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2016 (6) TMI 704 - HC - Indian LawsLiability to pay luxury tax - manner of calculation - department contends that when the petitioner accepts consolidated payment basis, the tax is to be calculated on the basis of 50% of the occupancy as per the average declared tariffs and not on the basis of the actual occupied number of rooms. - Held that - Accepting the petitioner s interpretation would render the expression on the basis of meaningless. Quite apart from the two expressions being used in the same provision, obviously for different effect, accepting interpretation of the petitioners would lead to plain absurdity as may be demonstrated presently. We may recall, under clause (a), on consolidated payment basis, the proprietor would pay 8 per cent of the 50 per cent occupancy. If this occupancy is understood as actual occupancy as suggested by the petitioners, the assessee would have tax burden of 8 per cent calculated on the basis of half of the actual tariff collected during the period under consideration. On the other hand, for a proprietor opting for clause (b), he would pay tax at 12.5 per cent on the basis of actual occupancy i.e. 12.5% of the total tariff. We are informed that now the rates prescribed for clauses (a) and (b) are 6 per cent and 12.5 per cent respectively. In plain term thus, proprietor governed by clause (b) would pay more than 4 times tax payable by one governed under clause (a). There is no earthly reason why the Legislature should provide for two options; one inviting tax four times, the other option. Petition dismissed - Decided against the assessee.
Issues:
1. Interpretation of luxury tax calculation under The Gujarat Luxuries (Hotels and Lodging Houses) Tax, 1977. 2. Applicability of tax calculation based on actual occupancy versus declared tariff. 3. Judicial review of assessment order by Deputy Collector, Vadodara. Issue 1: Interpretation of luxury tax calculation under The Gujarat Luxuries (Hotels and Lodging Houses) Tax, 1977. The petitioners sought a declaration that they should pay luxury tax at a rate of 6% of 50% of the actual occupancy of their hotel. The dispute arose from the interpretation of Section 3 of the Act, which provides for the levy and collection of tax based on the categories of rooms in hotels. The petitioners argued that tax should be computed based on 50% of the actual occupancy, while the department contended that tax should be calculated on 50% of the occupancy as per the average declared tariffs. The court analyzed the statutory provisions and held that the term "occupancy" and "actual occupancy" carry different meanings as used in the Act. The court rejected the petitioners' interpretation, emphasizing that the legislature's use of specific language indicated distinct calculations for tax rates based on occupancy percentages. Issue 2: Applicability of tax calculation based on actual occupancy versus declared tariff. The court examined the provisions of the Act related to consolidated tax payments and assessed the tax rates based on different occupancy scenarios. It noted that the Act prescribed graded tax rates depending on the charges for lodging and the method of payment chosen by the proprietor. The court highlighted that the Act provided two options for proprietors with charges exceeding a certain threshold: either pay 8% tax on 50% occupancy as per declared tariff or pay 12.5% on the actual occupancy as per declared tariff. The court concluded that accepting the petitioners' interpretation would lead to absurd results, with one option resulting in significantly higher tax liability than the other. The court dismissed the petitioners' argument and upheld the tax calculation method based on the declared tariff and occupancy percentages specified in the Act. Issue 3: Judicial review of assessment order by Deputy Collector, Vadodara. The petitioners challenged the order of assessment passed by the Deputy Collector, Vadodara, which raised their tax liability. The court observed that the lower authorities had not addressed the petitioners' contentions regarding tax calculation under Section 3 of the Act. Despite previous refusals to interpret the provisions, the court decided to provide clarity on the issue as the petitioners had directly challenged the assessment order. The court dismissed the petition, emphasizing that the statutory authority should not abdicate its duty to interpret the law and that the petitioners' challenge invited judicial interpretation rather than referral to the appellate authority for further litigation. In conclusion, the High Court of Gujarat dismissed the petition seeking a declaration on luxury tax calculation, ruling in favor of the tax calculation method based on declared tariffs and occupancy percentages specified in The Gujarat Luxuries (Hotels and Lodging Houses) Tax, 1977. The court's detailed analysis of the statutory provisions and rejection of the petitioners' interpretation underscored the importance of clear language and distinct calculations in tax laws.
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