TMI Blog1988 (4) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hotel receipt tax (hereinafter referred as tax) was calculated for the months of February and March, 1981 at Rs. 58, 586 and from1st April, 1981to31st March, 1982at Rs. 3,68,140. Under s. 21 of the Hotel Receipt Tax Act, such tax was deductible in computing total income under the IT Act, 1961 under the head profit and gains of business or profession in the case of an assessee carrying on the business of hotel to which this Act applies. Sec. 5 of the Act provides for the levy of the hotel receipt tax on every person carrying on the business of hotel in relation to which this Act applies for every assessment year commencing from year after year from1st April, 1981. Sec. 14 of the Act provides that hotel receipt tax shall be payable in advance during the financial year in respect of chargeable receipts of the party which would be previous year for the immediately following assessment year as under: Hotel receipt tax shall be payable in advance in two instalments on the following dates during the financial year: (i) 15th September, in respect of chargeable receipts attributable to first half of the previous year, and (ii) 15th March, in respect of chargeable receipts attributab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titions alongwith the applications for stay above-mentioned being called on for hearing before this Court onthe 13th March, 1981. Upon perusing the said Writ Petitions Applications and the accompanying documents and upon hearing Counsel for the Petitioners. The Court while directing issue of Rule Nisi to the Respondents above named and further clarifying that in the event of the petitioners failing in the matters they will be liable to pay tax irrespective of the fact whether they have collected it from the customers or not Doth order that pending the hearing and final disposal by the Court of the applications for stay above mentioned after notice, the operation of the Hotels Receipts Tax Act, 1980 be and is hereby stayed." and this Court doth further order that this order be punctually observed and carried into execution by all concerned; Witness the Honourable Shri Yeshwant Vishnu Chandrachud, Chief Justice of India at the Supreme Court, New Delhi dated this the 13th day of March, 1981." 4. The effect of the above order of the Supreme Court is that the operation of the Hotel Receipts Tax Act, 1980 was stayed till the final disposal of the petition. It was stated that the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unded to the customers from whom it has been collected and in case the refunds are not made within the specified period or are not claimed by the customers within the specified period the same will become income of the assessee company by virtue of various provisions of law. (4) The IAC of Income-tax has mentioned in the assessment order that the contention of the assessee company is that whatever has been charged from the customers belongs to it and there was no need for imposing the tax. It is respectfully submitted that the assessee has never raised such a contention before any authority and the IAC has wrongly understood the whole matter. The assessee s grounds, as stated above, are very clear. (5) The IAC has further mentioned that the income accrues or arises when it is received or when the right to receive becomes vested in the assessee. It is submitted that the receipt is not income as the right to receive is not at all with the assessee as the right itself is in dispute. It is patent that either the assessee will have to pay the tax collected to the Government or to the customers from whom the tax has been collected. Hence no income has accrued, arisen, received and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bom); (iii) L.J. Patel Co. vs. CIT (1974) 97 ITR 152 (Ker)). Kind attention is also drawn to the Bombay High Court judgment CIT vs. Tata Chemicals Ltd. (1986) 52 CTR (Bom) 293 : (1986) 162 ITR 556 (Bom) wherein cases of Kedarnath Jute Mfg. Co. Ltd. vs. CIT (1971) 82 ITR 363 (SC) as well as CIT vs. Chowringhee Sales Bureau Pvt. Ltd. vs. CIT (1973) CTR (SC) 44 (1973) 87 ITR 542 (SC) were taken into account and it was held that a liability will remain until extinguished by Supreme Court s decision on pending writ petition. (10) In the case of N.K. Textile Mills vs. CIT (1984) 43 CTR (Del) 343 : (1985) 152 ITR 594 (Del) Delhi High Court, held that the primary liability did arise in the year in which the assessee has made transaction though actual quantification may be done later. (11) The IAC has mentioned in the order that collection of hotel receipt tax is like sales-tax. Kind attention is invited to Tribunal (Delhi) Third Member case of ITO vs. Ram Kishore Ram Gopal (1985) 14 ITD 355 (Del) where it has been held that sales tax is a liability which a dealer collects and deposits with the Government and hence cannot be treated as income. It was further held by Tribunal (Madr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal. 7. Shri S.C. Malhotra,C.A., learned counsel for the assessee contended that the issue was squarely covered in favour of the assessee by order of Bombay Bench E , of the Tribunal in the case of Piem Hotels Ltd. (Hotel President),Bombayvs. IAC (Asstt.)-IV-C,Bombayfor the asst. yr. 1972-73 reported as (1987) 61 CTR (Trip) 79 (Bom). He also laid emphasis on the submissions contained in the written note, which we have reproduced earlier. On the point of deductibility of the hotel receipt tax from the total income of the assessee, he strongly relied on the order of the Tribunal referred to above. 8. Learned Departmental Representative on the other hand has supported order of the lower Authorities. It was vehemently urged that in view of various authorities relied upon by the Assessing Authority and the CIT(A) hotel tax receipts were trading receipts and, therefore, taxable. He also relied upon the order of the Tribunal aforesaid on the point of taxability of these receipts. In relation to alternative plea of the assessee, he submitted that the ratio of judgment of Kedarnath Jute Mfg. Co. Ltd. vs. CIT was not applicable to the facts of the case and, therefore, the judgment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given. In that case there was no stay of operation of the Sales Tax Act or the order of the Sales Tax Authority determining the sales tax liability. In terms of the notice from the Sales Tax Authority, the demand was payable. In the case before us the operation of the Hotel Receipt Tax Act, 1980 itself has been stayed by the Hon ble Supreme Court. By virtue or this fact no hotel receipt tax is payable during the operation of stay by the Supreme Court. In other words, nothing is due from the assessee during this period. Even on mercantile system of accounting, assessee is not entitled to any deduction as the liability has not become due. In fact there is no liability at all during the period of operation of the stay by the Hon ble Supreme Court. We have already stated in brief some of the provisions of the Hotel Receipts Tax Act levied on person carrying on the business of hotel on whose receipts this Act applies. No provision of the Act has been brought to our notice to show that in the event of Hotel Receipts Tax Act being struck-down by the Hon ble Supreme Court, the tax collected will be refundable to the customers. Nothing has been shown that either under law or by way of contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Delhi High Court aforesaid, the assessee was not entitled to deduction. 14. Before us, it has been urged on behalf of the assessee that these expenses are of allowable nature. He relied on the judgment of the Delhi High Court in the case of Laxmi Sugar Mill Co. (P) Ltd. vs. CIT (1975) 98 ITR 568 (Del) and J.N. Singh and Co. Pvt. Ltd. vs. CIT (1966) 60 ITR 732 (Punj). He further pointed out that for the immediately preceding year, the CIT(A) had allowed such deduction and no appeal was filed by the Department, and therefore, same was allowable. 15. Learned departmental representative on the other hand has supported the order of the CIT(A). 16. In our opinion, there is no merit in this ground of the appeal by the assessee. In this case, assessee company itself had been prosecuted alongwtih its employees. Company being juridical person cannot be jailed. It can only be fined in the ratio of judgment of the Delhi High Court in the case of CIT vs. Chamanlal Bros. (1970) 77 ITR 383 (Del) wherein it was held that the assessee was not entitled to deduction. In that case partner of the firm had been prosecuted and the Court held that the legal expenses were not deductible as the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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