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TMI Blog2019 (9) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... he Petitioners in Writ Petition No.94/2002. 3. Heard Mr. Mihir Naniwadekar with Ms. Vinita Palyekar for the Appellant in Tax Appeals No.53, 54 and 55 of 2007. 4. Heard Ms. Susan Linhares, learned Standing Counsel for the Respondents in the Appeals, as well as the Writ Petition. 5. In all these appeals and the writ petition,the common issue relates to the interpretation of the provisions in Section 3(1) of the Expenditure Tax Act, 1987 (said Act). In Tax Appeals No.53, 54 and 55 of 2007, there is an additional issue raised in the context of the proviso to Section 4(a) of the said Act. The learned Counsel for the parties request that Tax Appeal No.32 of 2006 be treated as the lead matter in respect of the common issue and Tax Appeal No.53 of 2007, in respect of the additional issue. We do so accordingly. 6. Tax Appeal No.32/2006 came to be admitted by this Court vide order dated 21 August 2006, on the following substantial questions of law. "Whether in view of the express provisions of section 3 of the Expenditure-tax Act, the Hon'ble Income-tax Appellate Tribunal ought to have held that in a case (like the Appellant) where the room charges were less than Rs. 1,200/- per day pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.2006. (F) Hence, the present Appeal which, as indicated earlier, is restricted to the Assessment Year 1996-97. 10. Mr. Dada, learned Senior Advocate for the Appellant, submits that the assessing authorities erred in placing blind reliance upon the decision of the Himachal Pradesh High Court in HPTDC (supra) when, in fact, the same was distinguishable on facts. He submits that in the said case, room tariff was fixed under a statute. Further, the Himachal Pradesh High Court did not have the benefit of amendment to the said Act, which came into force with effect from 1/6/2002. He submits that, based upon these two distinguishing features, the decision in HPTDC (supra) was not at all applicable to the fact situation in the present matters and the assessing authorities erred in placing blind reliance upon the same. 11. Mr. Dada submits that in any case, the decision in HPTDC (supra) completely ignores the expression "per individual", appearing in Section 3(1) of the said Act. He submits that the interpretation placed upon Section 3(1) of the said Act by the Himachal Pradesh High Court is contrary to the literal reading of the provisions and also renders the words "per individual", ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Tax vs. Ellis Bridge Gymkhana, etc.etc. [229 ITR 1 (SC)]; Commissioner of Income Tax vs. Kasturi & Sons Ltd. [237 ITR 24 (SC)] and Federation of Andhra Pradesh Chambers of Commerce & Industry & ors. etc. etc. vs. State of Andhra Pradesh & ors. [247 ITR 36 (SC)]. 14. Mr. Dada submits that the Parliament, on realisation that the expression "per individual" in Section 3(1) of the said Act will essentially require the room tariff to be split into two, in case of double occupancy or split into three, in case of triple occupancy has, with effect from 1.6.2002, done away with the expression "per individual" in Section 3(1) of the said Act. The amendment is expressly made prospective in nature. Mr. Dada submits that from this it is apparent that the law prior to 1.6.2002 very clearly requires the acceptance of interpretation now proposed by the Appellant, as opposed to the interpretation made by the Himachal Pradesh High Court in HPTDC (supra). Mr. Dada submits that the Himachal Pradesh High Court did not have the benefit of this amendment which came into force only on 1.6.2002. He, therefore, submits that this is an additional reason why the interpretation now proposed by the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same contention before this Court. She submits that in such situation, the principle of estoppel clearly applies. 20. Ms. Linhares, without prejudice to the aforesaid, submits that the interpretation proposed by the Appellant is neither consistent with the literal interpretation of Section 3(1) of the said Act, nor will the same forward the objective of the said Act. She submits that the constitutional validity of the said Act has been already upheld by the Hon'ble Supreme Court in the case of Federation of Hotel & Restaurant Association of India, etc. vs. Union of India and others 1989 3 SCC 634. She submits that the said Act was, therefore, to be permitted to operate fully and its provision cannot be so interpreted, as to truncate its scope or ambit. She further submits that in these matters there are concurrent findings of fact that room charges for any unit of residential accommodation was in excess of Rs. 1200 per day per individual. She submits that the charging section advisably makes no reference to room charges per day or even per occupant. She submits that it is the appellants who seek to read some words in the statute, which is clearly impermissible, even according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Act, before the date of such approval. He submits that the approval merely recognizes and affirms the position that the Appellant's hotel was indeed a hotel referred to in clause (ii), sub-Section (5) of Section 80-IA of the Income Tax Act. He, therefore, submits that the contrary view taken by the assessing authorities is improper and requires reversal. He submits that this is an additional ground in support of the Appellant in Tax Appeals No. 53, 54 and 55 of 2007. 