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2012 DIGILAW 454 (KER)

Trivandrum Club v. Sales Tax Officer

2012-05-24

ANTONY DOMINIC

body2012
Judgment: 1. Whether the rent realized by a club for the rooms and cottages let out to its members and their guests is exigible to tax under the Kerala Tax on Luxuries Act,1976 (hereinafter referred to as the ‘Act’ for short) is the question raised by the petitioner. 2. Trivandrum Club, a Society registered under the Travancore-Cochin Literary, Scientific and Charitable Societies Registration Act, 1955 is the petitioner and Ext.P1 is its Rules and Bye-Laws. They were issued Exts .P2 and P3 pre-assessment notices proposing to complete assessment of luxury tax under the Act for the years 2002-03 to 2005-06. In these notices, it was alleged that the petitioner is providing residential accommodation and services in their 7 A/C rooms, 5 A/C cottages and 2 Non-A/C rooms and that therefore it is liable for luxury tax under the Act. On receipt of these notices, petitioner submitted objection, a copy of which is Ext.P4, where it was mainly contended that the Act does not apply to social clubs such as the petitioner. They also contended that they are providing accommodation only to their members and their guests and that this was not done by way of business. Overruling their objections, assessment was completed by Exts.P5 to P9 orders. It is challenging these orders this Writ Petition is filed. On the other hand, according to the respondents, there are several rooms attached to the petitioner club, which are let out on rent to the members and their guests and therefore, the club is a hotel as defined in S.2(e) of the Act. On this basis it was contended that the petitioner is liable to comply with the provisions of the Act. 3. I have considered the submissions made by both sides. 4. At the oust itself, it is clarified that the dispute raised in this Writ Petition concerns only the liability of the petitioner for luxury tax in respect of the rooms and cottages let out by it to its members and their guests and the tax liability in respect of the other facilities in the club were neither raised by the petitioner nor considered by this court. 5. To answer the contentions raised in this Writ Petition, it is necessary to refer to some of the provisions of the Act. 5. To answer the contentions raised in this Writ Petition, it is necessary to refer to some of the provisions of the Act. S.4 of the Act provides for levy and collection of luxury tax and Sections 4(1), 4(1)(i) & 4(2)(a), being relevant, are extracted below for reference; 4(1). “Levy and Collection of luxury tax.—Subject to the provisions of this Act, three shall be levied and collected a tax, hereinafter called the ‘luxury tax’, in respect of any luxury provided-4(1)(i). in a hotel, house boat, hall, auditorium or kalyanamandapam or including those attached to hotels, clubs, kalyanamandapam and places of the like nature which are rented for accommodation for residence or used conducting functions, whether public or private, exhibition;” 4(2)(a).”in respect of a hotel, for charges of accommodation for residence and other amenities and services provided in the hotel, excluding food and liquor,- (i) at the rate of ten per cent [per room] for hotels, in respect of ms where the gross charges of accommodation for residence and other amenities and services provided is [above rupees two hundred upto five hundred] per day; (ii) at the rate of fifteen per cent for hotels in respect of rooms where the gross charges of accommodation for residence and other amenities and services provided is [above rupees five hundred per day]; Provided that no luxury tax shall be payable, for such charges received in respect of services rendered outside the hotel premises, such as vehicle hire, boat hire and trekking. Provided further that the hire charges received in respect of house boats owned or possessed with right to use it by the hotels shall be liable to tax under the Act;” The expressions “hotel” and “luxury” have been defined in sections 2(e) and (ee) respectively, as follows: “2(e). “hotel” means a building or part of a building where residential accommodation is by way of business provided for a monetary consideration and includes a lodging house. 