2019 (9) TMI 102 - HC - Income Tax

Interpretation of the provisions in Section 3(1) of the Expenditure Tax Act 1987 - whether room charges were less than Rs. 1, 200/- per day per individual no expenditure tax would be chargeable at all - HELD THAT - According to us Section 3(1) of the said Act will have to be interpreted having regard to the provisions therein in their entirety and not merely by focusing upon the various expressions used therein disjunctively. Further for interpreting the provision in its entirety interpretation which harmonizes all such expressions will have to be preferred over the interpretation which ignores or leaves out any expressions found in the statute. Further an attempt will have to be to harmonize the provision in Section 3(1) of the said Act with other provisions in the said Act as well as the basic scheme of the said Act. In doing so due regard will have to be had to the principles of interpretation of statutes including in particular the principles relating to interpretation of taxing statutes. According to us Section 3(1) of the said Act will have to be interpreted having regard to the provisions therein in their entirety and not merely by focusing upon the various expressions used therein disjunctively - attempt will have to be to harmonize the provision in Section 3(1) of the said Act with other provisions in the said Act as well as the basic scheme of the said Act. In doing so due regard will have to be had to the principles of interpretation of statutes including in particular the principles relating to interpretation of taxing statutes. The said Act refers to room charges for an unit of residential accommodation in terms of the definition in Section 2(10) of the said Act. There is no further distinction made in the said Act on the basis of double occupancy or triple occupancy or quad occupancy when it comes to determination of room charges. Such distinction is some unilateral act by the hotel concerned and the same cannot govern the statutory construction particularly when the provisions of a statute are quite clear. All that the Appellants contend is that they have fixed the room charges on double occupancy basis and therefore the room charges are required to be split or divided by two since the fraction does not exceed Rs. 1200 the said Act is inapplicable. Such contention according to us does not deserve acceptance. It was not even the case of the Appellants that the individual invariably or in particular cases split up the chargeable expenditure or incur the chargeable expenditure independent of one another when room charges are fixed on double occupancy basis or triple occupancy basis . Based upon some artificial ambiguity when in fact there exists none the assessee cannot claim benefit of the principle that such ambiguities in a fiscal statue deserve to be resolved in favour of the assessee. The principle that the ambiguities in a fiscal statute have to be resolved in favour of the assessee applies in case of genuine ambiguities and not to ambiguities created by overemphasizing upon one of the expressions in a statute and ignoring or downplaying the other expression in the same statute. Substantial question of law relating to the interpretation of the provision in Section 3(1) of the said Act is required to be answered against the Appellants and in favour of the Revenue. Appellants had virtually conceded before the ITAT that the benefit under the proviso to Section 4(a) of the said Act would be inapplicable to the Appellants for any assessment years prior to 1995-96 because the approval of the Director General (Exemption) was obtained only on 28/7/1994 relevant to the Assessment Year 1995-96 - We do not propose to non-suit the Appellants on this basis accepting the contentions of Mr. Naniwadekar that the orders made on the rectification application had made it clear that the concession will not preclude the Appellants from raising further challenges and that there can be no estoppel against the law. The proviso to Section 4(a) of the said Act makes very specific mention to a hotel referred to in clause (ii) of sub-section (5) of section 80-IA of the Income-tax Act. There is no reference to clause (iii) of sub-section (4) of section 80-IA of the Income-tax Act. Admittedly approval in terms of clause (ii) of sub-section (5) of section 80-IA of the Income-tax Act was obtained only on 28.7.1994 relevant to the Assessment Year 1995-96. Thus upon plain reading of the proviso to Section 4(a) no exemption can be extended to the Appellants for any assessment year prior to 1995-96. To accept the Mr. Naniwadekar s contention and to grant exemption to the Appellants would mean reading of some provision in the proviso to Section 4(a) of the said Act which provision admittedly finds no place in the text of the proviso to Section 4(a) of the said Act. The exemption is thus sought to be claimed on the basis of some sort of implication. This according to us is impermissible. No such violence can be done to the statutory text and that too in determining whether the Assessee falls within the exemption clause. On a plain reading of the provisions in the proviso to Section 4(a) i.e. on interpretation of the provision on its own merits we are satisfied that the Appellant has made out no case for the extension of exemption for any assessment year prior to 1995-96. No error in the view taken by the ITAT and the additional substantial question of law framed in these appeals is also required to be answered against the Appellant and in favour of the Revenue.

Summary

Issues Involved:
1. Interpretation of Section 3(1) of the Expenditure Tax Act, 1987.
2. Applicability of the proviso to Section 4(a) of the Expenditure Tax Act, 1987.

Issue-Wise Detailed Analysis:

1. Interpretation of Section 3(1) of the Expenditure Tax Act, 1987:
The primary issue in these appeals and the writ petition concerns the interpretation of Section 3(1) of the Expenditure Tax Act, 1987. The appellants argued that the room charges should be divided by the number of occupants (e.g., double or triple occupancy) to determine if the charges exceed Rs. 1200 per day per individual. They contended that this interpretation aligns with the expression "per individual" in Section 3(1). However, the court rejected this argument, emphasizing that the expenditure tax is a tax on the individual who incurs chargeable expenditure and not on the hotel itself. The expression "per individual" refers to the individual incurring the expenditure, not the number of occupants. The court upheld the interpretation that the room charges for any unit of residential accommodation should be considered as a whole, without splitting based on occupancy. This interpretation harmonizes the expressions "room charges for any unit of residential accommodation" and "per individual" and aligns with the legislative intent of the Act.

2. Applicability of the Proviso to Section 4(a) of the Expenditure Tax Act, 1987:
In Tax Appeals No. 53, 54, and 55 of 2007, the additional issue was whether the appellants were entitled to exemption under the proviso to Section 4(a) of the Expenditure Tax Act. The appellants argued that their hotel qualified for exemption as it was referred to in clause (ii) of sub-section (5) of Section 80-IA of the Income Tax Act. However, the court noted that the appellants obtained the necessary approval only on 28.7.1994, relevant to the Assessment Year 1995-96. The court held that the exemption under the proviso to Section 4(a) could not be extended to any assessment year prior to 1995-96, as the approval was obtained only from that date. The court emphasized that the text of the proviso to Section 4(a) specifically mentions clause (ii) of sub-section (5) of Section 80-IA, and there is no reference to clause (iii) of sub-section (4) of Section 80-IA. Therefore, the appellants' claim for exemption for earlier years was not supported by the statutory text.

Conclusion:
The court dismissed all the tax appeals and the writ petition, holding that the interpretation proposed by the appellants for Section 3(1) of the Expenditure Tax Act was incorrect and that the exemption under the proviso to Section 4(a) could not be applied to assessment years prior to 1995-96. The substantial questions of law were answered in favor of the Revenue and against the appellants.