TaxTMI 
TaxTMI 
2023 (11) TMI 673
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....the erstwhile Companies Act, 1956 [the 1956 Act], had neither obtained registration under the Act nor had it paid any tax thereunder. The view as taken by the Assessing Authority as embodied in its order of assessment dated 19 March 2013 was affirmed by the First Appellate Authority on 21 May 2014. It is in that backdrop that the matter came to be laid before the Commissioner. 3. The petitioner asserts that it is a social club, governed by the principle of mutuality and it stood duly incorporated as such in terms of Section 25 of the 1956 Act. It is the case of the petitioner that it is a mutual benefit association and its various activities are confined to its members. Resting the challenge to the order passed by the first respondent on the principles of mutuality as enunciated in respect of such clubs and associations, it is contended that the respondent has clearly erred in holding it liable to pay luxury tax. 4. As was noticed by us hereinabove, the period of assessment with which we are concerned are FYs 2009-10, 2010-11 and 2011-12. However, the order impugned before us appears to have proceeded on the basis of the provisions of the Act, as they stood post its amendment....
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....f tax 3. (1) Subject to the provisions of this Act and the rules made thereunder there shall be levied a tax on the turnover of receipts of a hotelier. (2) There shall be levied a tax on the turnover of receipts of a hotelier at a rate not exceeding fifteen per cent to be notified by the Government from time to time and different rates may be notified for different classes of hotels as charges of luxury provided in a hotel: Provided that, where the charges are levied otherwise than on daily basis or per room then the charges for determining the tax liability under. this section shall be computed proportionately for a day and per room based on the total period of occupation of the accommodation for which the charges are made according to the rules or practice of the hotel. (3) Where, in addition to the charges for luxury provided in a hotel, service charges are levied and appropriated by the hotelier and not paid to the staff, then such charges shall be deemed to be part of the charges for luxury provided in the hotel. (4) Where luxury provided in a hotel to any person (not being an employee of the hotel) is not charged at all, or is char....
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....in two sub-clauses, namely sub-clauses (eb) and (g). The definition of the term "establishment", as amended vide the 2012 Amendment Act and explained in the said two said subclauses is reproduced hereinbelow: - "2. Definition.-In this Act, unless the context requires otherwise:- xxx xxx xxx (eb) "establishment" means a banquet hall or a gymnasium/health club or a hotel or a spa where luxury is provided to a customer by way of business; xxx xxx xxx (g) "establishment" includes a residential accommodation, a lodging house, an inn, a club, a resort, a farm house, a public house or a building or part of a building, where a residential accommodation is provided by way of business;" For some inexplicable reason, the word establishment has been defined twice over by virtue of the aforesaid clauses (eb) and (g), post the 2012 Amendment Act. However, and since not much would turn on that, we refrain from observing anything further in that respect. 13. The expression "luxury" came to be inserted in the Act in terms of the aforesaid amendment and stands defined as follows:- "2. Definition.-In this Act, unless the context requires oth....
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....at, where the charges are levied otherwise than on daily basis or per room then the charges for determining the tax liability under this section shall be computed proportionately for a day and per room based on the total period of occupation of the accommodation for which the charges are made according to rules or practice of the hotel. (3) In case, in addition to the charges for providing luxury, service charges are levied and appropriated by the proprietor and not paid to the staff, then, such charges shall be deemed to be part of the turnover of receipts for the purpose of levy of tax under this Act. (4) In case luxury provided in a hotel to any person (not being an employee of the proprietor) is not charged at all, or is charged at a concessional rate, nevertheless there shall be levied and collected the tax on such luxury, at the rate specified in sub-section (2), as if full charges for such luxury were paid to the proprietor. (5) The tax shall not be levied and payable in respect of turnover of receipts for supply of food, drinks and goods such as cosmetics, medicines, nutritional supplements etc, on the sale of which the proprietor is liable to pay....
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....submissions are addressed oblivious of the statutory position of the Act as it prevailed prior to 2012. This aspect also clearly appears to have been overlooked by the Commissioner who has also rested his decision on the amended provisions of the Act. However, and bearing in mind the assessment years with which we are concerned, it is evident that it would be the Act as it stood prior to its amendment in 2012 which would be applicable. 20. While we find no ground to doubt the principles of mutuality as were explained in Calcutta Club and which constitutes the foundation for the decision handed down by the Kerala High Court in Madhavaraja Club, we find that the petitioner did not question the validity of the provisions of the Act as it originally stood and which extended the incidence of tax to the provision of residential accommodation in a club. 21. If it were the contention of the petitioner that the tax on the provision of such residential accommodation could not be levied, it was incumbent upon it to question the validity of the provisions of the Act as they originally stood. However, and in the absence of such a challenge having been mounted and bearing in mind the statu....
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....r its treatment by him as, stock-in-trade of a business carried on by him shall be chargeable to income tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him and, for the purposes of Section 48, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset." It can be seen from this provision that profits or gains arising from a transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business, is by a deeming fiction brought to tax, despite the fact that there is no transfer in law by the owner of a capital asset to another person. Modalities such as these to bring to tax amounts that would do away with any doctrine of mutuality are conspicuous by their absence in the language of Article 366(29-A)(e). xxxx xxxx xxxx 52.1. The doctrine of mutuality continues to be applicable to incorporated and unincorporated members' clubs after the 46th Amendment adding Article 366(29-A) to the Constitution of Ind....
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....te of Karnataka v. Drive-in Enterprises - [(2001) 4 SCC 60] in support of his contention that the incidence of luxury tax is on the enjoyment of luxury and not on the providing of luxury is also misplaced. The said decisions considered the issue of legislative competence of the respective legislatures while imposing the levy of luxury tax. It was in that context that the Supreme Court found that the levy of luxury tax was on the enjoyment of the luxury and hence, even if the incidence of tax was on the 'turnover of stock of luxuries' or on the 'admission of cars/motor vehicles inside the drive in theatre', as the case may be, in pith and substance, the levy of tax was on a luxury and therefore within the competence of the respective legislatures to levy, as Entry 62 of List II under the Seventh Schedule to the Constitution authorised the levy of "Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling". To the same effect is the judgment of the Division Bench of this court in Asianet Satellite Communications Ltd. v. State of Kerala - [(2010) 3 KLT (SN 22) 29] as also the judgments of the Supreme Court in Express Hotels and Purvi Communication [supra].....