2(ee). “luxury” means a commodity or service that ministers comforts or pleasure;” 6. In so far as this case is concerned, S.4 read with S.2(e) of the Act shows that hotels which provide residential accommodation by way of business and for monetary consideration, are liable for luxury tax under the Act. 2(ee). “luxury” means a commodity or service that ministers comforts or pleasure;” 6. In so far as this case is concerned, S.4 read with S.2(e) of the Act shows that hotels which provide residential accommodation by way of business and for monetary consideration, are liable for luxury tax under the Act. That apart, halls, auditoriums or kalyanamandapmans attached to clubs, which are rented out for accommodation for residence or used for conducting functions, whether public private, exhibition etc., are also liable to tax under the Act. 7. In the light of the pleadings in this case, what needs to be considered is whether on account of letting out its rooms and cottages to its members and their guests, the club of the petitioner is a hotel as defined in the Act. To answer this question it is necessary to examine what is a hotel for the purposes of the Act. As per S.2(e) which defines hotel, building or part of a building where residential accommodation is provided for monetary consideration is a hotel. It is also clarified that the said activity must be carried on in a building or part of a building, by way of business. In view of the language used in the definition of the expression hotel, it must be held that, to be a hotel as defined under the Act, the establishment need not be one which is engaged exclusively in accommodating guests or providing them the other luxuries. On the other hand, if a building or part of a building, which is situated in the premises of an establishment like a Club, is utilized for providing residential accommodation, by way of business and for monetary consideration, such building or part of building will be a hotel for the purposes of the Act. 8. It was contended that only members and their guests are accommodated and therefore, such a facility cannot be termed a hotel. First of all, the Act does not make any distinction among hotels on the basis of the type of guests accommodated. Secondly, in view of the words used in S.4 of the Act, once residential accommodation is provided in the club for monetary consideration, the fact that those accommodated are members or their guests, is not of any consequence. Therefore, this contention has no substance at all. 9. Secondly, in view of the words used in S.4 of the Act, once residential accommodation is provided in the club for monetary consideration, the fact that those accommodated are members or their guests, is not of any consequence. Therefore, this contention has no substance at all. 9. It was argued that the club is not providing residential accommodation by way of business to render its activity a hotel. This contention is also not of any substance. The words of a statute must be interpreted in the context of the statute in which the words occur and not in any other manner. See in this context the Apex Court judgment in S. Mohan Lal v.R. Kondiah (1979)2 SCC616). Explanation to S.2(e) to the Act shows that even guest houses run by the government or a company or a corporation established by or under any law or any other agency shall be deemed to be hotel within the meaning of the section. This provision therefore shows that the expression “by way of business” used in S.2(e) to the Act is not to be understood in the commercial sense of the term and that only common parlance meaning need be attributed to the expression. Therefore, in the context of the Act, the expression “business” only means that which activity one is seriously or principally concerned with. If the expression is so understood, it has to be held that letting out rooms and cottages on rent to their members or their guests, an activity carried on by the club in terms of its by laws, is a business activity of the club. 10. Learned Senior Counsel for the petitioner then relied on S.4(2A) of the Act and contended that in respect of clubs a separate provision has been made by the Legislature and therefore, there is no other liability under the Act. Section 4(2A) and its explanation reads as under: “Notwithstanding anything contained in sub-section (2), there shall be levied a luxury tax at the rate of rupees one hundred per year per member and the same shall be collected by the person responsible for the management of the club, by whatever name called. Section 4(2A) and its explanation reads as under: “Notwithstanding anything contained in sub-section (2), there shall be levied a luxury tax at the rate of rupees one hundred per year per member and the same shall be collected by the person responsible for the management of the club, by whatever name called. Explanation: For the purpose of this section, ‘club’ means a club which provides more that two facilities like card room, bar, billiard rooms, snooker room, tennis court, swimming pool, Sauna Jacuzzi and the like, gymnasium, golf course, internet facility, video, video compact disk, digital video disk and computer games and having a membership strength of at least twenty five.” 11. In my understanding, this provision renders members of clubs also liable for tax at the rate as indicated therein and the tax liability of the members is in addition to the liability of the clubs under S.4 of the Act. Therefore, this provision will not be of any assistance to the petitioner. For the aforesaid reasons, I do not find anything illegal in the impugned assessment orders and therefore, this Writ Petition is to be dismissed and I do so.