TaxTMI 
TaxTMI 
2008 (12) TMI 714
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....Hotel' means a building or part of a building where lodging accommodation with or without board is by way of business provided for a monetary consideration, and includes a lodging house, club and holiday resorts. Explanation.-A club, a lodging house and a holiday resort for which charges are collected for providing accommodation whether or not in the course of business shall be deemed to be a hotel for the purpose of this Act." The abovesaid amendment to the definition clause of "hotel" is with retrospective effect as the amended provision shall always be deemed to have been inserted. What prompted the State Legislature to include club in the definition of "hotel" is the decision rendered by this court in the case of Bangalore Golf Club v. Assistant Commissioner of Luxury Taxes reported in [1999] 115 STC 338 (Karn). In that case it is held that hotel does not include club. In order to overcome the said decision, the amendment in question has been made by the State Legislature by including club in the definition of "hotel". Pursuant to the amendment to the provision of section 2(4) and inserting Explanation clause, notices were issued to the clubs under se....
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....s to its proprietor or partners or shareholders. There is no profit making motive in a club. To become member of a club, one has to fulfil the eligibility criteria and pay huge membership fee to acquire membership but it is not so in respect of a hotel. With all the above distinct features, it is not proper and correct for the State Legislature to treat a club on par with a hotel as the element of business is lacking in the clubs which is one of the cardinal principle to levy luxury tax, as observed by the apex court in the case of State of Andhra Pradesh v. H. Abdul Bakshi and Bros. [1964] 15 STC 644. The relevant portion is extracted from Bangalore Golf Club case [1999] 115 STC 338 (Karn), which is reproduced hereunder (at page 342 of 115 STC): "The expression 'business' though extensively used is a word of indefinite import. In taxing statutes it is used in the sense of an occupation, or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive, and not for sport o....
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....nt or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the court in interpreting the true purport and intendment of the enactment, and (e) It cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same." The Explanation should also be in conformity with the provision of the Act to which it is attached. This portion is clear from the observation made in the decision in Bihta Co-operative Development and Cane Marketing Union Ltd. v. Bank of Bihar reported in AIR 1967 SC 389. The relevant portion is extracted in Sundaram's case AIR 1985 SC 582 at paragraph 49, which is reproduced hereunder: "The Explanation must be read so as to harmonise with and clear up any ambiguity in the main section. It should not be so construed as to widen the ambit of the section." Hence, the insertion of Explanation to the definition clause "hotel" under section 2(4) of the Act is contrary to the definition provision an....
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....d down by the apex court in the case referred to above. When clubs are not run on non-profit basis and in the absence of element of business, the observation of the learned single judge in the impugned order is contrary to the definition. The further observation of the learned single judge that it matters little whether the activity of the club is by way of business or otherwise, is also not legally correct. It is well-settled that each word of a statutory provision must be given its weight and in this connection the famous words of judge learned Hand extracted in the case of K.P. Varghese v. Income-tax Officer, Ernakulam reported in [1981] 131 ITR 597 (SC), are reproduced hereunder (at page 604): ". . . it is true that the words used, even in their literal sense, are the primary and ordinarily the most reliable source of interpreting the meaning of any writing: be it a statute, a contract or anything else. But it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to t....