2016 (2) TMI 550 - HC - Indian Laws

Levy of tax on open space termed as banquet halls providing only accommodation or space for marriages/receptions in terms of Section 2(c) in the manner stated under Section 2(k) of the Haryana Tax on Luxuries Act, 2007 - whether these are not covered under the head Luxury vide entry No.62 of List II of Schedule VII of the Constitution of India? - Held that - The explanation being clarificatory in nature has simplified the calculation as to what amount would be included for quantifying ₹ 20,000/-. It cannot be held to be unreasonable or arbitrary in any manner as it encompasses those cases where the facilities or amenities are provided by the proprietor of the banquet hall or any person on his behalf when such amenities are provided within the precincts of such banquet hall. It can by no stretch of imagination on taking hypothetical illustration be declared to be ultra vires without showing lack of legislative competence of the State to enact such a provision or there being violation of any constitutional mandate. Nothing has been shown by the learned counsel for the petitioner to substantiate that the State legislature was not empowered to define the expression luxury in the banquet hall under Section 2(k) in the statute. The definitions of various expressions under Section 2 of the Act and other substantive provisions of the Act are within the legislative competence and have not been shown to be contrary to any constitutional mandate. The services provided by the petitioner do fall under the said definition so as to be liable to levy of tax. Once there exists legislative competence in the State legislature to enact a provision, in the absence of the learned counsel for the petitioners to demonstrate that the same is arbitrary, discriminatory or violative of Article 14 of the Constitution of India, it cannot be declared to be unconstitutional. Thus the provisions of Explanation to Section 2(k) of the Act and also the other provisions of the Act to which an attempt has been made to assail as ultra vires, cannot be held to be beyond the legislative competence of the Haryana State Legislature or that they had exceeded its law making power or contravened any of the provisions of the Constitution of India on the basis of which it could be declared to be unconstitutional. The validity of the same is upheld and the petition is dismissed.

Issues Involved:
1. Levy of tax on open space termed as "banquet halls" under the Haryana Tax on Luxuries Act, 2007.
2. Constitutionality of Explanation to Section 2(k) of the Act.
3. Legislative competence of the State to impose luxury tax on banquet halls.
4. Inclusion of charges for amenities provided by third parties in the computation of luxury tax.
5. Whether letting out space for marriage functions constitutes 'luxury.'

Issue-wise Detailed Analysis:

1. Levy of Tax on Open Space Termed as "Banquet Halls":
The petitioner challenged the levy of tax on open spaces used as banquet halls for marriages/receptions under the Haryana Tax on Luxuries Act, 2007. The petitioner argued that these spaces do not provide 'luxury' as defined under Sections 2(j) and 2(k) of the Act and, therefore, should not be subject to tax. The court examined the statutory provisions and concluded that the activity of letting out space for marriage functions falls under the definition of 'luxury' as per the Act.

2. Constitutionality of Explanation to Section 2(k) of the Act:
The petitioner contended that the computation of the taxable limit of Rs. 20,000 for luxury tax, as depicted in Explanation to Section 2(k) of the Act, is unconstitutional. The court held that the explanation is clarificatory in nature and simplifies the calculation of the taxable amount. It includes charges for amenities provided by the proprietor or any other person within the precincts of the banquet hall. The court found no unreasonableness or arbitrariness in this provision and upheld its validity.

3. Legislative Competence of the State to Impose Luxury Tax on Banquet Halls:
The petitioner argued that the State lacks the legislative competence to impose luxury tax on banquet halls. The court referred to Entry 62 of List II of Schedule VII of the Constitution of India, which empowers the State Legislature to enact laws regarding taxes on luxuries, including entertainments, amusements, betting, and gambling. The court cited previous judgments, including Express Hotels Private Limited vs. State of Gujarat, to affirm that the State Legislature has the competence to impose luxury tax on services provided in banquet halls.

4. Inclusion of Charges for Amenities Provided by Third Parties in the Computation of Luxury Tax:
The petitioner argued that the charges for amenities provided by third parties should not be included in the taxable amount. The court noted that the explanation to Section 2(k) of the Act includes charges for amenities provided by the proprietor or any other person within the banquet hall's precincts. The court found this provision reasonable and upheld its validity, stating that it simplifies the computation of the taxable amount.

5. Whether Letting Out Space for Marriage Functions Constitutes 'Luxury':
The petitioner contended that letting out space for marriage functions does not constitute 'luxury' in the present-day context, as it is a necessity. The court referred to the definition of 'luxuries' under Section 2(j) of the Act, which includes services ministering to enjoyment, comfort, or pleasure extraordinary to necessities of life. The court concluded that letting out space for marriage functions falls under this definition and is subject to luxury tax.

Conclusion:
The court dismissed the petition, upholding the validity of the provisions of the Haryana Tax on Luxuries Act, 2007, including the Explanation to Section 2(k). The court found that the State Legislature has the competence to impose luxury tax on banquet halls and that the provisions are neither arbitrary nor unconstitutional. The petitioner's arguments were found to lack merit, and the court affirmed the legislative competence and constitutionality of the impugned provisions.

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