Dismissed

C T O v. M/S Hotel Merwara Estate

Rajasthan HC10 Feb 2017STR/49/2010

Case brief

AI extract

What is this about?

The Rajasthan High Court dismissed revenue petitions challenging an order exempting a Guest House from luxury tax. The bench held that although the respondent provided room and lawn services, the daily charges were below the statutory threshold for luxury taxation, rendering the impugned orders justified.

What did the court decide?

The petitions were dismissed; the orders of the Revenue authorities deleting tax, interest, and penalty were upheld.

C T O Vs M/S Hotel Merwara Estate — Banking and Recovery | Rajasthan HC (2017)

¶1

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR

¶2

S.B.Sales Tax Revision / Reference No. 49 / 2010

¶3

C T O, Commercial Taxes Department, Circle-A, Ajmer

¶4

----Petitioner

¶5

Versus

¶6

M/S Hotel Merwara Estate, Subhash Bagh Road, Ajmer

¶7

----Respondent
Connected With
S.B.SALES TAX REVISION/REFERENCE No.50/2010
CTO
----Petitioner
Versus
M/S Hotel Merwara Estate
----Respondent
S.B.SALES TAX REVISION/REFERENCE No.51/2010
CTO
----Petitioner
Versus
M/S Hotel Merwara Estate
----Respondent
S.B.SALES TAX REVISION/REFERENCE No.52/2010
CTO
----Petitioner
Versus

¶8

(2 of 9)

¶9

[STR-49/2010]

¶10

M/S Hotel Merwara Estate

¶11

----Respondent

¶12

S.B.SALES TAX REVISION/REFERENCE No.54/2010 CTO ----Petitioner Versus M/S Hotel Merwara Estate ----Respondent S.B.SALES TAX REVISION/REFERENCE No.87/2010 CTO ----Petitioner Versus M/S Hotel Merwara Estate ----Respondent S.B.SALES TAX REVISION/REFERENCE No.141/2010 CTO ----Petitioner Versus M/S Hotel Merwara Estate ----Respondent Judgment pronounced on : February 10, 2017 _____________________________________________________ For Petitioner(s) : R.B. Mathur with

(3 of 9)

[STR-49/2010]

For Respondent(s) :

Ms. Tanvi Sahai and Ms. Meenal Ghiya Mr. Sarvesh Jain

¶17

HON'BLE MR. JUSTICE JAINENDRA KUMAR RANKA

¶18

Judgment

¶19

All these petitions are directed against order dt 5.10.2009 passed by Rajasthan Tax Board, Ajmer, whereby the appeals filed by the respondent assessee were allowed. It relates to assessment years 1997-98 to 2002-03.

¶20

Brief facts are that the respondent is running a Guest House mainly for the purposes of weddings and other functions having a Lawn, which is part of the estate which is let out. It was noticed by the Assessing Officer that the assessee had received amounts relating to bookings of rooms and also for renting/leasing out “Lawn”. However, insofar as the amount received for letting out rooms is concerned, it was held to be exempt but the AO was of the prima facie view that insofar as the amounts received for letting/leasing out of “Lawn” is concerned, it is to be taxed under the Rajasthan Tax on Luxuries (in Hotels & Lodging Houses) Act, 1990, and accordingly a show cause notice was given.

¶21

On behalf of the assessee it was contended that it does

¶22

not fall within the provisions of the Act as it is not a luxury hotel and merely few rooms, that too occasionally, are booked and even the Lawn is let out along with the rooms, and even the rent/tariff is nominal and within the prescribed limit of Rs.750/- per day.

¶23

(4 of 9)

¶24

[STR-49/2010]

¶25

However, the AO was not satisfied and held that insofar as the Lawn is concerned, it is to be taxed @ 6% and simultaneously the AO charged interest and penalty u/s 21(2) and 21(5) of the Act.

