2011 (1) TMI 1253 - HC - VAT and Sales Tax

Whether BIEC an exhibition-cum-sale hall is a building where accommodation is provided for marriage or reception or matters related therewith and functions are conducted in such halls regularly or not is a marriage hall within the definition of the said term under section 2(5B) liable to be impost under section 3C of the Act? Whether letting out BIEC on hire for exhibition-cum-sale is a luxury meaning services ministering to enjoyment comfort or pleasure extraordinary to necessities of life within section 2(4B) attracting the impost under section 3C of the Act? Whether in the facts and circumstances the luxury tax levied and demanded in the notices annexures G G1 and L on the rental income from hiring BIEC and for services rendered therein are legal valid and sustainable? Held that - The meaning of marriage hall in section 2(5B) of the Act is thus comprehended to include halls building or part of the building where accommodation is provided for the purpose of marriage reception or matters related therewith.There can be no rigidity that an exhibition-cum-sale hall ex hypothesi be considered to fall within the meaning of section 2(5B) of the Act. The question in each case should be whether in the light of the cumulative facts as established an exhibition-cum-sale hall is a building or a part of the building where accommodation is provided for marriage or reception or matters related therewith whether functions are conducted in such halls regularly or not? the amendment as also the decision in Godfrey Phillips India Ltd. s case 2005 (1) TMI 391 - SUPREME COURT OF INDIA . In the result the petitions are allowed. The proceedings initiated by the respondents culminating in the notices annexures G G1 and L impugned are quashed.

Summary

Issues Involved:

1. Definition and applicability of "marriage hall" under section 2(5B) of the Karnataka Tax on Luxuries Act, 1979.
2. Interpretation of "luxury" under section 2(4B) and its applicability to the Bangalore International Exhibition Centre (BIEC).
3. Legality and validity of the luxury tax levied on rental income from hiring BIEC.

Issue-wise Detailed Analysis:

1. Definition and Applicability of "Marriage Hall" under Section 2(5B):

The petitioner challenged the notices demanding luxury tax, arguing that BIEC does not qualify as a "marriage hall" under section 2(5B) of the Karnataka Tax on Luxuries Act, 1979. The petitioner contended that BIEC is used for high-value machinery exhibitions and not for marriages or related functions. The court examined the amended definition of "marriage hall," which includes "seminar, convention, banquets, meeting or exhibition-cum-sale hall" regardless of whether functions are conducted regularly. The court referred to the apex court's decision in Godfrey Phillips India Ltd. v. State of U.P. [2005] 139 STC 537 (SC), which emphasized that luxury tax pertains to "activities of indulgence, enjoyment and beyond necessities of life." The court concluded that BIEC, not being used for marriages or related functions, does not fall within the definition of "marriage hall" under section 2(5B).

2. Interpretation of "Luxury" under Section 2(4B):

The petitioner argued that the tax on rental income from hiring BIEC for exhibitions does not constitute a "luxury" as defined under section 2(4B), which refers to "services ministering to enjoyment, comfort or pleasure extraordinary to necessities of life." The court noted that the definition of "luxury" was amended to include services and not goods, aligning with the decision in Godfrey Phillips India Ltd.'s case. The court agreed with the petitioner that the rental income from BIEC, used for industrial exhibitions, does not qualify as a luxury service under the Act.

3. Legality and Validity of the Luxury Tax Levied on Rental Income from Hiring BIEC:

The court examined whether the luxury tax levied on BIEC's rental income was legal and valid. The respondents argued that BIEC, being an exhibition-cum-sale hall, falls within the definition of "marriage hall" and is subject to luxury tax. They contended that the services provided in BIEC, such as comfortable seating and amenities, constitute luxury. However, the court emphasized that the tax should only apply to services related to marriages or receptions. The court found that the notices demanding tax on BIEC's rental income were beyond the scope of the Act and not supported by the legislative intent.

Conclusion:

The court allowed the petitions, quashing the impugned notices (Annexures G, G1, and L). It held that BIEC does not fall within the definition of "marriage hall" under section 2(5B) and that the rental income from hiring BIEC for exhibitions does not constitute a taxable luxury service under section 2(4B). The court emphasized the need to interpret fiscal statutes in line with legislative intent and judicial precedents, ensuring that they do not lead to unjust taxation.