1975 (8) TMI 71 - AT - Income Tax

Summary

Issues:
- Dispute over inclusion of receipts under "Minimum Dinner Charges" in turnover for sales tax assessment.

Analysis:
1. The appellants, a hotel running a restaurant, disputed the inclusion of receipts under "Minimum Dinner Charges" in their turnover for the assessment year 1972-73. The assessing authority found discrepancies in claimed exemptions and determined the total turnover at Rs. 18,90,067.95. The appellants contested the inclusion of receipts amounting to Rs. 4,392.75 under "Minimum Dinner Charges."

2. The appellants argued that the "Minimum Dinner Charges" were not consideration for supplies made and should not be part of turnover for sales tax assessment. They contended that the charges were levied to prevent customers from overstaying during entertainment events at the restaurant. The first appellate authority upheld the inclusion of the charges in turnover, considering them as part of the aggregate amount received by the dealer.

3. The appellants further argued before the Tribunal that the charges were distinct from the value of goods consumed and should not be considered as consideration for sales. They highlighted that customers were obligated to pay the minimum charges irrespective of actual consumption, emphasizing the contractual obligation imposed by the hotel.

4. The Tribunal analyzed the nature of the charges and concluded that the "Minimum Dinner Charges" formed part of the consideration for the sale of food consumed by customers. The Tribunal emphasized that customers had no option to pay only the actual cost of food consumed, making the total charges the consideration for dining at the restaurant.

5. Referring to the Tamil Nadu General Sales Tax Act, the Tribunal clarified that the agreed sale value of goods, not the intrinsic value, constituted the consideration for assessment. The Tribunal held that the fixed minimum charges were part of the contractual obligation for customers entering the restaurant, regardless of actual consumption, and thus formed part of the turnover for sales tax assessment.

6. Ultimately, the Tribunal dismissed the appeal, upholding the inclusion of receipts under "Minimum Dinner Charges" in the taxable turnover of the appellants. The decision was based on the understanding that the total receipts under this head constituted the consideration for the sale of foodstuff consumed by customers, in accordance with the contractual terms imposed by the hotel.