2023 (11) TMI 673 - HC - VAT and Sales Tax

Validity of assessment order - exigibility to tax under the Delhi Tax on Luxuries Act, 1996 - Club and Association service - doctrine of mutuality - HELD THAT - While we find no ground to doubt the principles of mutuality as were explained in Calcutta Club and which constitutes the foundation for the decision handed down by the Kerala High Court in Madhavaraja Club, we find that the petitioner did not question the validity of the provisions of the Act as it originally stood and which extended the incidence of tax to the provision of residential accommodation in a club. If it were the contention of the petitioner that the tax on the provision of such residential accommodation could not be levied, it was incumbent upon it to question the validity of the provisions of the Act as they originally stood. However, and in the absence of such a challenge having been mounted and bearing in mind the statutory position which prevailed, we find ourselves unable to hold in favour of the petitioner on this score. When one reverts to the facts of the case, it is evident that the Act as it stood during the assessment period in question extended its application also to the providing of residential accommodation in a club and in any case did not at the relevant time exclude the provisioning of accommodation to members of a club from the expression luxury . In fact, the word luxury did not even exist on the statute book prior to its insertion by virtue of the 2012 Amendment Act. In view of the above and bearing in mind the statutory position which prevailed at the time when the assessment orders came to be passed, there are no justification or ground to interfere with the ultimate conclusion arrived at by the first respondent. The decision of the Commissioner assailed shall not be liable to be treated as a precedent for any assessment period post the promulgation of the 2012 Amendment Act. Any assessments made or proceedings pending would have to be considered bearing in mind the observations rendered - Application disposed off.

Summary

Issues Involved:
1. Validity of the order dated 01 July 2014.
2. Applicability of the Delhi Tax on Luxuries Act, 1996.
3. Principle of mutuality.
4. Provisions of the Act pre and post the 2012 Amendment Act.
5. Definition and scope of "luxury" and "establishment".
6. Relevance of the Calcutta Club decision.

Summary:

Issue 1: Validity of the order dated 01 July 2014
The petitioner questioned the validity of the order dated 01 July 2014 passed by the Commissioner, which affirmed the assessment orders for FYs 2009-10, 2010-11, and 2011-12, holding it liable to tax under the Delhi Tax on Luxuries Act, 1996.

Issue 2: Applicability of the Delhi Tax on Luxuries Act, 1996
The petitioner, a not-for-profit club, had neither obtained registration under the Act nor paid any tax. The assessment orders were based on the provisions of the Act as amended by the 2012 Amendment Act, which the petitioner contested.

Issue 3: Principle of Mutuality
The petitioner asserted it was governed by the principle of mutuality, confining its activities to its members, and argued that it should not be liable for luxury tax. The court noted the principles of mutuality as explained in the Supreme Court's decision in Calcutta Club Limited and the Kerala High Court's decision in Madhavaraja Club.

Issue 4: Provisions of the Act Pre and Post the 2012 Amendment Act
The original Act concentrated the levy of luxury tax on providing residential accommodation by a hotelier. Post the 2012 Amendment Act, the definition of "establishment" was expanded to include banquet halls, gymnasiums, health clubs, hotels, and spas. The court observed that the amended provisions were not applicable for the assessment years in question.

Issue 5: Definition and Scope of "Luxury" and "Establishment"
The court examined the definitions of "business," "club," "establishment," "hotelier," and "luxury" as provided in the Act. It found that the petitioner club fell within the definition of "establishment" and "hotelier" and was liable to pay tax under Section 3 of the Act. However, the court noted that "luxury" did not exist in the statute book before the 2012 Amendment Act.

Issue 6: Relevance of the Calcutta Club Decision
The court acknowledged the principles of mutuality as explained in Calcutta Club but noted that the petitioner did not challenge the validity of the Act's provisions as they originally stood. The court found no justification to interfere with the Commissioner's decision but clarified that this decision should not be treated as a precedent for any assessment period post the 2012 Amendment Act.