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TMI Blog1989 (5) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... fall outside such a "wider connotation" of "income" in the wider constitutional meaning and sense of the term as understood in entry 82, List 1. Hotels in which room charges were ₹ 400 or more per day per person were alone brought under the Act. The differentia was held to be both intelligible and endowed with a rational nexus to the object of the legislation, viz., bringing to tax certain class of expenditure incurred at hotels which were legislatively presumed to attract an economically superior class of clientele. Having regard to the wide latitude available to the Legislature in fiscal adjustments, the classification was found not violative of article 14. The differentia of classification presupposes and proceeds on the premise that it distinguishes and keeps apart as a distinct class hotels with higher economic status reflected in one of the indicia of such economic superiority. The presumption of constitutionality has not been dislodged by the petitioners by demonstrating how even hotels, not brought into the class, have also equal or higher chargeable receipts and how the assumption of economic superiority of hotels to which the Act is applied is erroneous or irrele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8092, Writ Petition No. 9430, Writ Petition No. 9431, Writ Petition No. 1936 of 1981, Writ Petition No. 8114, Writ Petition No. 8115, Writ Petition No. 1342 of 1982, Writ Petition No. 392 of 1987, Writ Petition No. 1409, Writ Petition No. 1432, Writ Petition No. 1433, Writ Petition No. 1723, Writ Petition No. 1724, Writ Petition No. 1877, Writ Petition No. 1878, Writ Petition No. 288, Writ Petition No. 289, Writ Petition No. 1468, Writ Petition No. 1848 decided on May 02, 1989 N.A. Palkhivala, Soli J. Sorabjee and T.R. Andhyarujina, Senior Advocates (H.P. Ranina, S. Ganesh, J.B. Dadachanji, Ravinder Narain, Mrs. A.K. Verma, D.N. Mishra, S. Sukumaran, Mrs Lira Goswami, Joel Pares, Ms. Rubia Anand, R.F. Nariman, P.H. Parekh, Sanjay Bhartari, M.K.S. Menon, R.K. Dillon, Ms. Rohini Chhabra, Ms. Sunitha Sharma, Ms. Ayesha Mishra, A. Subba Rao, S. Balakrishnan, Harish N. Salve, S.S. Shorff, Mrs. P.S. Shroff, Mrs. Ms. Malvika Rajkotia, B. Parthasarathi, Vijay Kumar Verma, Mukul Mudgal, Suresh Verma, Praveen Kumar and Vishnu Mathur, Advocates, with them), for the petitioners. K. Parasaran, Attrorney-General for India, B. Datta, Additional Solicitor-General, J.Jaganatha Rao and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture-tax Act, 1987, was challenged on substantially similar grounds. In the present Act, the levy is on "chargeable receipts" while in the Expenditure-tax Act, 1987, it is on "chargeable expenditure" which represents substantially the same items as constitute "chargeable receipts" under the present Act. We have disposed of Writ Petition No. 1395 of 1987 and the connected matters by separate judgment. Sections 3, 5, 6 of the Act have a bearing on the application of the contentions urged in support of the challenge to the constitutionality of the Act. Section 3 reads: "3. (1) Subject to the provisions of sub-section (2) and sub-section (3), this Act shall apply in relation to every hotel wherein the room charges for residential accommodation provided to any person at any time during the previous year are seventy-five rupees or more per day per individual. Explanation. -Where the room charges are payable otherwise than on daily basis or per individual, then the room charges shall be computed as for a day and per individual based on the period of occupation of the residential accommodation for which the charges are payable and the number of individuals ordinarily permitted to oc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying on the business of a hotel to which this Act applies and shall also include every amount collected by the assessee by way of tax under this Act, sales tax, entertainment tax and tax on luxuries. (2) For the removal of doubts, it is hereby declared that where any such charges have been included in the chargeable receipts of any previous year as charges accruing or arising to the assessee during that previous year, such charges shall not be included in the chargeable receipts of any subsequent previous year in which they are received by the assessee. " Other provisions are machinery provisions, providing for the mode of assessment, levy and collection of the tax, for offences, penalties, punishments, etc. The challenge to the Act is, in the main, lack of legislative competence on the part of the Union Parliament to enact the law. Respondent Union seeks to support the legislation under and as referable to entry 82 of List I, i.e., taxes on income. The contentions raised in support of the petitions are these (a) That, in pith and substance, the law is one imposing a tax on luxuries provided in hotels and, therefore, the law is one under entry 62, List 11 of the Seventh S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitations alone that power can be lawfully exercised. The fundamental relation of 'capital' to 'income' has been much discussed by economists, the former being likened to the tree or the land, the latter to the fruit or the crop ; the former depicted as a reservoir supplied from springs, the latter as the outlet stream, to be measured by its flow during a period of time. " Learned counsel also relied upon the following observations of Gajendragadkar J. in Navnit Lal C. Javeri' v. K. K. Sen, AA C [1965] 56 ITR 198, 204 (SC) [1965] 1 SCR 909, 915 " This doctrine does not, however, mean that Parliament can choose to tax as income an item which in no rational sense can be regarded as a citizen's income. The item taxed should rationally be capable of being considered as the income of a citizen. Learned counsel submitted that the gross receipts of a hotel received from a customer towards room charges, food, drink and other services provided at the hotel cannot constitute "income" known as such to law. The submission, in substance, is two fold: first that the "chargeable receipts" as conceived in the Act do not constitute "income" for the purposes, and within the meaning, of entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ept of "income" in all its width and comprehensiveness should be avoided. The cardinal rule of interpretation is that the entries in the legislative lists are not to be read in a narrow or restricted sense and that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it. The widest possible construction, according to the ordinary meaning of the words in the entry, must be put upon them. Reference to legislative practice may be admissible in reconciling two conflicting provisions in rival legislative lists. In construing the words in a constitutional document conferring legislative power, the most liberal construction should be put upon the words so that the same may have effect in their widest amplitude. In Navinchandra Mafatlal v. CIT [1954] 26 ITR 758, 763, 764 (SC) [1955] 1 SCR 829, the question was whether the provisions of section 12B of the Indian Income-tax Act, 1922, imposing a tax on capital gains was ultra vires the powers of the federal Legislature under the Government of India Act, 1935. It was contended that taxes on income under entry 54, List 1, of the Government of India Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed by the Income-tax Act as such." In Bhagwan Dass Jain v. Union of India [1981] 128 ITR 315 AIR 1981 SC 907, the question of includibility, for purposes of income-tax, of the assessee's notional income from a house property in the personal residential occupation of the assessee was assailed on the ground that it did not constitute "income" for the purposes and within the meaning of entry 82 of List 1. The amplitude of the expression "income" in entry 82 of List came in for consideration. In that context, this court said (at p. 321 ) : "Even in its ordinary economic sense, the expression 'income' includes not merely what is received or what comes in by exploiting the use of a property but also what one saves by using it oneself. That which can be converted into income can be reasonably regarded as giving rise to income. The tax levied under the Act is on the income (though computed in an artificial way) from house property in the above sense and not on house property." The expression "income" in entry 82, List 1, cannot, therefore, be subjected, by implication, to any restriction by the way in which that term might have been deployed in a fiscal statute. A particular statu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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