1993 (1) TMI 109 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of Expenditure Tax Act, 1987 based on room charges.
2. Interpretation of the term "any unit of accommodation" in Section 3 of the Act.
3. Taxability of expenditure incurred in hotels with mixed room tariffs.
4. Alleged manipulation of records by the assessee to evade tax.

Detailed Analysis:

1. Applicability of Expenditure Tax Act, 1987 Based on Room Charges:
The primary issue revolves around whether the Expenditure Tax Act, 1987 applies to a hotel where only some rooms have tariffs exceeding Rs. 400 per day per individual. The assessing officer believed that if any room in the hotel charged more than Rs. 400, the Act would apply to the entire hotel. The CIT (Appeals) partially agreed but limited the applicability to the period after the tariff increase on 22-10-1990.

2. Interpretation of the Term "Any Unit of Accommodation" in Section 3 of the Act:
The appellant argued that "any unit of accommodation" should be interpreted as "all units of accommodation," meaning the Act should only apply if all rooms in the hotel charge Rs. 400 or more per day per individual. The revenue contended that the term should be understood in the singular sense, implying that the presence of even one room with a tariff of Rs. 400 or more would subject the entire hotel to the Act.

3. Taxability of Expenditure Incurred in Hotels with Mixed Room Tariffs:
The Tribunal examined whether the expenditure incurred by guests in rooms priced below Rs. 400 per day per individual should be taxed if the hotel also has rooms priced above this threshold. The Tribunal concluded that the Act is intended to apply to hotels where all rooms meet the Rs. 400 threshold, thus excluding mixed-tariff hotels from the Act's purview.

4. Alleged Manipulation of Records by the Assessee to Evade Tax:
The assessing officer alleged that the assessee manipulated records to show lower occupancy rates and avoid tax. The Tribunal found that the corrections in the records were not conclusively proven to be manipulative. The refunds issued to customers for overcharges were considered genuine and not an afterthought to evade tax.

Judgment:
The Tribunal held that the Expenditure Tax Act, 1987 does not apply to the assessee's hotel as it did not meet the criteria of having all rooms priced at Rs. 400 or more per day per individual. The appeal was allowed, and the assessments based on the alleged manipulations were not sustained.