Judgment

VENKATACHALIAH, J.:- In this batch of writ petitions under Article 32 of the Constitution of India petitioners who are hoteliers challenge on grounds of lack of legislative competence and of violation of Articles 14 and 19(1)(g) the constitutional validity of the Hotel Receipts Tax Act, 1980, (Act for short) which imposes a special tax on the gross receipts of certain category of hotels. Section 3 of the Act limits the application of the Act to those hotels where the "room-charges" for residential accommodation provided to any person during the previous year are Rs. 75/- or more per day per individual. If a hotel is within this class then Section 5 brings to charge the Hotels chargeable-receipts as defined under Sec. 6 of the Act.

The Act was passed on 4-12-1980 and came into force on 9-12-1980 when it received the assent of the President of India. The levy under the Act commences from the assessment-year 1981-82 and brings to tax the chargeable receipts of the corresponding previous year. The rate of tax is a flat rate of 15 percent of the "chargeable-receipts" defined in See. 6 as the total amount of all charges, by whatever name called, 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. But such charges received from persons within purview of Vienna Convention on Diplomatic Relations, 1961, or Vienna Convention on Consular Relations are exempt from the tax. The machinery under the Income-tax Act, 1961, is engrafted for purposes of assessment, levy and collection of tax under the Act.

It is, however, relevant to note that though the Act is put into force from the Asst. year 1981-82 the levy was discontinued from 27-2-1982.

2. This batch of writ petitions were heard along with writ petition No. 1395 of 1987* and the connected writ petitions in which the constitutional validity of the Expenditure 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 to constitute Chargeable-Receipts under the present Act. We have disposed WP No. 1395 of 1987 and the connected matters by a separate Judgment.

* Reported in AIR 1990 SC 1637

3. 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 occupy such accommodation according to the rules and custom of the hotel.

(2) Where a composite charge is payable in respect of residential accommodation and food, the room charges included therein shall be determined in the prescribed manner.

(3) Where-

(i) a composite charge is payable in respect of residential accommodation, food, drink and other services, or any of them, and the case is not covered by the provisions of sub-section (2); or

(ii) it appears to the Income-tax Officer that the charges for residential accommodation, food, drink or other services are so arranged that the room charges are understated and the other charges are overstated, the Income-tax Officer shall, for the purposes of sub-section (1), determine the room charges on such reasonable basis as he may deem fit."