TMI Blog2002 (6) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... justification or hardship for it to do so. In conclusion, we hold that the charges paid to the first petitioner-company by its customers like respondents Nos. 4 and 5, for use and occupation of the hotel rooms should be regarded as "rent" within the meaning of section 194-I of the Act. - - - - - Dated:- 28-6-2002 - Judge(s) : S. R. NAYAK., S. ANANDA REDDY. JUDGMENT The judgment of the court was delivered by S.R. NAYAK J.-The petitioner, Krishna Oberoi, which is a division of Novopan Industries Limited is a company registered under the Indian Companies Act, 1956, with its registered office at Banjara Hills, Hyderabad. The writ petition was filed initially seeking mandamus declaring that the charges paid/payable to the petitioner-company by its customers on account of room charges are not in the nature of rent within the meaning of section 194-I of the Income-tax Act, 1961. Later, that prayer was amended by filing WPMP No. 13783 of 1996, and that WPMP was ordered by this court on October 7, 1996. The amended prayer reads as follows: "In the facts and circumstances stated above this court may be pleased to issue an appropriate writ order or order or direction declaring th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DS under section 194-I of the Act as those provisions have no application to the payments that are being made to the first petitioner hotel by the management of Indian Airlines Limited. However, the Indian Airlines Limited had refused to accede to the request of the first petitioner for the fear of prosecution proceedings under section 201 of the Act. At a certain point of time, the first petitioner had approached the second respondent, seeking a clarification under section 197 of the Act with respect to payments receivable from Indian Airlines Limited. But that did not yield any useful result and that the process of applying for and obtaining a certificate under section 197 of the Act is cumbersome and time consuming. Due to the deduction of TDS at 23 per cent., the petitioners are receiving only about 2/3rds of the actual amounts, thus, the first petitioner is deprived of working capital which is paralysing the day-to-day functioning of the petitioner's hotel. The first petitioner had addressed a letter to the official respondents explaining the hardship caused to the petitioners with a request to issue necessary clarifications in exercise of their power under the Act. In particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the affidavit in the event of holding that section 194-I applies is no valid ground at all to exclude application of section 194-I. The writ petition is liable to be dismissed in limine inasmuch as it is premature and also on the ground that since the petitioner has not assailed the constitutional validity of section 194-I, he has to work out legal remedies as provided under the Act and he cannot be permitted to circumvent or by-pass the statutory remedies directly approaching this court for the relief. We have heard Sri C. Kodandaram, learned counsel for the petitioners, and Sri J.V. Prasad, learned standing counsel for the Income-tax Department. Sri C. Kodandaram, contended that the relationship between the first petitioner and its customers is a kind of licensing-arrangement and not a leasing-arrangement, and, therefore, consideration received by the first petitioner cannot be treated as rent to attract the provisions of section 194-I of the Act. Sri Kodandaram contended that the object of section 194-I of the Act is to bring into the tax net such of those persons who are otherwise earning income by way of house rentals by letting out their immovable property. The income a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner's fundamental right guaranteed under article 19(1)(g) of the Constitution of India. Sri J.V. Prasad, learned standing counsel for the Income-tax Department, on the other hand, justified the TDS by the corporate customers of the first petitioner by contending that the rent as defined under the provisions of section 194-I includes the consideration received by the first petitioner by letting out accommodation and providing the facilities to the customers. Learned standing counsel also contended that if the provisions of section 194-I are attracted, the financial hardship pleaded by the petitioner, even if it is true, would not be a valid or legal ground to exclude the application of section 194-I. In the premise of the rival contentions of learned counsel for the parties, the only question that arises for our consideration and decision is whether the corporate customers of the first petitioner, viz., the impleaded respondents Nos. 4 and 5 are entitled to effect TDS with regard to the rents paid or payable to the first petitioner. Section 194-1 reads as follows: "194-I. Rent.--Any person, not being an individual or a Hindu undivided family, who is responsible for pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or any building (including factory building), together with furniture, fittings and the land appurtenant thereto, whether or not such building is owned by the payee. Thus, the word "rent" has been defined in a wider sense to include not only consideration paid under a lease, or sub-lease or tenancy, but also the consideration paid under any other agreement or arrangement for the use of any land or building, etc. The expressions "any payment", by whatever name called, and "any other agreement or arrangement" occurring in the definition of the term "rent" in the Explanation to section 194-I have the widest import. According to Black's Law Dictionary, the word "any" is often synonymous with either "every" or "all". Its generality may be restricted by the context in which that word occurs in a statute. The Supreme Court in Lucknow Development Authority v. M.K. Gupta [1994] 80 Comp Cas 714 (SC); AIR 1994 SC 787, dealing with the use of the word "service" in the context it has been used in the definition of the term in clause (o) of section 2 of the Consum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... June 1, 1994. In Anand Theatres' case [2000] 244 ITR 192 (SC) also, the word "rent" as defined in the Explanation to section 194-I did not fall for interpretation. In other words, the enlarged and wide definition of the word "rent" as defined under the Explanation to section 194-I did not fall for interpretation/construction in any of the judgments cited by learned counsel. In R.N. Kapoor's case, AIR 1959 SC 1262, the question that arose for con sideration was what is the meaning of the expression "a room in a hotel". In that case, the appellants, the Associated Hotels of India, were the proprietors of Hotel Imperial, New Delhi. The respondent, R.N. Kapur, was in occupation of