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TMI Blog1989 (5) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... ition No. 1456, Writ Petition No. 1457, Writ Petition No. 1458, Writ Petition No. 1459, Writ Petition No. 1460, Writ Petition No. 1461, Writ Petition No. 1462, Writ Petition No. 1463, Writ Petition No. 1464, Writ Petition No. 1465, Writ Petition No. 1466, Writ Petition No. 1472, Writ Petition No. 1473, Writ Petition No. 1474, Writ Petition No. 1475, Writ Petition No. 1476, Writ Petition No. 1477, Writ Petition No. 1478, Writ Petition No. 1479, Writ Petition No. 1480, Writ Petition No. 1481, Writ Petition No. 1482, Writ Petition No. 1483, Writ Petition No. 1484, Writ Petition No. 1485, Writ Petition No. 1486, Writ Petition No. 1491, Writ Petition No. 1492, Writ Petition No. 1493, Writ Petition No. 1494, Writ Petition No. 1501, Writ Petition No. 1502, Writ Petition No. 1512, Writ Petition No. 1532, Writ Petition No. 1576, Writ Petition No. 1577, Writ Petition No. 1578, Writ Petition No. 1580, Writ Petition No. 1597, Writ Petition No. 1629, Writ Petition No. 1630, Writ Petition No. 1635, Writ Petition No. 1636, Writ Petition No. 1647, Writ Petition No. 1648, Writ Petition No. 1720, Writ Petition No. 1728, Writ Petition No. 1729, Writ Petition No. 1744, Writ Petition No. 1815, Writ Pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e previous year are Rs. 75 or more per day per individual. If a hotel is within this class, then, section 5 brings to charge the hotel's "chargeable receipts" as defined under section 6 of the Act. The Act was passed on December 4, 1980, and came into force on December 9, 1980, when it received the assent of the President of India. The levy under the Act commences from the assessment year 1981-82 and brings to tax the chargeable receipts of the corresponding previous year. The rate of tax is a flat rate of 15 per cent. of the "chargeable receipts" defined in section 6 as the total amount of all charges, by whatever name called, received by, or accruing or arising to, the assessee in the previous year in connection with the provision of residential accommodation, food, drink and other services in the course of carrying on the business of hotel. But such charges received from persons within the purview of the Vienna Convention on Diplomatic Relations, 1961, or Vienna Convention on Consular Relations are exempt from the tax. The machinery under the Income-tax Act, 1961, is engrafted for purposes of assessment, levy and collection of tax under the Act. It is, however, relevant to not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged on every person carrying on the business of a hotel in relation to which this Act applies, for every assessment year commencing on or after the 1st day of April. 1981, a tax in respect of his chargeable receipts of the previous year at the rate of fifteen per cent. of such receipts Provided that where such chargeable receipts include any charges received in foreign exchange, then, the tax payable by the assessee shall be reduced by an amount equal to five per cent. of the charges (exclusive of the amounts by way of sales tax, entertainment tax, tax on luxuries or tax under this Act) so received in foreign exchange." [Explanation omitted as unnecessary.] [Section 5(2) omitted as unnecessary except Explanation (ii) Explanation (ii) to section 5 (2) provides "any food, drink or other services shall be deemed to have been provided on the premises of a hotel if the same is or are provided in the hotel or any place appurtenant thereto and where the hotel is situate in a part of the building, in any other part of the building." Section 6 provides: "6.(1) Subject to the provisions of this Act, the chargeable receipts of any previous year of an assessee shall be the total amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch seeks to impose a tax on what is styled "chargeable receipts" which include payments for residential accommodation, food, drink and other services at petitioners' hotels really brings to tax "luxuries"-an impost under entry 62, List II, reserved to the States. Learned counsel submitted that the reliance by the respondents on entry 82, List 1, to support the impost as a tax on income is wholly misconceived inasmuch as, the concepts of "income" and "tax on income" have definite legal connotations crystallised by settled legislative practice and do not admit of "gross receipts" being treated as "income" for purposes of levy of tax under entry 82, List I Learned counsel submitted that neither the nomenclature given to the tax nor the standard by which it is measured can determine its true nature and the Legislature cannot enlarge its power by choosing an appropriate name to the tax. To show the essential characteristics of what is the concept of "income", learned counsel referred to certain observations of the Supreme Court of the United States of America: ". . ..it becomes essential to distinguish between what is and what is not 'income' as the term is there used ; and to apply t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be given to it, and equally giving to the language of the Provincial Legislative List a meaning which it can properly bear.", submitted that entry 62, List 11, and entry 82, List 1, would require to be reconciled accordingly. Learned Attorney-General, appearing for the Union of India, sought to support the impost as a tax on income under entry 82 of List 1. It was urged that the word "income" in that entry broadly indicates the topic or field of legislation and that it should not be read in a narrow or pedantic sense, but must be given its widest amplitude and should not be limited by any particular definition which a Legislature might have chosen for the limited purposes of that legislation. The statutory definitions of and meanings given to "income" are matters of legislative policy and do not exhaust the content of the legislative entry by the particular manner in which, and the extent to which, the statute has chosen to define that expression. On a consideration of the matter, we are of the opinion that the submissions of the learned Attorney-General as to the source of the legislative power to enact a law of the kind in question require to be accepted. The word "income" is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts' Loan and Trust Co. v. Smietunka (255 U. S. 509; 65 L. Ed. 751) and United States of America v. Stewart (311 U. S. 60 ; 85 L. Ed. 40) and Resch v. Federal Commissioner of Taxation (66 CLR 198). In each of these cases, very wide meaning was ascribed to the word 'income' as its natural meaning. The relevant observations of the learned judges deciding those cases which have been quoted in the judgment of Tendolkar J., quite clearly indicate that such wide meaning was put on the word 'income' not because of any particular legislative practice either in the United States or in the Commonwealth of Australia but because such was the normal concept and connotation of the ordinary English word 'income'. Its natural meaning embraces any profit or gain which is actually received. This is in consonance with the observations of Lord Wright to which reference has already been made." (emphasis supplied) Indeed, Navnit Lal's case [1965] 56 ITR 198, 204 (SC), relied upon by Shri Palkhivala, would itself conclude the point: "In dealing with this point, it is necessary to consider what exactly is the denotation of the word 'income' used in the relevant entry. It is hardly necessary to emphasise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls alone was brought to tax, leaving the other hotels out. We have rejected the challenge to the constitutionality of the provisions of that Act based on articles 14 and 19(1)(g). There, hotels in which room charges were Rs. 400 or more per day per person were alone brought under the Act. The differentia was held to be both intelligible and endowed with a rational nexus to the object of the legislation, viz., bringing to tax certain class of expenditure incurred at hotels which were legislatively presumed to attract an economically superior class of clientele. Having regard to the wide latitude available to the Legislature in fiscal adjustments, the classification was found not violative of article 14. Similar contentions as to the unreasonableness of the restrictions which the imposition of the impugned tax was said to bring about on the petitioners' freedom of trade and business and the adverse effect of this tax on a significant area of national economy generally and the tourism industry in particular have been considered in the petitions assailing the vires of the Expenditure-tax Act, 1987. It is now well-settled that a very wide latitude is available to the Legislature in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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