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TMI BlogThe Hotel-Receipts Tax Act, 1980--Explanatory notes on provisions of. IntroductionX X X X Extracts X X X X X X X X Extracts X X X X ..... five or more per day per individual. It may be mentioned that the provisions of this Act apply only in respect of hotels situated in India. The term "hotel" has been defined to include a building or part of a building where residential accommodation is, by way of business, provided for a monetary consideration. It should be noted that the definition of "hotel" is inclusive and not exhaustive. "Hotel" thus includes every place which the word signifies according to its natural import, as also every building or part of building in which residential accommodation is provided as a business activity, whether termed as a hotel, a tourist home, guest house, etc. The levy will extend to all such hotels wherein the charges for any room at any time during the previous year are not less than Rs.75 per day per individual. Where a person owns more than one hotel and all or any of them are covered under the provisions of this Act, such person will have to file one return of chargeable receipts in respect of all or such of the hotels owned by him. In other words, such person will not be required to file a separate return for each of the hotels which is governed by the provisions of this Act. The e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... food, drink and other services are overstated in order to exclude the hotel from the purview of the Act. In both these cases, the Income-tax Officer has been empowered to determine the room charges on such reasonable basis as he may deem fit. 2.4 The hotel receipts tax is levied at the rate of 15 per cent. of the chargeable receipts of the previous year. The hotel-receipts tax will be payable in respect of the chargeable receipts of a hotel of the previous year relevant to every assessment year commencing on or after 1st April, 1981. For this purpose, the expression "chargeable receipts" has been defined to mean the total amount of all charges referred to in section 6 computed in the manner laid down in section 7. 2.5 The "chargeable receipts" of the previous year of an assessee will be the total amount of all charges received by, or accruing or arising to, the assessee in the previous year in connection with the provision of residential accommodation, food, drink and other services in the course of carrying on the business of a hotel. The chargeable receipts will also include the hotel-receipts tax collected by the assessee, sales tax, entertainment tax and tax on luxuries. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will not be taken into account. Since the Act has come into force in December, 1980, the chargeable receipts for any period prior to 1st February, 1981, will not be included in the chargeable receipts for the purpose of hotel-receipts tax. 2.7 Further, the chargeable receipts will be computed after allowing deduction in respect of the following:- (i) The amount of charges which is established to have become a bad debt during the relevant previous year. The deduction in respect of bad debts will be allowed only if the following conditions are satisfied, namely:- (a) the amount of such charges has been taken into account in computing the chargeable receipts of the assessee of any earlier previous year; (b) the amount is written off as irrecoverable in the accounts of the assessee for the relevant previous year; (ii) any amount payable by way of sales tax, entertainment tax or tax on luxuries in respect of any charges included in the chargeable receipts of the previous year; and (iii) the amount of hotel-receipts tax chargeable under the Act. It should be noted that no deductions other than the deduction on account of bad debts and the taxes referred to above are allowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to in (1) above by an airline on behalf of a foreign tourist or a group of foreign tourists. 3.3 It is, however, necessary that the travel agent or the airline furnishes a certificate in Form No. 1 to the hotel at the time of making the payment with a view to availing of the concessional tax treatment. For the purpose of this rule, the expressions "airline" and "travel agent" respectively mean an airline or travel agent which holds a valid licence granted under section 32 of the Foreign Exchange Regulation Act, 1973. Further, the expression "authorised dealer" means a person for the time being authorised under section 6 of that Act to deal in foreign exchange. [Section 5(1) of the Act read with rule 4 of the Rules] Anti-avoidance measure 4.1 Where, under an arrangement made between a person carrying on the business of a hotel and any other person who is closely connected with him, any food, drink or other services is or are provided on the premises of the hotel by the latter, and the Income-tax Officer is of the view that this arrangement has been made with a view to enabling the former to avoid or reduce the liability to hotel-receipts tax, the person providing such fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Tax Rules, 1981. [Section 8 of the Act] Self-assessment 6.1 Section 9 of the Act provides for the payment of hotel-receipts tax by the assessee on the basis of his own assessment. Where the assessee has furnished a return of chargeable receipts and the hotel-receipts tax payable on the basis of the return exceeds any hotel-receipts tax already paid for the relevant assessment year, he will be required to pay the excess before furnishing the return. 6.2 In case of default in payment of hotel-receipts tax or any part thereof on the basis of self-assessment, the assessee would be liable to pay penalty at the rate of 2 per cent. of such tax or part thereof for every month of default. Before levying the penalty, the Income-tax Officer will be required to give a reasonable opportunity to the assessee of being heard. 