TMI Blog1998 (12) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... applicability of the Act to be illegal, arbitrary, unjust and beyond the scope of the Act and any assessment orders passed or proceeding initiated thereunder are void ab initio. The further relief sought for is a declaration that section 5 of the Act is contrary to section 3 which makes the Act applicable in circumstances that "at the time of incurring such expenditure" the room charges for any unit were Rs. 400 or more per day per individual and the provision of section 3 being related to the entire actual charge of the room and the expenditure incurred thereon and not to the entire expenses for the entire receipts of the hotel. The orders of assessment passed and filed in this proceeding as annexures-P-2 to P-5 pertaining to the years 1988-89, 1989-90, 1990-91 and 1991-92 are opposed to the provisions of the Act and, therefore, the levy is without the authority of law and violative of article 265 of the Constitution of India besides being violative of articles 19(l)(g) and 304(1) of the Constitution. So far as C. W. P. No. 310 of 1997 is concerned, the same type and nature of relief has been sought for with particular reference to the order of assessment passed for the year 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is more than Rs. 400 per person per day. The petitioner-corporation appears to have filed the returns in respect of the rooms in a particular hotel which fell within the purview of section 3 of the Act for the years 1988-89 to 1991-92 and the assessments in respect of those returns were said to have been finalised on December 3, 1992, under the orders filed as annexures-P-2 to P-5. It is stated further for the petitioner-corporation that though the return filed for the year 1988-89 has been accepted so far as the one in respect of the year 1989-90 as against the return, the chargeable expenditure has been determined for the purpose of levy at Rs. 87,19,355 as against the reported chargeable expenditure of Rs. 35,84,680. So far as the year 1990-91 is concerned, as against the reported chargeable expenditure of Rs. 47,57,489, the same appears to have been determined at Rs. 1,86,53,075. It is stated in the petition for the petitioner-corporation that the assessing authority, the third respondent, while formulating the question for consideration as to whether the changes in room rent during a particular year could affect the liability for expenditure-tax or whether the liability is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he orders of assessment driving the petitioners to the necessity of filing the above writ petitions. Mr. M. M. Khanna, the learned counsel appearing for the petitioner-corporation, did not pursue or project the ground raised in the writ petitions regarding the constitutional validity of section 5 of the Act. On the other-hand, the learned counsel confined his submissions to the applicability of the Act, relative scope and purport of sections 3 and 5 of the Act and the illegality involved in interpreting those provisions in a manner, which, according to the learned counsel for the petitioners, even altered the nature and character of the levy to make it an unauthorised and illegal levy thereby constituting violation of article 265 of the Constitution of India. In elaborating this aspect of the submissions made, the learned counsel submitted that the levy under the Act is on a person incurring expenditure on a hotel and not on the hotel or the gross receipts of the hotel, inclusive of the sale of food articles and other eatables to even persons, who were either casual visitors or/and who do not even stay in the hotel by availing lodging facility or occupying any room. The further g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by more than one, the charges for the unit of residential accommodation is to be divided per head and if in that process a room has the fixed charges of either Rs. 400 for the relevant period or Rs. 1,200 for the period subsequent to June 1, 1992, the same has to be divided among the number of occupants when charged therefor and if after such division, it is found to be less than the amount stipulated in section 3(1) per day per individual, the expenditure incurred in respect of such rooms by such persons also cannot be brought to tax. In substance, the submission of the learned counsel for the petitioners appears to be that it is not the rate fixed for the room as room charges for the notified capacity of the room that matters but it is to be also further divided among the number of persons, who occupied the room at a particular point of time to determine the applicability or otherwise of the Act to assess the chargeable expenditure for the purpose of levy of tax. On the above submissions, learned counsel for the petitioners submitted that the impugned orders of assessment as also the orders passed by the appellate authorities are liable to be set aside and the matter considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,200 or more per day per individual in relation to the respective period of assessment, the entire expenditure incurred by any and every one who comes to the hotel and thereby the total receipts in the said hotel will be subject to levy under the Act. Learned counsel while traversing the stand taken for the petitioner-corporation submitted that it is the room charges fixed for any unit of residential accommodation that is the criteria and the same cannot be further divided among the number of occupants of the room at a particular point of time in adjudging the applicability or otherwise of the provisions of the Act to a particular hotel. In support of the submissions, learned counsel also relied upon the decisions reported in Federation of Hotel and Restaurant Association of India v. Union of India [1989] 178 ITR 97 (SC), Hotel Manasarovar v. Union of India [1995] 213 ITR 668 (AP) and C. A. Abraham v. ITO [1961] 41 ITR 425 (SC). Learned counsel for the first respondent merely adopted the submissions of learned counsel for respondents Nos. 2 and 3. Before adverting to the contentions raised on merits of the claims, it would be appropriate to deal with the preliminary objectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les as to how to determine the room charges for the purpose of the said provision. Section 4 enacts that subject to the provisions of the Act "there shall be charged on and from the commencement of the Act, a tax at the relevant rates stipulated therein of the chargeable expenditure incurred in a hotel referred to in clause (1) of section 3". Section 5 of the Act provides for the meaning of chargeable expenditure for the purpose of the Act by stipulating that in relation to a hotel referred to in clause (1) of section 3, it means any expenditure incurred in, or payments made to, the hotel "in connection with the provision of any accommodation, residential or otherwise or food or drink by the hotel, whether at the hotel or outside, or by any other person at the hotel or any accommodation in such hotel on hire or lease or any other services at the hotel, either by the hotel or by any other person, by way of beauty parlour, health club, swimming pool or other service", certain categories of expenditure subject to certain riders specified are excluded from the said meaning of chargeable expenditure and it is unnecessary for our purposes to advert to those provisions in detail. The cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein it was held that the expression "any" occurring before the words "chargeable expenditure" in section 3(1) of the Act should cover all the items to be included therein except those expressly excluded and considered. In the context it would mean that even in case where the room charges for any one unit of the residential accommodation per day per individual does not exceed Rs. 400, the hotel concerned will be outside the net of expenditure tax and to make the Act applicable to a hotel, all the rooms must satisfy the bench mark of minimum rent of Rs. 400 or more for any type of accommodation. In substance, the entire submissions of learned counsel for the petitioners seem to draw serious inspiration from the submissions made before the Tribunal in that case. The plea on behalf of the petitioner-corporation as to the mode and manner of computing the room charges for any unit of residential accommodation at the time of incurring of such expenditure, viz., four hundred or one thousand two hundred rupees or more per day per individual, may be taken up for consideration first. The stand taken by learned counsel for the petitioner-corporation is that even in a case when the charges fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequently, the contention of learned counsel for the petitioner-corporation has to fail as unsubstantial and shall stand rejected. So far as the main and larger issue as to whether the provisions of the Act are attracted in cases of expenditure in a hotel, wherein the room charges for any one room are Rs. 400 or Rs. 1,200, as the case may be or more per day per individual or that it is only when the room charges for all and each and every one of the rooms are Rs. 400 or Rs. 1,200, as the case may be or more per day per individual or that it should be with reference to persons occupying the room priced or with a tariff of Rs. 400 or Rs. 1,200, as the case may be or more per day per individual, learned counsel appearing on either side tried to forcefully advance their stand with reference to the practical difficulties, possibilities of abuse and manipulations to escape liability and defeat the very object of the legislation. In order to effectively decide these claims of parties before us, the impact of sections 3, 4, 5 and 8 of the Act have to be analysed and considered. Section 3 is the primordial provision which would decide the question of applicability or otherwise of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el where services enumerated in sub-clauses (a) to (d) of clause (1) of section 5 are provided or by any other person who provides such class or category of service and renders him liable to collect the expenditure-tax on the chargeable expenditure and pay over to the State and submit periodical returns, as provided therefor. The incidence of the tax is also only on the persons who incur the "chargeable expenditure", in the class of hotels to which the Act applies. The main issue on which the parties on either side are at serious loggerheads is the interpretation that has to be placed on section 3 of the Expenditure-tax Act, 1987, which renders the Act applicable to any chargeable expenditure. Whereas the department would contend that even if in a hotel any one unit of residential accommodation/a room had a tariff or room charges of Rs. 400 or above or Rs. 1,200 or above per day per individual, as the case may be, for the relevant period, the entire expenditure incurred by every one, who avails of the services provided therein by all those who occupy even an unit of residential accommodation, which has its room charges far less than the minimum stipulated rate for the applicabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act to the expenditure incurred by a customer in a hotel. On the other hand, the department's stand is on the basis of a construction, which it would commend for our consideration that any unit "shall be construed to mean even one out of many and, therefore, the fact that any one unit of residential accommodation in a hotel has as its tariff or room charges at the minimum rate as stipulated in section 3 of the Act, the entire expenditure incurred by all customers who avail of services in such hotel attracts the applicability of the Act to such hotel and such expenditure incurred therein. The word used in the Act by the Legislature must be considered to have been used correctly and exactly and not loosely and inexactly in ascertaining the exact meaning. Mere reference to the ordinary dictionary meaning will be of no use and the construction divorced from the context in which it has been used and the object of the legislation may often lead to injustice, absurdity, contradiction or stultification of the very statutory objective and, consequently, the language must be so modifiedly read as to give effect to all the provisions of the Act. Further, when the language used is possible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 3 of the Act could be considered to be of that standard or so lavish or ostentatious, which required to be discouraged. The hotel of the petitioner-corporation itself may provide one of the best illustration in this regard and the tariffs approved by the competent statutory authority under the Himachal Pradesh Registration of Hotels and Travel Agents Act, 1969, and the rules framed thereunder would go to show that the large majority of the rooms or the unit of the residential accommodation do not even satisfy the minimum prescribed rate of tariff or room charges to make the provisions of the Act applicable to it and it is only one or two or very negligible number of rooms that alone has such minimum room charges/tariff to make the Act applicable. The construction sought to be placed by the Revenue if countenanced also in our view will virtually abolish and obliterate even the differences underlying the purpose of the Expenditure-tax Act, 1987, and the objects of the Hotel Receipts Act, 1980. For all the reasons, we are unable to persuade ourselves to agree with the extreme stand taken for the Revenue in these cases. Similarly, the other extreme stand taken for the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments made by such person for the provision of any or all such services, amenities and supplies effected as enumerated under section 5 of the Act. The Act envisages the taxing of such persons who could afford to occupy rooms of such lavish nature and the expenditure incurred by such affluent occupants who could equally, lavishly and ostentatiously spend while occupying such rooms. It is common knowledge that in hotels which have one or more only out of many of the rooms, which satisfy the minimum stipulated rates/charges for attracting the provisions of the Act-the standard or quality of services cannot and could not invariably or uniformly be of any lavish nature, but it would always be only to meet the requirements and cater to the needs of the large majority of the other persons who occupy or utilise the rooms with rates/charges far below the minimum rates stipulated in section 3 of the Act, failing which the place or hotel concerned may not attract such customers who only are expected to constitute the large majority of its users. To put it more specifically, if the standards or quality of services in a hotel are meant to satisfy or cater to the needs of an ordinary common p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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