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TMI Blog2019 (9) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, in particular, the principles relating to interpretation of taxing statutes. According to us, Section 3(1) of the said Act will have to be interpreted, having regard to the provisions therein, in their entirety and not merely by focusing upon the various expressions used therein disjunctively - attempt will have to be to harmonize the provision in Section 3(1) of the said Act with other provisions in the said Act as well as the basic scheme of the said Act. In doing so, due regard will have to be had to the principles of interpretation of statutes, including, in particular, the principles relating to interpretation of taxing statutes. The said Act refers to room charges for an unit of residential accommodation in terms of the definition in Section 2(10) of the said Act. There is no further distinction made in the said Act on the basis of double occupancy or triple occupancy or quad occupancy when it comes to determination of room charges. Such distinction is some unilateral act by the hotel concerned and the same cannot govern the statutory construction, particularly when the provisions of a statute are quite clear. All that the Appellants contend is that they have fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 4(a), no exemption can be extended to the Appellants for any assessment year prior to 1995-96. To accept the Mr. Naniwadekar s contention and to grant exemption to the Appellants, would mean reading of some provision in the proviso to Section 4(a) of the said Act, which provision, admittedly, finds no place in the text of the proviso to Section 4(a) of the said Act. The exemption is, thus, sought to be claimed on the basis of some sort of implication. This, according to us, is impermissible. No such violence can be done to the statutory text and that too in determining whether the Assessee falls within the exemption clause. On a plain reading of the provisions in the proviso to Section 4(a) i.e. on interpretation of the provision on its own merits, we are satisfied that the Appellant has made out no case for the extension of exemption for any assessment year, prior to 1995-96. No error in the view taken by the ITAT and the additional substantial question of law, framed in these appeals, is also required to be answered against the Appellant and in favour of the Revenue. - WRIT PETITION NO.94 OF 2002, WITH TAX APPEAL NO.21 OF 2010, TAX APPEAL NO.32/2006, TAX APPEAL NO.53 O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned Judgment and Order dated 4.4.2006 made by the ITAT, is a common Judgment and Order in relation to the Assessment Years 1995-96 and 1996-97. 8. In so far as the Assessment Year 1995-96 is concerned, the ITAT had, in fact, allowed the Appellant s Appeal and set aside the notice of reopening of the assessment on the ground that the Assessing Officer, despite demand, had failed to furnish reasons for reopening of the assessment. This part of the ITAT s order was questioned by the Respondent by instituting Tax Appeal No.71/2006, which came to be dismissed vide Order dated 27.11.2006. The Respondent s Special Leave Petition, against this Court s order dated 27.11.2006, also came to be dismissed on 16.7.2007. Therefore, though the challenge in this Appeal, is to the common Judgment and Order made by the ITAT on 4.4.2006, it is clarified that in this Appeal, we are only concerned with the assessment for the Assessment Year 1996-97. 9. The brief facts, in which the aforesaid substantial question of law arises for determination in this Appeal, are as follows : (A) For the Assessment Year 1996-97, the Appellants filed return of taxable expenditure at r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a statute otiose, is unacceptable. Mr. Dada submits that in the present matters, the fact that the tariff charged for rooms on double occupancy basis is not at all disputed by the Respondents. He submits that once this basic fact is not disputed, it is apparent that the tariff for an unit of residential accommodation is less than ₹ 1200 per day, per individual. He submits that the contrary interpretation adopted by the authorities is ex facie unlawful and ultra vires. 12. Mr. Dada submits that in such matters, the burden is always on the Revenue to demonstrate that the assessee falls within the strict letter of the charging provision. He submits that in the present case, from the material produced on record by the Appellant which, in fact, was not even disputed by the Respondent, it is apparent that the Appellant does not fall within the charging provisions. Yet, the assessing authorities, without discharging the burden which is otherwise cast on them, have purported to drag the Appellant into the tax net, which is, ex facie, impermissible. Mr. Dada relies on Dilip Kumar Roy vs. Commissioner of Income Tax [94 ITR 1 (Bom)] in support of the proposition that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. Finally, Mr. Dada submits that even if it is assumed that prior to the amendment which came into effect from 1.6.2002, there was an ambiguity in the provisions of Section 3(1) of the said Act, then, the ambiguity is required to be resolved in favour of the Assessee and against the Revenue. Mr. Dada submits that it is settled law that in a taxing statute when two views are possible, the view which favour the assessee must be adopted in preference to the view which supports the Revenue. In respect of this proposition, Mr. Dada relies on Commissioner of Income Tax vs. Podar Cement (P) Ltd. etc. [226 ITR 625 (SC)] 16. For all the aforesaid reasons, Mr. Dada submits that the substantial question of law, as framed, is required to be answered in favour of the Assesse and against the Revenue. 