6.3 The assessee will be given credit for the hotel-receipts tax paid on self-assessment against his liability under the regular assessment. [Section 9 of the Act] Assessment 7.1 Section 10 of the Act lays down the procedure to be followed in a regular assessment. The provisions in section 10 are broadly on the lines of the provisions of section 8 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax on the basis of a best judgment assessment under section 11, he can make an application to the Income-tax Officer within one month from the date of service of notice of demand issued to him, for the cancellation of the assessment if the following conditions are satisfied:- (i) he was prevented by sufficient cause from furnishing the return under section 8(2); or (ii) he did not receive the notice issued to him under section 10(1); or (iii) he did not have a reasonable opportunity to comply with or that he was prevented by sufficient cause from complying with the terms of the notice under section 10(1). 9.2 The Income-tax Officer is empowered to cancel the best judgment assessment if he is satisfied about the existence of any of the grounds referred to in the immediately preceding paragraph. Thereafter, the Income-tax Officer is required to make a fresh assessment in accordance with the provisions of section 10 or section 11. 9.3 The application made by the assessee for reopening of a best judgment assessment is required to be disposed of by the Income-tax Officer within a period of 90 days from the date of its receipt. However, in computing the period of 90 days, any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 10(1) and for concealment of chargeable receipts. 12.2 In a case where the assessee, without reasonable cause, delays or defaults in furnishing the return of chargeable receipts under section 8(1) or section 8(2) or section 13 of the Act or where the return is not furnished in the required manner, the quantum of penalty imposable would be 2 per cent. of the 'assessed tax' for every month during which the default continued subject to a maximum of 50 per cent. of the 'assessed tax'. For this purpose, 'assessed tax' would mean hotel-receipts tax chargeable under the provisions of the Act as reduced by the hotel-receipts tax paid in advance under section 14. 12.3 Where the assessee fails, without reasonable cause, to comply with a notice under section 10(1) of the Act, the minimum penalty leviable will be 10 per cent. and the maximum 50 per cent. of the amount of hotel-receipts tax which would have been avoided if the return had been accepted as correct. 12.4 In a case where the assessee has concealed the particulars of his chargeable receipts or furnished inaccurate particulars of such receipts, the minimum penalty imposable will be equal to the amount of hotel-receipts tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income-tax (Appeals) or Commissioner of Income-tax; (c) Form No. 6 for filing a memorandum of cross-objections to the Appellate Tribunal. [Sections 18, 19, 20, 22, 23 and 24 (Pt.) of the Act] Hotel-Receipts Tax to be deductible in computing taxable income under the Income-tax Act. 15. The hotel-receipts tax payable by a person owning a hotel to which the provisions of this Act apply for any assessment year will be deductible in computing the income of the hotel chargeable under that Act under the head "Profits and gains of business or profession" for that assessment year. [Section 21 of the Act] Recovery of hotel-receipts tax, penalty, etc. 16.1 The hotel-receipts tax or penalty levied under the Act will be recovered in the same manner as arrears of income-tax. For this purpose, the provisions relating to collection and recovery of the income-tax have been referentially applied to the proceedings under the Act. 16.2 Where any tax, penalty or fine or any other sum is payable in consequence of any order passed under the Act, the Income-tax Officer will be required to serve a notice on the assessee in Form No. 7 prescribed under the Hotel-Receipts Tax Rules, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aded if the failure had not been discovered. Where the amount of such tax exceeds Rs. 1 lakh, the punishment shall be rigorous imprisonment for a minimum term of six months and a maximum term of seven years and fine and, in any other case, rigorous imprisonment for a minimum term of three months and a maximum term of three years and fine. These provisions will not apply if the return is furnished before the end of the relevant assessment year or if the tax payable on the chargeable receipts on assessment as reduced by advance tax paid, if any, does not exceed Rs. 3,000. 18.3 Section 28 provides that in case of failure of an assessee to produce books of account, documents, etc., that may be called for by the Income-tax Officer by a notice issued under section 10(1), the assessee shall be liable to punishment with rigorous imprisonment for a term which may extend to one year or with fine or with both. 18.4 Section 29 provides for the punishment for a false verification in a statement or for delivery of a false account or statement. Where the amount of tax which would have been evaded if the statement of account had been accepted as true exceeds Rs. 1 lakh, the punishment shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for making rules with retrospective effect also, so, however, that no retrospective effect will be given from a date earlier than the coming into force of the Act. 19.2 The Central Government have been empowered to make an order for the removal of any difficulty that may arise in the operation of the Act provided the order is not inconsistent with the provisions thereof. This power will be exercisable during the period of two years from the coming into force of the Act, that is, before 8th December, 1982. [Section 34 and 36 of the Act] Power to exempt 20. The Central Government has been empowered to exempt any hotel or any class of hotel from the levy of hotel-receipts tax where it is satisfied that it is necessary or expedient to do so either in the public interest or having regard to the peculiar circumstances of the case. [Section 35 of the Act] Consequential amendment in other enactments 21.1 With a view to enabling the Board to administer the Act, the Central Boards of Revenue Act, 1963, has been amended so as to include the hotel-receipts tax in the list of direct taxes. 21.2 The Economic Offences (Inapplicability of Limitation) Act, 1974, has been amende ..... X X X X Extracts X X X X X X X X Extracts X X X X
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