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2016 (6) TMI 704 - GUJARAT HIGH COURT

2016 (6) TMI 704 - GUJARAT HIGH COURT - TMI - Liability to pay luxury tax - manner of calculation - department contends that when the petitioner accepts consolidated payment basis, the tax is to be calculated on the basis of 50% of the occupancy as per the average declared tariffs and not on the basis of the actual occupied number of rooms. - Held that:- Accepting the petitioner's interpretation would render the expression “on the basis of” meaningless. Quite apart from the two expressions being .....

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ng the period under consideration.

On the other hand, for a proprietor opting for clause (b), he would pay tax at 12.5 per cent on the basis of actual occupancy i.e. 12.5% of the total tariff. We are informed that now the rates prescribed for clauses (a) and (b) are 6 per cent and 12.5 per cent respectively. In plain term thus, proprietor governed by clause (b) would pay more than 4 times tax payable by one governed under clause (a). There is no earthly reason why the Legislature sho .....

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required to pay luxury tax at the rate of 6% of 50% of the actual occupancy of the petitioners' hotel. The petitioners have also challenged an order of assessment dated 21.9.2015 passed by the Deputy Collector, Vadodara, under which he has raised the differential tax liability of ₹ 2,19,108/- to be recovered with interest. 2. Brief facts are as under: Petitioner no.1 is a company registered under The Companies Act. Petitioner no. 2 is its Chairman and Managing Director. The petitioner .....

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ribed. 3. The case of the petitioners is that the tax so payable by the petitioners at the prescribed rate should be computed on the basis of 50% of the actual occupancy of the hotel rooms. The department opposes such interpretation and contends that when the petitioner accepts consolidated payment basis, the tax is to be calculated on the basis of 50% of the occupancy as per the average declared tariffs and not on the basis of the actual occupied number of rooms. 4. Before adverting to this iss .....

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rs therefore, filed Special Civil Application no. 16719 of 2013 and claimed refund of the excess tax amount of ₹ 40.11 lakhs. Said petition came to be disposed of by the Division Bench of this Court by order dated 18.12.2013 in which the Court rejected the petitioners' request for refund of the luxury tax. However, with respect to the future demand, the Court provided as under: 4.02. Now, so far as the apprehension on the part of the petitioners that interpretation made by the authorit .....

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e future assessment shall be considered in accordance with the prevailing law. 5. Once again when the authorities went on pressing for demand of higher tax without framing assessment, the petitioners filed a fresh petition being Special Civil Application no.6491 of 2014 which came to be disposed of by an order dated 7.5.2014 in following terms: 4. The case of the petitioners in this petition is that for the latter period, the petitioners have filed returns under section 5 of the said Act. In ter .....

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the reply, if any, so filed. If no assessment is made on the returns filed by the petitioners, the same may also be done in accordance with law. With these directions, petition is disposed if at admission stage. 6. This fresh petition was filed on the basis that once again without passing formal order of assessment, the authorities are demanding higher luxury tax from the petitioners. During pendency of the petition, the Deputy Collector, Vadodara passed order of assessment dated 21.9.2015 which .....

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therefore, compelled to challenge the order of assessment directly before High Court. Learned Assistant Government Pleader opposed the petition contending that the tax demand raised by the authorities is according to the provisions contained in the Act. 8. In the context of interpretation of section 3 of the Act, it would be necessary to take notice of the statutory provisions in order to better appreciate the contentions of the petitioners. Section 2(h) of the Act defines term tax as to mean l .....

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lodging are not more than rupees five hundred. Nil 2 Where the charges for lodging are more than rupees five hundred but not more than rupees two thousand On consolidated payment made on the basis of 50 per cent occupancy as per the average declared tariff. 5 percent 3 Where the charges for lodging are more than rupees two thousand (a) On consolidated payment made on the basis of 50 per cent occupancy as per the average declared tariff, or (b) On payment made on the basis of actual occupancy as .....

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te of 8 per cent, on the basis of 50 per cent occupancy as per the declared tariff. 10. A proprietor liable to pay tax under the Act is required to furnish return as provided under section 5 of the Act. Section 6 pertains to assessment and collection of tax. Under sub-section (1) of section 6, if the Collector is satisfied that the return furnished under sub-section (1) of section 5 is complete and he has no reason to believe that it is incorrect, he would assess the amount of tax due from the p .....

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clause 3(a) of sub-section (1) of section 3 must mean actual occupancy. In other words, according to the learned counsel for the petitioners, the consolidate payment would be computed on the basis of half of the actually occupied rooms and the tax would be payable on such computation at the prescribed rate. 12. A perusal of the table contained in sub-section(1) of section 3 of the Act would show that the tax is prescribed in a graded manner. Where charges for lodging are not more than ₹ 50 .....

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uch a case, the proprietor would have two options. As per clause (a) he would pay 8 per cent tax on consolidated payment on the basis of 50 per cent occupancy as per average declared tariff. If however, he does not wish to be governed by this consolidated payment regime, he may opt for clause (b) in which case he would be taxed at the rate of 12.5 per cent on payment made on the basis of actual occupancy as per declared tariff. 13. It can thus be seen that the terms occupancy and actual occupanc .....

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y referred to in clause (a) must mean actual occupancy and not 50 per cent of the available rooms for rent in a given hotel. Further in clause (a) expression used is ...On the basis of 50% occupancy... the legislature has advisedly used words on the basis of and not on 50% occupancy . If the intention was to change tax, the legislature could easily have provided tax on 50% of the occupancy. The expression on the basis of completely changes the complexion. Accepting the petitioner's interpret .....

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