26. Ms. Linhares resists the contentions of Mr. Naniwadekar by pointing out that the Appellant who he represents had expressly conceded that its case was fully covered by the decision in HPTDC (supra) and further that the Appellant was not entitled to the benefit under the proviso to Section 4(a) of the said Act for any assessment year, prior to 1995-96. She submits that thereafter, rectification applications were taken out by the Appellant to contend that there was no concession. However, the rectification applications were rejected. She, therefore, submits that the Appellants in Tax Appeals No.53, 54 and 55 of 2007 may not be permitted to raise the contentions which they now seek to raise in these appeals. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der any provision of the said Act. 34. Section 2(10), defines the expression 'room charges', to mean the charges for an unit of residential accommodation in a hotel and includes the charges for (a) furniture, air-conditioner, refrigerator, radio, music, telephone, television; and (b) such other services as are normally included by a hotel in room rent and it does not include charges for food, drinks, and any services other than those referred to in sub-clauses (a) and (b). Expression 'chargeable expenditure' is defined to mean the expenditure referred to in Section 5 of the said Act. 35. Section 3 of the said Act is most important provision, in so far as the issues raised in the present Appeal are concerned and the same reads thus : "3. Application of the Act. This Act shall apply in relation to any chargeable expenditure-- (1) incurred in a hotel wherein the room charges for any unit of residential accommodation at the time of incurring of such expenditure are [one thousand two hundred rupees] or more per day per individual and where,-- (a) a composite charge is payable in respect of such unit and food, the room charges included therein shall be determined in the prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a restaurant referred to in clause (1) of section 3 of the said Act, if the expenditure relates to the services specified in sub-clauses (a) to (d) of clause (1) of Section 5 provided by the hotel, the person who carries on the business of such hotel, the expenditure so collected shall be at the rate specified in clause 4(a) of the said Act. 40. Section 7(3) of the said Act provides that the tax so collected by the person who carries on the business of the hotel, during any calendar month in accordance with the provisions of subsection (1) or sub-section (2) shall be paid to the credit of the Central Government by 10th of the month immediately following the said calendar month. 41. Section 7(4) of the said Act provides that any person responsible for collecting the tax, who fails to collect the tax in accordance with the provisions of sub-section (1) or sub-section (2) shall, notwithstanding such failure, be liable to pay the tax to the credit of the Central Government in accordance with the provisions of sub-section (3) of the said Act. 42. Section 8 provides for a person responsible for collecting tax to furnish prescribed return. Section 9 provides for assessment. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable expenditure in a hotel specified in Section 3(1) of the said Act. This is not the tax on the hotel itself, or on the person carrying on business of the hotel. Such hotel or the person carrying on business of the hotel is only made responsible for collection of the tax and crediting of the same to the Central Government. Only in case of failure on the part of the hotel, or the person carrying on business of the hotel to collect and credit such expenditure tax from the individual incurring chargeable expenditure at the hotel, does the hotel or the person carrying on business of the hotel, become liable to pay such tax to the Central Government. Therefore, the basic premise necessary to be noted is that the expenditure tax is a tax on the individual incurring chargeable expenditure and not upon the hotel or the person carrying on the business of the hotel where such individual incurs the chargeable expenditure. 