2000 (11) TMI 285 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the service of notice under Section 11 of the Expenditure Tax Act.
2. Applicability of the Expenditure Tax Act to the assessee.
3. Calculation of chargeable expenditure and the applicability of the Expenditure Tax Act.
4. Exclusion of certain receipts from the computation of chargeable expenditure.
5. Liability to pay interest under Section 14 of the Expenditure Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the Service of Notice under Section 11 of the Expenditure Tax Act:
The assessee challenged the validity of the service of notice under Section 11, arguing that the notice was illegal and invalid. The Tribunal found that the service of the notice was not in dispute and that the assessee had filed the return under protest, which does not absolve it from paying the expenditure tax. The Tribunal held that the notice issued was valid and the assessment made was not in dispute, dismissing the assessee's contention regarding the validity of the notice.

2. Applicability of the Expenditure Tax Act to the Assessee:
The assessee contended that the Expenditure Tax Act did not apply to it, arguing that the room charges for any unit of residential accommodation did not exceed the prescribed amount per day per individual. The Tribunal found that the assessee collected expenditure tax from customers and was liable to file expenditure tax returns. The Tribunal also noted that the assessee's hotel did not qualify for exemption under Section 80-IA of the Income Tax Act as it was not situated in a hilly area or a place of pilgrimage. The Tribunal upheld the applicability of the Expenditure Tax Act to the assessee.

3. Calculation of Chargeable Expenditure and the Applicability of the Expenditure Tax Act:
The assessee argued that the room charges should be divided among the occupants to determine the chargeable expenditure. The Tribunal rejected this contention, stating that the room charges per individual do not become a correct proposition to deny the liability to pay expenditure tax. The Tribunal held that the room charges for any single unit in the hotel above Rs. 1,200 per day fulfilled the criterion of room charges for any unit of residential accommodation above Rs. 1,200 as per the Expenditure Tax Act. The Tribunal upheld the calculation of chargeable expenditure by the AO and the CIT(A).

4. Exclusion of Certain Receipts from the Computation of Chargeable Expenditure:
The assessee contended that receipts from restaurants, conference halls, and bars should be excluded from the computation of chargeable expenditure. The Tribunal found that the assessee collected expenditure tax from customers and included these receipts in the total charges. The Tribunal held that the assessee could not exclude these receipts from the computation of chargeable expenditure and upheld the inclusion of these receipts in the total charges for the purpose of calculating expenditure tax.

5. Liability to Pay Interest under Section 14 of the Expenditure Tax Act:
The assessee denied the liability to pay interest under Section 14 of the Expenditure Tax Act. The Tribunal held that charging of interest under Section 14 is an automatic statutory provision because of not making the payment of expenditure tax collected within time to the Government. The Tribunal upheld the liability of the assessee to pay interest under Section 14 of the Expenditure Tax Act.

Conclusion:
The Tribunal dismissed the appeals of the assessee, upholding the validity of the service of notice, the applicability of the Expenditure Tax Act, the calculation of chargeable expenditure, the inclusion of certain receipts in the computation of chargeable expenditure, and the liability to pay interest under Section 14 of the Expenditure Tax Act. The appeals filed by the Department were also dismissed as infructuous.