¶26

The matter was assailed before the Dy. Commissioner (Appeals), who was satisfied that in view of sec. 2(i) of the Act the assessee is not providing any luxury taking into consideration that the amount charged by the assessee per day was within the prescribed limit of Rs.750/-, and accordingly deleted the imposition of tax and consequently the interest as well as penalty. 5. On a further appeal by the Revenue, the Tax Board also upheld the finding of the DC(A). Hence this petition by the Revenue.

¶27

Learned counsel for the Revenue contended that the Lawn admittedly forms part of the estate and admittedly the assessee is charging separate amount for letting out the Lawn and, therefore, it comes within the provisions of sec. 2(i) of the Act even prior to 9.3.2007 when an amendment was brought into by the Finance Bill No.3 of 2007. Learned counsel further contended that if the definitions of “business”, as given in sec. 2(1)(a), “hotel” as given in sec. 2(1)(g), “luxuries provided in a hotel” as given in sec. 2(1)(i), and “turnover” as given in sec. 2(1) (u) of the Act are taken into consideration, that would prove that “business” covers almost all activities of receiving amounts in any manner. Learned counsel also elaborated that admittedly it is a “hotel”, though may be termed as 'estate' but purpose is to receive amount by way of letting out rooms, may be for limited

¶28

(5 of 9)

¶29

[STR-49/2010]

¶30

users who take the rooms for wedding or such other purposes and 'luxury' provided in a 'hotel' includes amount received for letting out Lawn. Thus, it was contended that the AO was justified in charging Luxury Tax and both the appellate authorities have gone wrong in deciding in favour of the respondent assessee. Learned counsel also contended that the arguments as advanced in the connected case of Assistant Commissioner v. M/s Rajmahal Palace Hotels, are adopted by him which has also been heard simultaneously, and placed reliance on the same judgments.

¶31

Per contra, learned counsel for the respondent contends that there is a material difference insofar as M/s Rajmahal Palace Hotels vis-a-vis the facts of the assessee is concerned, as the assessee is not a 'hotel' and is merely running a Guest House mainly for the purposes of weddings and such other functions along with Lawn, which is part of the estate. Learned counsel also contended that there is a material difference inasmuch as if sec. 2(i) of the Act is considered, both the appellate authorities and even the AO have found that the room rent per day of ground floor is only Rs.589/- and that of first floor is only Rs.667/-, when the threshold limit for holding one to be a luxury, is Rs.750/- or more per day, and thus contended that 'luxury' would mean if the room rent is Rs.750/- or more for the different assessment years, then only it is a ‘luxury’ and thus supported the orders of both the appellate authorities who have categorically held that taking into consideration the definition u/s 2(i) of the Act, would exempt the assessee.

¶32

(6 of 9)

¶33

[STR-49/2010]

¶34

I have heard learned counsel for the parties and perused the material available on record as well as the impugned order.

¶35

The petitions were admitted on the following questions

¶36

of law :-

¶37

(i) Whether in the facts and circumstances of the case of Rajasthan Tax Board was justified in law in holding that there is no tax liability of the luxury tax on lawn in the case of respondent prior to Finance Act 2007 i.e. before 9.3.2007.

¶38

(ii) Whether in the facts and circumstances of the case the Rajasthan Tax Board was justified in law in deleting tax, interest and penalty under the Rajasthan Tax on Luxuries (in Hotel and Lodging Houses) Act 1990 holding that the tax could not be levied as the definition of “Hotel” and “Business” was amended w.e.f. 9.3.2007 without appreciating that the tax was leviable even prior to that?