45. Now, none of these Appeals have been instituted by an individual primarily responsible for payment of expenditure tax. These Appeals have been instituted by the hotels or the persons carrying on business of the hotel, because they were responsible for collectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes that this provision relates to the applicability of the said Act. In its opening portion, this section states that it shall apply 'in relation to any chargeable expenditure'. This means that Section 3(1), at least in its opening part, does not make reference to the application of the said Act to any hotel as such, but rather it refers to application in relation to 'any chargeable expenditure'. This is in consonance with the basic scheme of the said Act that the expenditure tax is not a tax on any hotel or on any person carrying on business of the hotel, but rather the expenditure tax is a tax on chargeable expenditure incurred by an individual at the hotel specified in Section 3(1) of the said Act. 50. Further, Section 3(1) of the said Act proceeds to state that the said Act shall apply in relation to any chargeable expenditure incurred in a hotel wherein the 'room charges' for 'any unit of residential accommodation' at the time of incurring of such expenditure are Rs. 1200 or more 'per day' 'per individual'. Rest of the section deals with determination of room charges where composite charges are payable in respect of such unit meaning unit of residential accommodation and foo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harges on the basis of occupancy position, as is contended by the Appellants. 54. The expression 'any unit of residential accommodation in a hotel' is not statutorily defined in the said Act, or for that matter, in the Income Tax Act. Therefore, we will have to assign to this expression its natural meaning, keeping in mind the context and perspective of the said Act. So construed, the expression means a room in a hotel for residential accommodation. This expression will have to be read and construed along with the definition of the expression 'room charges' in Section 2(10) of the said Act. From such conjoint reading, it is quite clear that the expression 'any unit of residential accommodation' refers to the hotel room, along with all its furnishings, as indicated in substantial details in Section 2(10) of the said Act. Again, this expression, per se does not support the construction that 'a unit' must be determined on the basis of 'beds' or 'occupancy'. In fact, any such construction might amount to stretching the expression beyond its natural meaning or even beyond setting in which it is placed. 55. The expression 'per day' in Section 3(1) of the said Act poses no difficulty an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rictly in the provisions of law, the subject can be taxed. Further, as held in Dilip Kumar Roy (supra), the burden is always upon the Revenue to show that the Assessee comes with the charging provision. Thirdly, a fiscal statute will have to be interpreted only on the basis of the language therein and not de hors the same. No words can be added or ignored, only the language used in a statute is to be considered for ascertaining the proper meaning and intent of the legislation. This means that the intention of the legislation must be gathered from the language used in the statute. Fourth principle is that the Courts, whilst construing taxing statute, have to give a fair and reasonable construction to the language of the statute, without leaning to one side or the other, meaning thereby that no tax or levy can be imposed on the subject when the words of the statue show the clear intention. This means that the so called equitable construction of words of the statute is not permissible. This is also expressed in the principle that before taxing any person, the Revenue must show that such person falls within the ambit of the charging section by clear words used in the section. No person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e words in Section 3(1) of the said Act or for that matter, in the said Act itself, which is impermissible. In any case, such an interpretation would amount to introducing the concepts in the said Act which find no place either in the express words of the statute, or even by reference to the legislative intent. This means that neither the principle of literal interpretation, nor the principle purposive interpretation, supports the construction proposed. Rather, the interpretation adopted by the Revenue is quite consistent with the text of the statute and co-incidentally furthers the legislative intent of the said Act. Therefore, such interpretation deserves acceptance over the interpretation proposed by the Appellants. 