Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (7) TMI 367 - KARNATAKA HIGH COURT

2016 (7) TMI 367 - KARNATAKA HIGH COURT - TMI - Levy of luxury tax - whether the exhibition halls come within the definition Section 2(5-B) of the Karnataka Tax on Luxuries Act, 1979 - The premises consist of three exhibition halls, four AC conference halls of different dimensions with flexible seating arrangements in the halls, classroom, theatre and roundtable, auditorium seating four conference halls, CCTV link between four conference halls, green room and video conferencing facilities. The a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

re the first of its kind in India which offer services and amenities of the highest quality at par with international standards. - Held that:- With the facilities the appellant has already hosted an exhibition of over 1,10,000 sq.mt. of exhibit area. It has been able to cater to over 20,000 business visitors per day on several exhibition days. In this background, the argument of the learned counsel for the appellant that the word accommodation as mentioned in the other provisions which is c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

pt tax only when act is applicable. If the Act itself is not applicable, the question of exempting the appellant from payment of tax does not arise. In that view of the matter, viewed from many angle, as rightly held by the learned Single Judge, the appellant contention that the demand of tax is ultra vires and Act is not applicable to them is without any substance. - Decided against the petitioner. - W.A.Nos. 277/2015 & 291-293/2015(T) - Dated:- 26-2-2016 - MR. N.KUMAR AND MR. G.NARENDAR JJ. Ap .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

appellant is an Industry Association promoting the cause of machine tool industry in the country. It is set up with the primary intention of helping to promote the activities of the machine tool industry in India and was registered under Section 25 of the provision of the Companies Act, 1956. The assessee has created a state of the art exhibition and conference facility in Bangalore to promote the business of machine tools manufacturing industries by having specialized exhibitions and shows, ex .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed by the Government of Karnataka under its Industrial Infrastructure Policy, 1997. 3. The appellant was served with a notice dated 02.10.2008 from the 5th respondent, the Assistant Commissioner of Commercial Taxes under Section 4-A of the Act and was called upon to register itself under the provisions of the said Act and to pay luxury tax for the period 2007-08 on the ground that all the activities conducted by the appellant in BIEC falls within the purview of Section 3-C of the act read with t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, liable to get itself registered under the Act and pay the tax. The 5th respondent quantified the appellant s tax liability for the periods 2007-08 and 2008-09 up to October 2008 and also proposed to levy penalty under the provisions of Section 7 of the Act. The appellant, by a letter dated 14.10.2008 brought to the notice of the Government of Karnataka the aforesaid proceedings and requested for their intervention. In the meanwhile, the 5th respondent issued revised notices dated 01.12.2008 to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ays from the date of issuance of the notice, failing which the proposals would be confirmed and orders accordingly passed. The assessee-appellant filed his reply to the aforesaid notice by letter dated 08.12.2008 stating that the matter was pending consideration before the Government of Karnataka and requesting the authority to await the Government s response before proceeding further in the matter. Thereafter, the assessee was served with an intimation dated 10.08.2009 informing them that their .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

atrix, it is not in dispute that BIEC was considered as an exhibition-cum-sale hall to showcase the promotion of sale of various Industrial machinery manufactured by industrialists globally and not a building or part thereof where accommodation is provided for marriages or reception or matters related therewith so as to fall within the definition of the term marriage hall under Section 2(5-B) chargeable to luxury tax under Section 3-C of the Act. The said judgment was not challenged and as such .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

orders and consequent demand notices. Subsequently, the writ petition was allowed by an order dated 25th February, 2011 quashing the assessment orders and demand notices following the judgment of the Division bench referred to supra. 5. The appellant submits that subsequently, an amendment was made to Section 2(5-B) of the Act. Indeed, the Karnataka Taxation Laws [Amendment Act] 2012 with effect from 01.04.2012 and the definition of Marriage Hall was amended. It is thereafter, the 5th responden .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

