Luxury tax on hotel internet facility cannot stand where internet access is treated as a basic necessity and not a taxable luxury.

Internet facility provided by a hotel to its guests was treated as outside the scope of luxury tax, following earlier rulings that such service is akin to a telephone facility and does not amount to "luxury" under the relevant provision. The Court noted that internet access had become a basic necessity, so the addition on that count could not be sustained. Once the substantive levy failed, the revised rate issue and the consequential penalty also could not survive. The impugned assessment, appellate and revisional orders were therefore set aside.

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Issues: Whether the internet facility provided by a hotel to its guests could be subjected to luxury tax, and whether the assessment, appellate and revisional orders levying such tax and consequential penalty could be sustained.

Analysis: The Court followed earlier decisions on the same issue holding that internet facility provided through the hotel is akin to telephone facility and falls outside the ambit of luxury for the purpose of the relevant provision. The Court accepted that internet service has come to be regarded as a basic necessity and, on that reasoning, the addition made on this count was not sustainable. The Court also accepted the earlier view that the revised rate issue and the penalty could not survive once the substantive levy itself was set aside.

Conclusion: The luxury tax levied on the internet facility was held unsustainable, and the impugned orders were quashed in favour of the assessee.

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