two rooms described as ladies and gentlemen's cloak rooms, and carried on his business as a hair-dresser. He secured possession of the said rooms under a deed dated May 1, 1949, executed by him and the appellants. He got into possession of the said rooms, agreeing to pay a sum of Rs.9,600 a year, i,e., Rs.800 per month, but later on, by mutual consent, the annual payment was reduced to Rs.8,400, i.e., Rs.700 per month. On September 26, 1950, the respondent made an application to the Rent Controller, Delhi, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a compromise decree was passed in the appellate court, enabling the decree-holder, by its terms to execute the decree if the judgment-debtor failed to pay "rent" for any three consecutive months, the court was called upon to decide whether the said compromise deed did create a lease. The court held that the compromise deed did not create a lease but a licence. In deciding so, the court has to deal with the principles and the tests to be applied to distinguish a lease from a licence on consideration of several decisions including those in Ramjibhai Virpal Shah v. G.M. Bhagat, AIR 1954 Bom 370; Mrs. M.N. Clubwala v. Fida Hussain Saheb, AIR 1965 SC 610; Associated Hotels of India Ltd. v. R.N. Kapoor, AIR 1959 SC 1262; Isaac v. Hotel De Paris Ltd. [1960] 1 All ER 348 (PC); Errington v. Errington and Woods [1952] 1 All ER 149 (CA); Cobb v. Lane [1952] 1 All ER 1199; Clarke v. Grant [1949] 1 All ER 768 (CA); Booker v. Palmer [1942] 2 All ER674 (CA); State of Punjab v. British India Corporation Ltd., AIR 1963 SC 1459 and held that exclusive possession is not conclusive evidence of a lease and that only exclusive posses sion coupled with an interest in the property would construe as a leas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent" in clause (ii) of rule 18(4) held: "The next question is: what is the meaning of 'rent' in clause (ii) of rule 18(4). In its wider sense rent means any payment made for the use of land or building and thus includes the payment by a licensee in respect of the use and occupation of any land or building. In its narrower sense it means payment made by tenant to landlord for property demised to him." The above observation of the Constitution Bench of the Supreme Court supports the stand of the Department because the word "rent" in its wider sense may mean payment made by a licensee also for the use of land or buildings and not necessarily a payment made by a tenant or a lessee. If such a wider meaning can be given to the word "rent", even in the absence of a definition of the word "rent" in a statute, we do not find any weighty or sound reasons to limit the meaning of the word "rent" occurring in the Explanation to section 194-I only to payment made by a tenant or a lessee for the use of land or buildings demised to him. We say this because, the term "rent" is defined in the Explanation in a wider sense. As per the definition, "rent" includes and means not only a payment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere provided to the members by the club as agent of the members and not as owner of the house property; the members had provided for themselves these facilities through the instrumentality or agency of the club; the club was not the landlord and the members, during their stay, were not the tenants of the club. Therefore, the court held that the amounts paid by the members for accommodation could not be regarded as rent and was not assessable as income from house property. It is an authority to state that the relationship between a club and its members cannot be equated to the relationship between the management of a hotel and its patrons/customers. The contention of Sri Kodandaram that since the rents payable under the agreement to the first petitioner include not only the charges for occupancy but also the charges for other facilities provided by the hotel management, the payment could not be regarded as rent within the meaning of that term, is also not well founded. Suffice it to state that the agreement between the first petitioner and the Indian Airlines as reflected in the letter Reference No. MDS/CPS/48B/2461, dated September 8, 1995, for example, clearly shows that the roo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esai. The clause is couched in simple and unambiguous language and in its plain meaning provides that it would be a good ground enabling a landlord to sue for eviction without the permission of the District Magistrate if the tenant has made or has permitted to be made without the landlord's consent in writing such construction which materially alters the accommodation or is likely substantially to diminish its value. The language of the clause makes it clear that the Legislature wanted to lay down two alternatives which would furnish a ground to the landlord to sue without the District Magistrate's permission, that is, where the tenant has made such construction which would materially alter the accommodation or which would be likely to substantially diminish its value. The ordinary rule of construction is that a provision of a statute must be construed in accordance with the language used therein unless there are compelling reasons, such as, where a literal construction would reduce the provision to absurdity or prevent the manifest intention of the Legislature from being carried out. There is no reason why the word 'or' should be construed otherwise than in its ordinary meaning. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeks to confiscate property in the name of taxation. Further, merely because a restriction on the right guaranteed under article 19(1)(g) of the Constitution operates harshly, it cannot be said that that restriction is unreasonable. In Krishnan Kakkanth v. Government of Kerala, AIR 1997 SC 128, the Supreme Court held that the fundamental rights guaranteed under article 19 of the Constitution are not absolute, but they are subject to the social control permitted by clauses (2) to (6) under article 19. The Supreme Court held: "The reasonableness of restriction is to be determined in an objective manner and from the standpoint of the interests of general public and not from the standpoint of the interests of the persons upon whom the restrictions are imposed or upon abstract consideration. A restriction cannot be said to be unreasonable merely because in a given case, it operates harshly and even if the persons affected be petty traders (Mohd. Hanif Quarashi v. State of Bihar, AIR 1958 SC 731). In determining the infringement of the right guaranteed under article 19(1), the nature of right alleged to have been infringed, the underlying purpose of the restriction imposed, the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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