¶39

It would be appropriate to quote the provisions as it existed and which has been taken note of by all the three authorities, of what is (i)“business”, (ii)“hotel”, (iii)“luxuries provided in the hotel”, and (iv)“turnover”, which is the bone of contention in the instant petitions, and it would also be appropriate to refer to the definitions which were amended by the Finance Bill No.3 of 2007 with effect from 9.3.2007 :-

¶40

Section 2(1)	In This Act, unless t required	he context other	wise
	Provisions prior to Finance Bill No.3 of 2007.	Provisions after amendment Finance Bill No. 2007.	the by 3 of
(a)	“business” includes the activity of	“business” incl the activities	udes of
	providing residential	providing reside	ntial
	accommodation and any other service in	accommodation any place for	or the

¶41

(7 of 9)

¶42

[STR-49/2010]

¶43

connection with, or	purpose of
ancillary to, such	organizing parties,
activity of providing	ceremonies or
residential accommodation, by	functions and any other service in
a hotelier for	connection with, or
monetary consideration, whether or not such activity of providing residential accommodation is carried on with motive to make gain or profit and whether or not any gain or profit accures from such activity.	ancillary to, such activities for monetary consideration, whether or not such activities are carried on with motive to make gain or profit and whether or not any gain or profit accrues from such activities;
(g) “hotel” includes a residential accommodation along with the lawns therefore, a lodging house, an inn, a public house or a building or part of a building, where a residential accommodation is provided by way of business;	“hotel” includes a residential accommodation along with the lawns there of, a lodging house, an inn, a public house or a building or parts of a building or any place, where a residential accommodation or a space for the
	purpose of
	organizing parties, ceremonies or
	functions is provided by way of business;
(i) “Luxuries provided in a hotel” means accommodation	No change.
(such as room or other place or lawn etc., by whatever name called) and other services including air- conditioning, coolers, heaters,
geysers, television,
radio, music,

¶44

(8 of 9)

¶45

[STR-49/2010]

¶46

entertainment, [Spa massage] extra beds, linen articles and the like in a hotel, for which the rate of charges per day or part hereof is [seven hundred fifty rupees or more]; and Explanation(i) Day shall include part of the day. (ii) Room shall include the lawn. (u) “turnover” means No change. the aggregate of the amounts of the monetary consideration receivable by a hotelier or by his agent in respect of luxuries provided in a hotel during the given period.

¶47

On perusal of the above, in my view taking into consideration sec. 2(1)(i) the assessee is not liable to pay the luxury tax, as held by the AO and rightly held by both the appellate authorities though the assessee would certainly be covered in the definitions of “business” as well as “hotel” as well as “turnover”.

¶48

This court in the case of Assistant Commissioner v. M/s Rajmahal Palace Hotel had considered a case where the assessee was admittedly charging more than Rs.1000/- per day as room rent and in the said case it was held that the assessee is liable to

¶49

(9 of 9)

¶50

STR-49/2010]

¶51

pay Luxury Tax and the AO in that case was justified in charging Luxury Tax as sec. 2(i) makes a fine distinction.

¶52

In view of the above, and there being a fine distinction in between the two cases (M/s Rajmahal Palace Hotels vis-a-vis the assessee) of the amount which is the threshold limit to hold to cover it as a luxury in a hotel and admittedly in the instant case the room rent being Rs.589 or Rs.667/- per day, being less than the threshold limit of Rs.750/-, the view of both the appellate authorities is just and proper and, in my view, the same is not required to be interfered with.

¶53

Though in the case of Assistant Commissioner v. M/s Rajmahal Palace Hotels this court in SB STR No.117/2014 in judgment dt 13.1.2017 has held luxury tax leviable because in the said case the said Hotel was charging admittedly room rent over Rs.1000/- per day and thus a luxury u/s 2(i) whereas in the instant case it is less than Rs.750/- per day as applicable during the assessment years under consideration.

¶54

Accordingly, the petitions being devoid of any merits, are dismissed.

¶55

(JAINENDRA KUMAR RANKA) J.

¶56

¶57

119-125

C T O v. M/S Hotel Merwara Estate

Case brief

What is this about?

What did the court decide?

C T O v. M/S Hotel Merwara Estate

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Parth Treivedi and Anr. Vs U O I and Ors.

Vikki @ Vikas Vs State of Rajasthan through Pp

Tasveer Meena and Anr. Vs State of Rajasthan and Ors.

Sushil Agarwal Vs State of Rajasthan and Anr.

Gopal Saini Vs State Education Departmentanr

Bheemsingh Vs State of Raj and Ors.