TaxTMI 
TaxTMI 
2017 (4) TMI 1013
X X X X Extracts X X X X
X X X X Extracts X X X X
....ars 1995-96 and 1997-98 respectively. In the course of Assessment, the Assessing Authority noted that the Assessee had offered to tax chargeable expenditure of an amount of Rs. 31,35,18,224/- as against which a sum of Rs. 3,28,82,659/- had been paid leaving a sum of Rs. 26,02,331/- outstanding. A stand was taken by the assessee at the time of assessment to the effect that the outstanding amount represented expenditure that was yet to be incurred by the guests who had stayed at the hotels and that, upon such incurrence by the guests and collection by the hotel, the same would be paid over to the Government. 3. In advancing this argument, the Assessee interpreted the provisions of Section 5 of the Act that defines Chargeable Expenditure to mean such expenditure incurred that had been paid by the guests and duly received by the hotel. The stand of the Assessee was rejected by the Assessing Officer who was of the view that the mercantile system of accounting followed by the Assessee, necessitated all expenditure that had accrued, to be offered to tax. 4. The assessing officer also placed reliance on Section 7(4) of the Act that mandated any person responsible for collection of ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in respect of such unit, food, drinks and other services or any of them and the case is not covered by the provisions of sub-clause (a) or (ii) It appears to the Assessing Officer that the charges for such unit, food, drinks or other services are so arranged that the room charges are understated and the other charges are overstated, the Assessing Officer shall, for the purposes of this clause determine the room charges on such reasonable basis as he may deem fit; and (2) Incurred in a restaurant before the 1st day of June, 1992. 7. The Section originally extended to chargeable expenditure incurred in a restaurant as well. Vide an amendment made to sub-section (2) of Section 3 of the Act by Finance Act 1992 with effect from 01.06.1992, charges incurred in a restaurant housed within a hotel were excluded from the ambit of Expenditure Tax. The Act was thus made applicable only in the case of composite room charges as detailed above. Chargeable expenditure is defined in terms of Section 5 of the Act as follows: 5.Meaning of Chargeable Expenditure For the purposes of this Act, chargeable expenditure, - (1)In relation to a hotel referred to....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the exact point of time of incurrence of expenditure upon which would Section 5 stand attracted. 11. Sub-section (1) of Section 5 addresses two situations, and refers to the incurrence of expenditure or the payments made in or to a hotel. The two references are akin to the mercantile and cash system of accounting respectively. There is no difficulty with respect to the second component, that is, payments actually made. The first component presents some scope for debate in so far as the expenditure can be incurred either on a day to day basis over the period of stay, which is the view of the Revenue, or upon conclusion of stay, at the time of check-out, which is the view of the assessee. 12. The normal practice adopted by hotels in this regard would be of some relevance and bearing upon the issue. The expenditure incurred in a hotel is composite feature that takes into account the charges payable for accommodation, food, drink and other services that are offered along with the use of the room. Such composite charges can be quantified only upon conclusion of the stay of the guests though a day to day account may have been maintained thereof. We have noted earlier that the obje....
X X X X Extracts X X X X
X X X X Extracts X X X X
....one thousand two hundred rupees or more, per day per individual, as the case may be, for the relevant period under consideration, since the charge is levied upon and tax is payable by the customer who avails of any of the services enumerated in section 5 of the Act, it is the expenditure incurred by such person who occupies and the expenditure incurred during such time for all or any of the services rendered and which are enumerated in Section 5 that alone would constitute chargeable expenditure and it is only in respect of such chargeable expenditure, the assessee under the Act becomes responsible to collect the expenditure-tax at the rates specified in section 4 of the Act and remit the same in terms of the obligations cast upon him under section 8 of the Act. Therefore, the levy in all these cases on the total receipts of the hotelier, taking it to be the chargeable expenditure, cannot be sustained and the same is liable to be set aside.' 16. The Division Bench also noted the provisions of Section 3 of the Hotel Receipts Tax Act 1980 enacted for the purpose of imposing a special tax on gross receipts of certain hotels. In this context, it is stated as follows: Se....