Club accommodation cannot be redefined as a hotel by an Explanation that widens tax liability retrospectively.

A club is materially different from a hotel under the Karnataka Tax on Luxuries Act, because a hotel involves lodging accommodation provided by way of business for monetary consideration, while a club operates on membership and social or recreational purposes without the same business character. An Explanation to the definition could not enlarge the substantive charging provision by deeming club accommodation to be a hotel, since an Explanation must clarify and harmonise with the main text, not override it. The retrospective extension of luxury tax liability was also impermissible because a taxing amendment that creates a new burden on past transactions is ordinarily prospective. The amendment was therefore held invalid, and clubs could not be treated as hotels for luxury tax.

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Issues: Whether the inclusion of clubs in the definition of hotel under section 2(4) of the Karnataka Tax on Luxuries Act, 1979, together with the Explanation and its retrospective operation, was valid in law.

Analysis: The definition of hotel required lodging accommodation provided by way of business for monetary consideration, whereas a club was held to be materially different in nature, object and activity. A club functions on membership and social, cultural, sports and recreation purposes, and lacks the essential element of business or profit motive that characterises a hotel. The inserted Explanation, by deeming accommodation in a club to be a hotel whether or not in the course of business, was inconsistent with the main definition and could not enlarge it. An Explanation must clarify and harmonise with the substantive provision, not widen its ambit or nullify the controlling words of the enactment. The retrospective extension of tax liability was also impermissible, since an amendment that creates a new tax burden on past transactions is not ordinarily to be given retrospective effect.

Conclusion: The inclusion of club in the definition of hotel and the retrospective Explanation were invalid, unconstitutional and bad in law. The amendment was struck down and clubs could not be treated as hotels for levy of luxury tax.

Ratio Decidendi: An Explanation to a taxing provision cannot override or widen the scope of the substantive charging definition, and a taxing amendment creating a new liability is ordinarily prospective and not retrospective.

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