2019 (2) TMI 1159 - HC - VAT and Sales Tax

Imposition of luxury tax - Validity of assessment order - imposition of penalty - case of appellant is that they do not rent out any rooms for accommodation, as is done in a hotel. They would not come under the term luxury for reason of there being no rooms for rent - Held that - In the present case, the definition clause indicates very specifically and categorically as to what a luxury taxable under the provisions of the Act is. The luxury as provided in the various establishments enumerated in the definition clause, refers to accommodation for residence or use and other amenities and services provided thereon . Hence, the accommodation could be for residence or for use - The charging section also speaks of accommodation for residence or use , wherein the use is for conducting functions whether public or private. The computation provision speaks of the charges for accommodation, amenities and services and the word accommodation includes, the accommodation for residence and accommodation for use . On the renting out of the hall for a public or a private function, essentially the accommodation provided is for use of the hall, for a consideration. Admittedly, the renting out is for a charge and for the period it is rented out, the rentee could use it for the function for which it has been rented out as per the agreement between the two parties. In such circumstances, it can be said that, the computation provision also provides for a determination of the tax, which is on the charges for accommodation taken by the appellants from the person, who uses the hall for a public or a private function. Appeal dismissed - decided against appellant.

Summary

Issues:
Interpretation of the Kerala Tax on Luxuries Act, 1976 - Applicability of the Act to societies renting out auditoriums for public and private functions.

Analysis:

1. The judgment deals with appeals arising from writ petitions where the petitioners, two Societies registered under the Travancore Cochin Literary, Scientific and Charitable Societies Registration Act, 1955, were held to be covered under the Kerala Tax on Luxuries Act, 1976. The petitioners own auditoriums in Muvattupuzha and Ernakulam, rented out for functions, both public and private. The main contention was that since they do not offer rooms for accommodation like hotels, they should not be considered under the Act.

2. The impugned judgment analyzed the definitions and provisions of the Act, concluding that an auditorium offering itself for rent for public and private functions, even without accommodation for residence, falls under the definition of "luxury" as per section 2(f) of the Act. The charging section, section 4, was found applicable to such establishments providing amenities and services, attracting assessment and penalty.

3. The senior counsel argued that since the auditoriums did not rent out rooms for accommodation, they should not be assessed under the Act. However, the court highlighted that the Act's computation provision under section 4(2)(c) covers charges for amenities and services provided by auditoriums, clubs, or similar places, without specifying the need for accommodation for residence. The court emphasized that the plain reading of the provisions did not support the appellants' contentions.

4. The senior counsel relied on previous judgments to argue that if computation is not feasible, assessment cannot be made. However, the court, after considering the contentions and precedents, found no grounds for interference with the impugned judgment. The court emphasized that the Act's provisions must be read as a whole, and the definition of "luxury" clearly includes accommodation for residence or use, encompassing auditoriums rented out for functions.

5. The court further elaborated on the definition of "luxury" under the Act, emphasizing that the term includes accommodation for residence or use, whether for public or private functions. The computation provision covers charges for accommodation, amenities, and services, with "accommodation" encompassing both residence and use. The court rejected the appellants' arguments and upheld the impugned judgment based on a comprehensive interpretation of the Act's provisions.

6. In conclusion, the court dismissed the appeals, allowing the appellants to avail of the statutory remedy within two weeks from the judgment's receipt. The appeals were rejected, clarifying that they would only proceed to determine the quantum and not for further interpretation. No costs were awarded in the judgment.