61. Section 3(1) of the said Act merely provides that the said Act shall apply "in relation to any chargeable expenditure incurred". Section 3(1) does not say that it will apply to any hotel as such. Section then proceeds to specify the kind of the hotels in which an individual will have to incur the chargeable expenditure, in order that the said Act applies in relation to such chargeable expenditure. Section 3(1) then provides that such chargeable expenditure must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statute, neither the Revenue, nor the Assessee can propose any construction based only on the legislative intent. In fact, it is the case of the Appellants themselves that there can be no question of reference to 'intent' and if the subject subject falls within the clear words of the statute, then, the subject becomes liable to pay tax, irrespective of any hardships that may be involved in the process. Even otherwise, there is nothing in the said Act or in the scheme of the said Act to suggest that the legislative intent supports the construction proposed by the Appellants. 65. For instance, the Appellants say that in respect of unit of residential accommodation where the room charges are fixed on "double occupancy basis", the expression "per individual" must necessary imply that such room charges be split or divided by two. The same logic is sought to be extended to cases where the room charges are fixed on "triple occupancy basis" or "quadruplicate occupancy basis" where it is suggested that the room charges must be so split or so divided by a number of beds or a number of occupants. The said Act refers to room charges for an unit of residential accommodation in terms of the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid Act was indeed applicable to the Appellants, since the room charges per residential unit were in excess of Rs. 1200 per day. 68. The Appellants submit that the Revenue has no where disputed that the room charges were fixed by them on "double occupancy basis". This may or may not be so. However, even assuming that this was so, admittedly, it was not even the case of the Appellants that more than one individuals incur the chargeable expenditure in the hotel wherein the room charges or for any unit of residential accommodation, exceed Rs. 1200 per day. It was not even the case of the Appellants that the individual invariably or in particular cases split up the chargeable expenditure or incur the chargeable expenditure independent of one another when room charges are fixed on "double occupancy basis" or "triple occupancy basis". 69. Based upon some artificial ambiguity, when, in fact there exists none, the assessee cannot claim benefit of the principle that such ambiguities in a fiscal statue deserve to be resolved in favour of the assessee. The principle that the ambiguities in a fiscal statute have to be resolved in favour of the assessee, applies in case of genuine ambiguities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This is obvious, also for the reason that no two strangers, except in case of dormitories, will or be allowed to share a room and, therefore, the expenditure incurred for room charges from the main or one person who hires the room cannot further be allowed to be divided by the number of persons who really occupied, as claimed for the petitioners in adjudging the applicability of the Act." 71. The basis for attempting to distinguish the Judgment in HPTDC (supra) does not appeal to us. In paragraph 15 of the said Judgment, there is reference to the rate list approved by the Commissioner of Tourism in respect of the various groups of hotels of the petitioner-corporation under the provisions of the Himachal Pradesh Registration of Hotels and Travel Agents Act, 1969, and the rules made thereunder. Such approval by the Commissioner of Tourism in respect of a Government Corporation, according to us, makes no difference to the principle involved. The instance referred to in the said Judgment or the observations that no two strangers except in case of dormitories, will be allowed to share a room, has to be understood in the context or in the proper perspective. As noted earlier, the expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision in HPTDC (supra) was not delivered by the jurisdictional High Court. In absence of any contrary decision, there was nothing illegal in the assessing authorities relying upon the decision in HPTDC (supra). 73. Writ Petition No.94/2002, as filed, raises the very same issue, as is raised in the Appeals. In fact, Mr. H.D. Naik, learned Counsel for the Petitioners merely adopted the submissions made by Mr. Dada support of the Appellants. 74. For all the aforesaid reasons, the substantial question of law relating to the interpretation of the provision in Section 3(1) of the said Act is required to be answered against the Appellants and in favour of the Revenue. 75. In so far as Tax Appeals No.53, 54 and 55 of 2007 are concerned, we note that the Appellants had virtually conceded before the ITAT that the benefit under the proviso to Section 4(a) of the said Act would be inapplicable to the Appellants for any assessment years, prior to 1995-96, because the approval of the Director General, (Exemption) was obtained only on 28/7/1994, relevant to the Assessment Year 1995-96. Even the application for rectification contending that no such concession was ever made, was rejected by ..... 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