17. Mr. H. D. Naik, learned Counsel for the Petitioners in Writ Petition No.94/2002 adopts the submissions made by Mr. Dada, learned Senior Advocate appearing for the Appellants in the aforesaid Appeals. 18. Mr. Mihir Naniwadekar, the learned Counsel for the Appellants in Tax Appeals No.53, 54 and 55 of 2007 also adopts the submissions of Mr. Dada on the common i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 21. Ms. Linhares relies on Federation of Hotel Restaurant (supra); HPTDC (supra); Syed Hasan Rasul Numa and ors. vs. Union of India and ors. 1990 2 Scale 1007; The Commissioner of Income Tax, Chennai vs. M/s. Breeze Hotels Pvt. Ltd, Chennai 2012 0 Supreme (Mad) 4143 and Income-Tax Officer vs. Mahadeo Lal Tulsian 1976 0 Supreme (Cal) 335 in support of contentions. 22. For all the aforesaid reasons, Ms. Linhares submits that the substantial questions of law so framed are required to be answered against the Appellants and in favour of the Revenue, and on this basis, the present Appeals are liable to be dismissed. 23. Tax Appeal No.53 of 2007 was admitted by order dated 14.8.2007, on the following additional substantial question of law : Whether on the facts and in the circumstances of the case, the Appellate Tribunal is right in rejecting the claim for exemption under Section 4 of the Expenditure Act, 1987 ? 24. Mr. Naniwadekar relies upon proviso to Section 4(a) of the said Act to contend that nothing in the charging section will apply in case of a hotel referred to in clause (ii) of sub-section (5) of Section 80-IA of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls. 27. In any case, Ms. Linhares submits that the Appellants obtained the approval, as contemplated by clause (ii), sub-Section (5) of Section 80-IA of the Income Tax Act only on 28.7.1994, relevant to the year 1995-96. Therefore, upon plain reading of the proviso, the Appellants were not entitled to the benefit of exemption prior to the Assessment Year 1995-96. 28. For the aforesaid reasons, Ms. Linhares submits that Tax Appeals No.53, 54, and 55 of 2007 are liable to be dismissed. 29. Rival contentions now fall for our determination. 30. In order to appreciate and evaluate the rival contentions, it is necessary to advert to the scheme of the said Act, in the first place. 31. The said Act was enacted to provide for levy of tax on expenditure incurred in certain hotels or restaurants and for matters connected therewith or incidental thereto. With effect from 1st October, 1991, reference to restaurant stands deleted. The challenge to the constitutional validity of the said Act, both, on the ground of legislative competence, as well as the alleged violation of Articles 14 and 19 (1)(g) of the Constitution of India was repelled by the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable in respect of such unit and food, the room charges included therein shall be determined in the prescribed manner; (b) (i) a composite charge is payable in respect of such unit, food, drinks and other services, or any of them, and the case is not covered by the provisions of sub-clause (a), or (ii) it appears to the Assessing Officer that the charges for such unit, food, drinks or other services are so arranged that the room charges are understated and the other charges are overstated, the Assessing Officer shall, for the purposes of this clause determine the room charges on such reasonable basis as he may deem fit; and (2) incurred in a restaurant [before the 1st day of June, 1992. 36. Section 4 of the said Act, is the charging section and provides that subject to the provisions of the said Act, there shall be charged on and from the commencement of the said Act, a tax at the rate of 10 per cent of the chargeable expenditure incurred in a hotel referred to in clause (1) of section 3. Proviso to this Section provides that nothing in this clause shall apply in the case of a hotel referred to in clause (ii) of sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordance with the provisions of sub-section (3) of the said Act. 42. Section 8 provides for a person responsible for collecting tax to furnish prescribed return. Section 9 provides for assessment. Section 10 makes a provision for best judgment assessment. Section 11 makes a provision for chargeable expenditure escaping assessment. Section 12 makes provision for rectification of mistakes. Section 13 provides for time limit for completion of assessment and reassessment. Section 14 relates to interest on delayed payment of expenditure tax. Sections 15 to 19 relate to penalties. Section 20 relates to notice of demand. Section 21 relates to revision of orders by the Commissioner. Section 22 relates to appeals to the Commissioner (Appeals). Section 23 provides for appeals to Appellate Tribunal. Section 24 provides for application of provisions of Income-tax Act to the said Act. Section 25 deals with willful attempt to evade tax, etc. Section 26 deals with failure to furnish prescribed returns. Section 27 deals with false statement in verification, etc. Section 28 deals with abetment of false return, etc. Section 29 provides that certain offences to be non-cognizable. Section 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals have been instituted by an individual primarily responsible for payment of expenditure tax. These Appeals have been instituted by the hotels or the persons carrying on business of the hotel, because they were responsible for collection of such expenditure tax from the individuals, and having failed to do so, were held liable to pay such tax to the credit of the Central Government. 