Validity of Hotel Receipts Tax Act upheld as income definition and Rs.400 classification meet Articles 14 and 19(1)(g)

SC upheld validity of the Hotel Receipts Tax Act, 1980, rejecting challenges to legislative competence and alleged violations of Articles 14 and 19(1)(g). The Court held "income" in entry 82, List I has a wide meaning that encompasses the statute's taxable receipts. Limiting the tax to hotels charging Rs. 400 or more per day was an intelligible classification with a rational nexus to the object of taxing expenditure at hotels presumed to attract a wealthier clientele; the presumption of constitutionality stood. Petitioners failed to dislodge that presumption; appeal dismissed.

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Issues Involved:
1. Legislative competence to enact the Hotel Receipts Tax Act, 1980.
2. Violation of Article 14 of the Constitution (Right to Equality).
3. Violation of Article 19(1)(g) of the Constitution (Right to Practice Any Profession or to Carry on Any Occupation, Trade, or Business).

Issue-wise Detailed Analysis:

1. Legislative Competence:
The petitioners, who are hoteliers, challenged the constitutional validity of the Hotel Receipts Tax Act, 1980, on the grounds of lack of legislative competence. They argued that the Act, which imposes a special tax on the gross receipts of certain categories of hotels, is essentially a tax on luxuries and thus falls under Entry 62, List II of the Seventh Schedule to the Constitution, which is within the States' power. The respondents, however, supported the legislation under Entry 82 of List I, i.e., taxes on income. The court held that the word "income" in Entry 82, List I, should be given its widest amplitude and comprehensiveness. The court cited previous judgments, including Navinchandra Mafatlal v. CIT and Bhagwan Dass Jain v. Union of India, to support the view that "income" includes any profit or gain, whether of a capital or revenue nature. The court concluded that the "chargeable receipts" as defined in the statute fall within the wider connotation of "income" in Entry 82, List I. Therefore, the legislative competence of the Union Parliament to enact the Hotel Receipts Tax Act, 1980, was upheld.

2. Violation of Article 14:
The petitioners argued that the Act violates Article 14 of the Constitution because the classification of hotels based on room charges of Rs. 75 or more per day per individual has no rational nexus with the object of the law, which is to impose a tax on income. They contended that this classification leaves out other hotels with much higher gross receipts, thus failing to include all similarly situated persons. The court referred to its judgment in the case dealing with the Expenditure-tax Act, 1987, where a similar classification was upheld. The court held that the classification of hotels with higher economic status, reflected in room charges, is intelligible and has a rational nexus to the object of the legislation. The presumption of constitutionality was not dislodged by the petitioners. Therefore, the challenge based on Article 14 was rejected.

3. Violation of Article 19(1)(g):
The petitioners also contended that the Act imposes an unreasonable burden on their freedom of business, violating Article 19(1)(g) of the Constitution. They argued that the tax adversely affects the tourism industry and the national economy. The court, however, reiterated its stance from the Expenditure-tax Act, 1987, case, stating that a wide latitude is available to the Legislature in the matter of classification for purposes of taxation. The court emphasized that taxation is not merely a source of raising revenue but also a fiscal tool to achieve social and economic objectives. The classification of hotels based on economic status was found to be reasonable and not violative of Article 19(1)(g). Therefore, this contention was also rejected.

Conclusion:
The court dismissed the writ petitions, upholding the constitutional validity of the Hotel Receipts Tax Act, 1980. The Act was found to be within the legislative competence of the Union Parliament, and the classification of hotels based on room charges was deemed reasonable and not violative of Articles 14 and 19(1)(g) of the Constitution. There was no order as to costs in these petitions.

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