parte prosecution proceedings would be initiated. 6. The appellant by the letter dated 30.04.2012 sought sometime on the ground that they have approached the Government of Karnataka for exemption from the application of the Act. The Government of Karnataka exercising the power conferred by Section 12-A of the Act issued a Notification dated 27.11.l2012 exempting with immediate effect the tax payable under the Act on charges for luxury provided in a marriage hall for organizing industrial exhibit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he parties. The appellant preferred W.P. No.49960/2013 challenging the said notices and the demand. In which by order dated 08.11.2013 came to be disposed of leaving open the question with regard to the constitutional validity of Section 3-C read with Section 2(5-B) of the Act by directing the 5th respondent to consider the reply filed by the appellant before passing any order and also directed the appellant to register itself under the provisions of the Act with effect from 01.04.2012 under pro .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd also imposed penalty equivalent to the tax demanded on the appellant under Section 7 of the Act. Subsequently, a demand notice for a sum of ₹ 2,44,33,909-00 was also served on them towards luxury tax, penalty and interest for the Assessment Year 2012-2013. Challenging the constitutional validity of the aforesaid provision as well as the demand, the writ petition was filed. An interim order was granted in the said writ petition. No recovery was done. However, after hearing both the parti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f machine tools and conferences to promote trade and commerce. They have constructed halls in its premises for renting the same for the purpose of running exhibitions, seminars, conferences, etc. They are collecting charges of more than the prescribed limit under Section 3-B of the Act. Section 2(5-B) of the Act marriage hall is exempted by amendment with effect from 01.04.2012, which bring within its hold the premises of the petitioner. Because the premises of the petitioner falls under the def .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ediate effect i.e., 27.11.2012 as such it is prospective and therefore for the period earlier to that the petitioner is liable to pay the luxury tax. 8. After the additional reply was filed by them before considering the objections of the petitioner, the 5th respondent personally visited the place of the business of the petitioner on 19.11.2013 and verified the activities carried on by the petitioner. The premises of the petitioner consists of exhibition hall, convention centre along with helipa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

flexible seating arrangement in the Halls- class room, theatre, CCTV linking between 4 conference halls, green room and video conference facilities. Then they have referred to the definition clause in the Act and also the Judgments of the Apex Court and this Court and contend that Section 3-C of the Act provides that levy and collection of tax on charges for marriage hall where charges for the luxury provided in the marriage hall are not less than ₹ 5,000-00 per day. They shall be levy an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

01.04.2012 to 26.11.2012. The charging provision is valid and no grounds are made out to quash the same and therefore, sought for dismissal of them. 9. Learned Senior Counsel for the appellant assailing the impugned order of the learned single Judge contended that the charge of luxury tax under Section 3-C of the Act is attracted only on the charges for luxury provided in a marriage hall. The said provision makes a difference between the charges for a marriage hall and the charges for luxury pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

easure extraordinary to necessities of life and therefore, levy of tax on the marriage hall is impermissible. Though there was a substantial amendment by the Karnataka Taxation Laws [Amendment] act 2012, as there was no amendment to charge under Section 3-C of the Act under the definition of luxury, the said amended provision has no impact in deciding the issue. In other words, mere rental of an empty hall cannot be said to be providing any luxury and does not attract any charge under the Act. E .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e. Any rent received in excess of ₹ 5,000-00 to a marriage hall attracts levy of luxury tax under the Act. Merely because in Section 3-C of the Act what are the items over which luxury tax is leviable is not mentioned as in the case of hotel, club and hospital, it would not render the provision arbitrary or vague. In fact, the entire case is covered by the Judgment of the Apex Court in the Express Hotels case; where it is categorically held that the rent received above the limit prescribed .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Act dealing with a club, Section 3 of the act dealing with a hotel and Section 3-B of the Act dealing with a health club? b) Whether levy of luxury tax on a marriage hall in the light of the definition of luxury as contained in Section 2(4-B) of the Act and charges for marriage hall as provided under Section 2(1-A) of the Act is unsustainable in law? 12. The Karnataka Legislature in order to augment the revenue to the State enacted the Karnataka Tax on Luxuries Act, 1979, proposing to levy .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sorily payable, but excluding charges for food and drinks) is not less than 2[one hundred and fifty rupees per room per day; (ii) provision in hotels, whether to residents or others of such facility as health club, beauty parlour, swimming pools, conference hall and the like for which charges are seperately made. 13. Section 3 was amended by Act 9 of 1981 by way of Karnataka Tax on Luxuries (Hotels and Lodging Houses) Amendment Act, 1981 by way of substitution providing for higher per centage of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ver, by Karnataka Act 6 of 1995 i.e., the Karnataka Taxation Laws Amendment Act, 1995, Marriage hall also was defined. In addition to that, taxes on luxuries like Health club was also added. The definition of Marriage Hall reads as under: (5-B) "Marriage Hall" means Kalyana Mantap, Shadi Mahal, Community Hall, a building or part of a building where accommodation is provided for marriage or reception or matters related therewith, whether or not such marriage or reception or matter relat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nceived as an exhibition-cum-sale hall to showcase the promotion of various Industrial machinery, manufactured by industrialists globally and not a building or part thereof where accommodation is provided for marriages or reception or matters related therewith so as to fall within the definition of the term marriage hall under Section 2(5-B) chargeable to luxury tax under Section 3-C of the Act. The appellant is not liable to pay luxury tax on such accommodation. It is after the aforesaid judgme .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cial, social or business function whether functions are conducted in such place regularly or not; (ii) Seminar, convention, banquets, meeting or exhibition hall or a temporary structure or a property as defined in Section 3of the Transfer of Property Act, 1882 where accommodation is provided for marriage or reception or matters related therewith or for organizing any official, social or business function whether functions are conducted in such place regularly or not; (iii) Any other place or tem .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t of luxury tax. The Government by notification dated 27.11.2012 exercising the power conferred on them under Section 10-A of the Act exempted with immediate effect, the tax payable under the Act on charges for luxury provided in a marriage hall for organizing industrial exhibitions. Therefore, now the question for consideration is: Whether the appellant is liable to pay luxury tax under the Act from 01.04.2012 to 27.11.2012? 16. The argument is though in view of the substituted amendment to Mar .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