46. The Appellants, i.e. the hotels or the persons carrying on the business of hotels, contend that the said Act does not apply to them because the room charges for any unit of residential accommodation at their hotels are fixed on double occupancy basis . Therefore, though room charges per se may appear to exceed ₹ 1200 per day, having due regard to the expression per individual appearing in Section 3(1) of the said Act, such room charges are required to be divided into two . Upon such division, they contend that the room charges do not exceed ₹ 1200 and, therefore, the said Act does not apply to them. The Appellants contend that any other interpretation will render the expression per individual appearing in Section 3(1) of the said Act, redundant or otiose. They conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esidential accommodation at the time of incurring of such expenditure are ₹ 1200 or more per day per individual . Rest of the section deals with determination of room charges where composite charges are payable in respect of such unit meaning unit of residential accommodation and food. With this later part of the section we are presently not concerned in these Appeals. 51. Now, it is correctly the case of the Appellants that each of the expressions, which will include the above referred italicized expressions in Section 3(1) of the said Act have to be given some meaning and cannot be ignored while considering the scope and import of the section. Even the Respondents do not and perhaps cannot dispute this proposition. 52. The expression room charges in Section 3(1) of the said Act poses no difficulty in interpreting, because such expression is defined in Section 2(1) of the said Act. Significantly, this definition refers to charges for a unit of residential accommodation in a hotel and then proceeds to state that it includes the charges for furniture, air-conditioner, refrigerator, radio, music, telephone, television and such other services as are nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport the construction that a unit must be determined on the basis of beds or occupancy . In fact, any such construction might amount to stretching the expression beyond its natural meaning or even beyond setting in which it is placed. 55. The expression per day in Section 3(1) of the said Act poses no difficulty and in fact, none was raised by the learned Counsel for either parties. The expression is quite clear and self evident and needs no further analysis. 56. The crucial expression for the purposes of the present Appeals is the expression per individual . This expression is not statutorily defined in the said Act. There is no doubt that this expression will not only have to be assigned some meaning, but further this expression is also required to be taken into account for the purposes of interpreting Section 3(1) of the said Act. This is in consonance with the law laid down by the Hon ble Supreme Court in Mohammad Ali Khan (supra) that it is not open to a Court to ignore the expression in a statute or to interpret a statute in a manner which renders the words in a statute redundant or otiose. To the same effect are the rulings in Orissa State W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subject when the words of the statue show the clear intention. This means that the so called equitable construction of words of the statute is not permissible. This is also expressed in the principle that before taxing any person, the Revenue must show that such person falls within the ambit of the charging section by clear words used in the section. No person can be taxed only by implication. A charging section has to be strictly construed and if a person is not brought with the ambit of a charging section by clear words, he cannot be taxed at all. Finally, the fifth principle, relevant for our purposes is that even when two views are possible in a taxing statute, the view which favours the assessee must be adopted, as held in Podar Cement (P) Ltd. etc. (supra). Therefore, the provision in Section 3(1) of the said Act will have to be interpreted in the light of these principles of statutory interpretations of taxing statute. 59. On a plain reading of the provisions in Section 3(1) of the said Act, we are unable to accept the interpretation proposed by the Appellants on the basis of occupancy position in units of residential accommodation at their hotel. The expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to any chargeable expenditure incurred . Section 3(1) does not say that it will apply to any hotel as such. Section then proceeds to specify the kind of the hotels in which an individual will have to incur the chargeable expenditure, in order that the said Act applies in relation to such chargeable expenditure. Section 3(1) then provides that such chargeable expenditure must be incurred by an individual in a hotel wherein the room charges for any unit of residential accommodation, at the time of incurring such expenditure, are more than ₹ 1200 per day. Reading of Section 3(1), in this manner, neither ignores the expression per individual appearing in Section 3(1), nor does it downplay the expression the room charges for any unit of residential accommodation as it appears in the very same section. In fact, such reading of the two expressions, harmonises the two expressions and, does not render either of the expressions otiose or redundant. Such reading would, therefore, be in consonance with the law laid down by the Hon ble Supreme Court in several decisions relied upon by Mr. Dada himself in these Appeals. 