 14 of the Constitution. The appeal was dismissed, and costs were awarded to the respondent.

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Issues Involved:
1. Constitutionality of the luxury tax under the West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972.
2. Alleged discrimination under Article 14 of the Constitution of India due to the imposition of a flat rate of luxury tax.

Issue-wise Detailed Analysis:

1. Constitutionality of the Luxury Tax:
The appellants contended that the provisions of the West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972, and the rules framed thereunder were unconstitutional and void. They argued that the tax imposed under the Act was a property tax based on floor space rather than a tax on luxury items, thus exceeding the legislative powers of the state legislature under Entry 62 of List II of the Seventh Schedule of the Constitution of India.

The Court referred to the Constitution Bench decision in Express Hotels Private Ltd. v. State of Gujarat and Anr., which concluded that the tax on air-conditioned floor space was within the legislative competence of the state. The Court held that the taxable event under Section 4 of the Act was the provision for air-conditioning in hotels and restaurants, irrespective of its utilization or the income derived therefrom. Therefore, the Act was not ultra vires the Constitution.

2. Alleged Discrimination under Article 14:
The appellants argued that Section 4 of the Act imposed a flat rate of Rs. 100 per annum for every 10 square meters of air-conditioned floor space, irrespective of the locality, quality, standard, or size of the hotels and restaurants. They claimed that this uniform rate failed to recognize the inherent differences between various hotels and restaurants, resulting in discrimination under Article 14 of the Constitution.

The Court examined the arguments and precedents cited by both parties. It was noted that the legislature has wide discretion in matters of classification for taxation purposes, and a tax need not be absolutely perfect in its classification. The Court held that the luxury tax was uniform for all within the group subjected to tax, and further classification within the group was not necessary. The measure of taxation based on air-conditioned floor space was deemed appropriate and not discriminatory.

The Court also referred to several cases, including Kunnathat Thathunni Moopil Nair v. The State of Kerala, State of Kerala v. Haji K. Haji K. Kutty Naha & Ors., and Twyford Tea Co. Ltd. & Anr. v. The State of Kerala & Anr., to emphasize that a taxation law will be struck down as violative of Article 14 if there is no reasonable basis behind the classification made by it. However, in this case, the classification based on air-conditioned floor space was found to be reasonable and within the legislative competence.

Conclusion:
The Court concluded that the luxury tax under Section 4 of the West Bengal Entertainments and Luxuries (Hotels and Restaurants) Tax Act, 1972, was not discriminatory and did not violate Article 14 of the Constitution. The appeal was dismissed with costs quantified at Rs. 5,000.

Judgment:
Appeal dismissed.

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