achinery provision contained in Section 4 and that too the explanation contained therein by way of definition of transaction value can neither override the charging provision nor by reason thereof a goods which is not excisable would become an excisable one only because one is fitted into the other, unless the context otherwise requires. 17. Similarly, reliance was placed on the judgment of the Apex Court in Godfrey Phillips India Ltd. and another V/s. State of U.P. and others reported in (2005) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

authority of law and ultravires the Constitution of India. Elaborating the said contention, it was urged that the definition of luxuries under Section 2(4-B) only means services to enjoyment conferred or pleasure extraordinary to necessitate supply and the service provided by the appellant. The instant case do not fall within the said definition and therefore, the levy of luxury tax is ultravires. 18. In order to appreciate this contention, first it is necessary to see the definition of luxuries .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y charges for food and drinks. Explanation - If any question arises whether any charges are charged for marriage hall, such question shall be referred to the State Government and the decision of the State Government shall be final and shall not be called in question in any Court. 20. Section 3-C, the charging Section reads as under:- 3-C. Levy and collection of tax on charges for marriage hall.- Subject to the provisions of this Act, where charges for luxury provided in a marriage hall are not l .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

4.2012 correspondingly, neither the definition of luxuries nor the definition of Charges for marriage hall nor Section 3-C the charging Section were amended. Therefore, the point that arises for consideration is by mere expanding the definition of marriage hall there could be a levy of tax on the premises of the appellant, which falls within definition of marriage hall . As could be seen from the definition of luxuries it is an inclusive definition. Luxury means services ministering the enjoymen .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

de any charges for food and drinks. The charging section makes it clear where charges for luxury provided in a marriage hall are not less than ₹ 5,000/- per day. They shall be levied and collected tax at the rate of 10% of such charges. Therefore, charges paid for a marriage hall which is less than ₹ 5,000/- per day is not taxed. It is only the charges paid in excess of ₹ 5,000/- is charged to tax under the Act. 22. What is the consequence of this prescription? Does it mean onl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and subsidiary matters which can fairly and reasonably be said to be apprehended in them. The concept of luxuries as a subject of tax was not confined to those who received or enjoyed the luxury. It could be all those who provided it. 23. Then they have referred to the definition of luxury in the Encyclopaedia Britannica, Webster s Comprehensive Dictionary, The New Dictionary of Thoughts and then held at para 21 as under: The concept of a tax on luxuries in Entry 62, List II cannot be limited me .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