62. If the interpretation suggested by the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary imply that such room charges be split or divided by two. The same logic is sought to be extended to cases where the room charges are fixed on triple occupancy basis or quadruplicate occupancy basis where it is suggested that the room charges must be so split or so divided by a number of beds or a number of occupants. The said Act refers to room charges for an unit of residential accommodation in terms of the definition in Section 2(10) of the said Act. There is no further distinction made in the said Act on the basis of double occupancy or triple occupancy or quad occupancy when it comes to determination of room charges. Such distinction is some unilateral act by the hotel concerned and the same cannot govern the statutory construction, particularly when the provisions of a statute are quite clear. 66. It is not even the case of the Appellants that where the room charges are determined on double occupancy basis and room is occupied by only a single occupant the charges are split or divided into two and such occupant is made to pay such split or divided charges. It is also not the case of the Appellants that where two occupants occupy a room on double occupanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of one another when room charges are fixed on double occupancy basis or triple occupancy basis . 69. Based upon some artificial ambiguity, when, in fact there exists none, the assessee cannot claim benefit of the principle that such ambiguities in a fiscal statue deserve to be resolved in favour of the assessee. The principle that the ambiguities in a fiscal statute have to be resolved in favour of the assessee, applies in case of genuine ambiguities and not to ambiguities created by overemphasizing upon one of the expressions in a statute and ignoring or downplaying the other expression in the same statute. Therefore, the principles in the case of Podar Cement (P) Ltd. etc. (supra) will clearly not apply to the present appeals. 70. In HPTDC (supra), the Himachal Pradesh High Cour4t rejected the connection now being raised by the Appellants, by observing thus : 15. The plea on behalf of the petitioner-corporation as to the mode and manner of computing the room charges for any unit of residential accommodation at the time of incurring of such expenditure, viz., four hundred or one thousand two hundred rupees or more per day per individual, may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Himachal Pradesh Registration of Hotels and Travel Agents Act, 1969, and the rules made thereunder. Such approval by the Commissioner of Tourism in respect of a Government Corporation, according to us, makes no difference to the principle involved. The instance referred to in the said Judgment or the observations that no two strangers except in case of dormitories, will be allowed to share a room, has to be understood in the context or in the proper perspective. As noted earlier, the expenditure tax is a tax on the expenditure incurred by an individual. It is not even the case of the present Appellants that in case of a room whose tariff is fixed on double occupancy basis, the two occupants incur expenditure separately or individually. Ultimately, from the material placed on record, it is apparent that it is only a single individual who is incurring the expenditure, inter alia, in respect the room charges, even where the room charges are determined on double occupancy basis . Admittedly, the decision in HPTDC (supra), was not interfered with by the Hon ble Supreme Court, though there is some doubt as to whether such noninterference was because the appeal against the same was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75. In so far as Tax Appeals No.53, 54 and 55 of 2007 are concerned, we note that the Appellants had virtually conceded before the ITAT that the benefit under the proviso to Section 4(a) of the said Act would be inapplicable to the Appellants for any assessment years, prior to 1995-96, because the approval of the Director General, (Exemption) was obtained only on 28/7/1994, relevant to the Assessment Year 1995-96. Even the application for rectification contending that no such concession was ever made, was rejected by the ITAT. However, we do not propose to non-suit the Appellants on this basis, accepting the contentions of Mr. Naniwadekar that the orders made on the rectification application had made it clear that the concession will not preclude the Appellants from raising further challenges and that there can be no estoppel against the law. 76. The proviso to Section 4(a) of the said Act makes very specific mention to a hotel referred to in clause (ii) of sub-section (5) of section 80-IA of the Income-tax Act. There is no reference to clause (iii) of sub-section (4) of section 80-IA of the Income-tax Act. Admittedly, approval in terms of clause (ii) of sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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