2015 (11) TMI 1146 - HC - VAT and Sales Tax

Challenge to the luxury tax is levied on the hospitals in view of the amended definition of the luxury provided in a hospital by virtue of the amendment to clause (7A) to section 2 of the Assam Tax on Luxuries (Hotels and Lodging Houses and Hospitals) Act, 1989 - Held that - It is pertinent to note that in judgment in Godfrey(supra) the Supreme Court has laid down the test to determine whether the facility is a luxury or otherwise, the requirements of the common man is a determinative factor to find out whether any facility is a luxury or otherwise. It is further observed that the facility so provided should be costly and generally recognised as beyond the necessary requirement of an average member of the society - If this test is considered, any facility like the air-conditioner and television provided to the patient or his attendant in a private hospital should definitely be construed as a luxury and liable for luxury tax. Besides, the Assam legislature has brought about an amendment to the Assam Tax on Luxuries (Hotels and Lodging Houses and Hospitals) Act, 1989, specifically to define the luxuries provided in a hospital with a determinate connotation. The said definition includes the facilities like air-conditioner and television provided to the patient or his attendant is within the ambit of a luxury. - The dissection of the definition of luxury provided in the hospital consists of multiple components a residence provided to a patient or his attendant in the hospital with the facility of air-conditioner and television or radio or any other services provided thereto in connection with the residence. - The rate of tax is variable as per the luxury provided in a hospital. If only a room is provided without having the facility of air-conditioner and television, such a situation would not come within the definition of luxury provided in the hospital - Decided against assessee.

Summary

Issues:
Challenge to luxury tax levied on hospitals based on amended definition of "luxury provided in a hospital."

Analysis:
The petitions challenge the imposition of luxury tax on hospitals following an amendment to the Assam Tax on Luxuries (Hotels and Lodging Houses and Hospitals) Act, 1989, which redefined "luxury provided in a hospital." The amendment, effective from August 29, 2009, specifically includes accommodation with charges for air conditioning, television, or radio as part of the luxury provided in a hospital, excluding charges for food, medicines, professional medical services, and medical tests.

The All-Assam Non-government Health Establishment Association filed petitions contesting the validity of the luxury tax on hospitals. The petitioners argued against the levy of luxury tax, citing a Supreme Court decision and emphasizing that facilities like air-conditioning and television in hospitals may be medically necessary and not purely for enjoyment, thus not constituting a luxury as per the Supreme Court's interpretation.

In response, the Additional Advocate-General referenced a Kerala High Court decision to support the State's legislative competence to impose luxury tax on hospitals offering amenities like air-conditioning and television to patients or attendants during treatment. The Court examined the submissions and cited the Supreme Court's test to determine luxury, emphasizing that facilities beyond the necessary requirements of an average member of society and recognized as costly are considered luxuries. The Court noted that the Assam legislature's amendment to define luxuries in hospitals includes amenities like air-conditioning and television, categorizing them as luxuries subject to tax.

The definition of "luxury provided in the hospital" includes various components such as accommodation with air-conditioning, television, or radio, along with other services connected to the residence. The definition is to be read in conjunction with section 3(A) of the Act, which outlines the liability of hospital proprietors to pay tax based on the turnover of receipts from luxuries provided. The tax rates vary depending on the charges for luxury provided in a hospital, with different percentages applied to different charge brackets.

Ultimately, the Court found no merit in the writ petitions challenging the luxury tax on hospitals, as the definition of luxury provided in a hospital encompasses facilities like air-conditioning and television, which are considered luxuries subject to taxation. Consequently, the writ petitions were dismissed.