end the element of extravagance or indulgence that differentiates luxury from necessity cannot be confined to goods and articles. There can be elements of extravagance or indulgence in the quality of services and activities. Further, at paras 25 & 27, it was held as under: The concept of luxuries in the legislative entry takes within it everything that can fairly and reasonably be said to be comprehended in it. The actual measure of the levy is a matter of legislative policy and convenience. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the manner suggested. Once the legislative competence and the nexus between the taxing power and the subject of taxation is established, the other incidents are matters of fiscal policy behind the taxing law. The measure of the tax is not the same thing as, and must be kept distinguished from, the subject of the tax. 24. Thereafter, dealing with the facts of that particular case, it was held as under: We are presently concerned with the question whether the quality or standards of lodging, acco .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ce, in the legislative assessment, can be assumed to have a logical interrelationship. This cannot be held to suffer from the vice of irrationality. The further contention is that when the price factor is made the sole criterion for imparting the quality of luxury to the lodging, accommodation, the means of identification so adopted ceased to distinguish areas in the services which are not luxuries but are really necessities and comforts and the subject of the tax would come to include, not mere .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es, some others as comforts and yet others as luxuries. Even necessities and comforts which have to them the additional element of undue elegance to a point of extravagance and indulgence might become luxuries. Though the arguments on these contentions were not without their interesting facets, we must, however, express out inability to accept them as valid arguments against the constitutionality of the provisions. 25. A Constitutional Bench of the Apex Court in the case of Godfrey Phillips Indi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

struction, fairly and reasonably includible in that entry. 26. Referring on this observation, it was contended that the decision in Express Hotel s case is impliedly over ruled. We are unable to accept the said submission. 27. In Godfrey s case, they did not disagree because in a judgment rendered by the Apex Court all that they have said is that a judgment cannot be held to be an authority for the proposition of articles or goods rather as a matter of construction fairly and reasonably included .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e of goods and passengers' under Entry 56, on 'vehicles' under Entry 57 and on 'animals and boats under Entry 58. There is no instance in any of the legislative lists of a tax being leviable only with reference to an attribute. An attribute as an object of taxation without reference to the object it qualifies would lead to legislative mayhem, blur the careful demarcation between taxation entries and upset the elaborate scheme embodied in the Constitution for the collection and di .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

2 of List II means the activity of enjoyment of or indulgence in that which is costly or which is generally recognized as being beyond the necessary requirements of an average member of society and not articles of luxury. 28. In other words, the Constitutional Bench of the Apex Court in Godfrey s case has affirmed the view expressed by the Constitutional Bench in Express Hotel s case. 29. Now in the instant case, as stated earlier, the definition of Luxury means the service relating to comfort o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ax charges for marriage hall makes a clear distinction between necessity of levy and luxury. If the charges for luxury provided in the marriage hall is less than ₹ 5,000/- it is a case of necessity. If the charges is more than ₹ 5,000/- per day, it is considered as luxury and that is precisely the Hon ble Apex Court in Express Hotels case has observed that the legislature has chosen to identify the luxury by the statutory standards prescribed by it. According to the legislative assum .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

xury as per List II Entry 62 means the activities of enjoyment or indulgence which is costly or which is generally recognized as being beyond the necessary requirements of an average member of society, which activities alone can be the subject matter of tax under List II Entry 62, and not goods or articles of luxury. Therefore, under the Act, if the charges leviable for the marriage hall is less than ₹ 5,000/- it is for a necessity not taxable if it is more than ₹ 5,000/- it is luxur .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

conference halls, CCTV link between four conference halls, green room and video conferencing facilities. The appellant has described the nature of activities with details, it discloses that the premises includes exhibition halls, convention centre and the events conducted by them and also stated that they provide exhibition halls, conference centre/ convention centre along with helipad area to the exhibitors for conducting exhibitions. Further, the photographs produced in the case which are not .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mands of India s booming economy and tremendous growth in the exhibition industry. It is located in 10th mile Tumkur Road. This multipurpose 34 acres of beautifully landscaped complex has 40,000 sqm of covered column-less air-conditioned exhibition space, a multi-facility conference centre spread over 5,600 sqm including 4 Conference halls, a Food Court of 7500 sqm, a machine tool Training centre and large outdoor area. It has a power supply infrastructure to distribute 10 MW, a Helipad, an Amph .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version