1994 (7) TMI 83 - SC - Income Tax

Whether the Jammu and Kashmir State Legislature has the legislative competence to enact the Jammu and Kashmir Hotel (Amenities and Services) Tariff Taxation Act, 1980? Held that - The Jammu and Kashmir Legislature has, therefore, the legislative competence to enact laws on any subject which comes within List II, Schedule VII by virtue of the residuary power it has been given by the Presidential Order mentioned above. The Constitution Bench in Express Hotels case 1989 (5) TMI 52 - SUPREME Court has held that the four legislations dealt with therein were under entry 62, List II, Schedule VII, Constitution of India. On similar reasoning the Act would also be a legislation under the same entry, and as such within the competence of the Jammu and Kashmir Legislature. We also agree with the reasoning and the conclusions reached by the High Court. There is no force in the contention that the Act is a legislation under entry 82, List I, Schedule VII, Constitution of India. We, therefore, see no ground to interfere with the Division Bench judgment of the High Court. The appeals/writ petitions are dismissed.

Summary

Issues:
1. Legislative competence of Jammu and Kashmir State Legislature to enact the Jammu and Kashmir Hotel (Amenities and Services) Tariff Taxation Act, 1980.
2. Constitutional validity of the Act challenged on the grounds of taxation on amenities and services provided by hotel keepers.

Analysis:
The Supreme Court addressed the issue of whether the Jammu and Kashmir State Legislature had the legislative competence to enact the Jammu and Kashmir Hotel (Amenities and Services) Tariff Taxation Act, 1980. The High Court had previously ruled in the affirmative, leading to appeals against this decision. The Act aimed to levy taxes on amenities and services provided by hotels in the state, with specific definitions provided in the preamble and section 2 of the Act. The charging provisions, as outlined in section 3 and the Schedule of the Act, detailed the rates of tax based on the tariff for resident and non-resident visitors. Section 13 of the Act authorized registered hotel keepers to collect the tax due on the tariff. The High Court had concluded that the tax was on amenities and services provided by hotel keepers to customers, not on their income, and thus fell within the legislative competence of the State Legislature.

The Supreme Court referenced a previous case involving similar state legislations, where the validity of taxing luxury services was upheld. The Court rejected contentions that the tax on services for lodging at hotels was beyond the scope of state legislative competence, emphasizing that the concept of a tax on luxuries extended beyond tangible goods to include services. The Act's provisions were deemed similar to the legislations of other states previously upheld by the Court, leading to the rejection of the challenge to the Act's validity based on legislative competence.

Furthermore, the Court examined the constitutional provisions under which the Jammu and Kashmir Legislature had the competence to legislate the Act. Article 370 of the Constitution of India and the Constitution (Application to Jammu and Kashmir) Order, 1954 were referenced to establish the legislative powers vested in the Jammu and Kashmir Legislature. It was clarified that except for specific matters under List I, the Legislature of Jammu and Kashmir could legislate on other subjects, including those falling under List II, Schedule VII. The Act was deemed to be within the competence of the Jammu and Kashmir Legislature under entry 62, List II, Schedule VII, Constitution of India, similar to the legislations upheld in the previous case. The Court agreed with the High Court's reasoning and conclusions, ultimately dismissing the appeals and writ petitions challenging the Act's validity.

In conclusion, the Supreme Court upheld the legislative competence of the Jammu and Kashmir State Legislature to enact the Jammu and Kashmir Hotel (Amenities and Services) Tariff Taxation Act, 1980. The Act's validity was confirmed based on its taxation of amenities and services provided by hotel keepers, falling within the state's legislative powers as per relevant constitutional provisions and previous legal precedents.