2018 (10) TMI 452 - HC - VAT and Sales Tax

Clubs renting rooms subject to luxury tax under Kerala Tax on Luxuries Act, 1976

The court affirmed the decision of the Division Bench, holding that clubs renting out rooms are subject to luxury tax under the Kerala Tax on Luxuries ... Levy of Luxury Tax - renting of rooms in a hotel - levy under sub-section (2A) of Section 4 - petitioner would contend that the Division Bench has wrongly arrived at the conclusion that a club could be charged with luxury tax on the renting of rooms it does at its premises. Held that:- We have to first look at the decision of this Court in Trivandrum Club [2013 (1) TMI 606 - KERALA HIGH COURT]. Therein the Division Bench had specifically noticed the contention raised by the appellant that unless accommodation is provided in the building as part of business against collection of rent, the building cannot be called hotel. The Division Bench found that the definition of hotel under the Act has a wider meaning, especially noticing the Explanation covering even guest houses run by the Government or a Company or a Corporation. What is sought to be taxed is not the renting of rooms for accommodation alone, but also the renting of auditorium, kalyanamandapam or hall and the amenities and services provided therein excepting service of food and beverages. Section 4 understands this distinction and levies and collects tax on the luxury provided in a hotel, house boat, hall, auditorium or kalyanamandapam. Consciously, aware of 'luxury' including renting of rooms as also use of auditoriums and kalyanamandapams and the other amenities and services provided, the inclusive levy is on the renting of hall, auditorium or kalyanamandapam attached to hotels and clubs and renting of rooms attached to a hall, auditorium or kalyanamandapam. The mere inclusion of club in the charging section and its exclusion from the definition of hotel or of luxury cannot at all be found to be significant insofar as the claim of the assessee to exempt them from such levy. Levy under sub-section (2A) of Section 4 - Held that:- The levy under sub-sections (1) and (2A) of Section 4 are quite distinct and different and can both be traced to Entry 62 of List II of Schedule VII of the Constitution of India - The luxury is specifically defined under sub-Section (f) and so is the charge created by Section 4(1). The incidence of tax is the enjoyment of such luxury, by the renting of rooms or halls, etc. The person on whom the levy is imposed is that person who enjoys the luxury the liability to collect being on the hotel, hall, kalyanamandapam or auditorium. The rate is also crystal clear from Section 4(2) and measure is the charge at which such renting of rooms or use of such premises is made and the charge for the other amenities and services provided in the specified premises. As far as Section 2A is concerned, the levy is conceded to by the petitioner. Appeal dismissed. Issues:1. Interpretation of provisions under the Kerala Tax on Luxuries Act, 1976 regarding the levy of luxury tax on clubs renting out rooms.2. Whether the charging section of the Act applies to clubs and the distinction between levies under different subsections.3. Reference to relevant legal precedents in taxation matters to support the arguments presented.Analysis:1. The main issue in this judgment revolves around the interpretation of the Kerala Tax on Luxuries Act, 1976, specifically regarding the levy of luxury tax on clubs renting out rooms. The petitioner club contended that a club should not be charged luxury tax on renting out rooms, contrary to the decision of a Division Bench in a previous case. The argument was based on the assertion that a club does not fall under the definition of a 'hotel' as per the Act, limiting the charge under Section 4 to specific activities related to clubs.2. The judgment delves into the provisions of the Act, emphasizing that the definition of a 'hotel' under the Act is broader than common understanding, encompassing any place providing residential accommodation for a monetary consideration. The Act's definition of luxury includes accommodation for residence and amenities exceeding a certain charge, with the levy applicable to clubs renting out rooms for accommodation or providing services. The court clarifies that the inclusion of clubs in the charging section does not exempt them from the luxury tax on accommodation provided for a monetary consideration.3. The judgment extensively references legal precedents in taxation matters to support the decision. Cases such as Govind Saran Ganga Saran and Ellis Bridge Gymkhana are cited to illustrate principles of taxation and the scope of levies under specific charging sections. The court also refers to Mathuram Agrawal and other cases to emphasize the importance of clear statutory language in determining tax liabilities. The judgment concludes by affirming the decision of the Division Bench and dismissing the Writ Appeal, citing adherence to the principles established in previous rulings and the specific provisions of the Act.This detailed analysis of the judgment provides a comprehensive understanding of the legal issues addressed, the arguments presented, and the court's reasoning based on statutory interpretation and relevant legal precedents.