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Karnataka High Court
Judges : Kumar Rajaratnam,K.Bhakthavatsala
PIEM HOTELS LTD. - Appellant
Versus
STATE OF KARNATAKA - Respondent
W. A. 5863 Of 1998
Decided On : 09/13/2002
luxury tax - telephone charges and laundry - Karnataka Tax on Luxuries Act, 1979, Sections 3, 3-B, 3-C - The court held that telephone charges and laundry charges are not exigible to luxury tax separately in the absence of a charging section. The judgment also emphasized the binding nature of circulars issued by the Commissioner of Commercial Taxes and the legislative amendment excluding telephone and laundry charges from luxury tax.
Fact of the Case:
The appellants challenged the inclusion of outgoing telephone calls and laundry charges to luxury tax under the provisions of Section 3 (1) of the Karnataka Tax on Luxuries Act, 1979. The learned single Judge dismissed the writ petitions and quashed the circular dated February 15, 1983, holding that it was not in accordance with the provisions of the act. The appellants did not question the constitutional validity of the relevant sections of the Act.
Finding of the Court:
The court found that telephone charges and laundry charges are not exigible to luxury tax separately in the absence of a charging section. The judgment also emphasized the binding nature of circulars issued by the Commissioner of Commercial Taxes and the legislative amendment excluding telephone and laundry charges from luxury tax.
Issues: The main issue was whether the hotels are liable to pay a separate tax in the form of luxury tax on charges collected from the clients for the use of outgoing calls and for bills on laundry charges.
Ratio Decidendi: The court held that telephone charges and laundry charges are not exigible to luxury tax separately in the absence of a charging section. The judgment also emphasized the binding nature of circulars issued by the Commissioner of Commercial Taxes and the legislative amendment excluding telephone and laundry charges from luxury tax.
Final Decision: The court set aside the order of the learned single Judge and disposed of the writ appeals accordingly. The State's writ appeals were dismissed.
( 1 ) WHAT is challenged in these writ appeals is the inclusion of outgoing telephone calls and laundry charges to a separate luxury tax apart from levy on luxuries provided in hotels and lodging houses.
( 2 ) THE Karnataka Tax on Luxuries Act, 1979 (hereinafter referred to as "the Act") makes provision for a levy on luxury provided in a hotel under Section 3 of the Act.
( 3 ) WHAT is relevant for the purpose of this case are Sections 3, 3-B, 3-C. These are the charging sections. Sections 3, 3-B, 3-C read as follows :
"3. Levy and collection of tax on luxury provided in a hotel.-- (1) Subject to the provisions of this Act, there shall be levied, and collected a tax on the luxury provided in a hotel in respect of every room (to be known as 'luxury tax') at the following rates, namely : w. P. No. Name Date of signing Date on which the Rolldeemed to have become an advocate 1054 of S. Ramu 5-2-1999 29-11-19972002 1120 of T. K Shridevi 4-9-1998 4-9-19972002 1121 of R. Manjuladevi 23-10-1998 18-10-19972002 1122 of R. Rekha 6-11-1998 15-3-19972002 1315 of Pramodha 9-1-1998 24-10-19962002 1316 of Ganapati 29-8-1998 23-8-1997 2002 vided that where charges for lodging are payable otherwise than on a daily basis, then, for the purposes of determining the tax liability under this section, the charges shall be computed as for a day, based on the period of lodging for which the charges are payable : provided further that where any charges for lodging are paid by any person who is a member of a foreign Diplomatic Mission in India, then such person shall be exempt from the payment of tax,- (1-A) Tax levied under Sub-section (1) shall be paid by every proprietor. (1-B) Notwithstanding anything contained in Sub-section (1), no tax shall be levied and collected from a hotelier to the extent of tax not collected by him during the period from the 1st day of August, 1985 to the 31st day of March, 1986. (3) In computing the amount of tax payable under this section, the amount shall, if it is not a multiple of five paise, be increased to the next higher multiple of five paise. 3-B. Tax on luxuries like health club, etc.--There shall be levied and collected a tax at the rate of twenty per cent on the charges collected for luxuries provided in a hotel for residents or others such as health club, beauty parlour, swimming pool, conference hall and the like when such charges are collected separately. 3-C. Levy and collection of tax on charges for marriage hall.--Subject to the provisions of this act, where charges for luxury provided in a marriage hall are not less than two thousand rupees per day there shall be levied and collected a tax at the rate of fifteen per cent of such charges. "
( 4 ) WE are only concerned with Section 3 (which is the charging section) which deals with tax on luxury provided in a hotel in respect of every room. Section 3-B is the charging section on luxuries like health club, beauty parlour, swimming pool, conference hall for which charges are collected separately from both residents as well as non-residents. Section 3c is the charging section for marriage halls. We are not concerned with Sections 3-B, 3-C. They are separate charging sections and they have no application in the present cases.
( 5 ) CHARGES for lodging is incorporated in the definition section. Section 2 is the definition section. Sub-section (1) of Section 2 reads as follows :
"'charges for lodging' include charges for air-conditioning, telephone, television, radio, music, extra beds and the like but do not include any charges for food, drink (telephone calls, laundry or other amenities) ; Substituted for the words "or other amenities" by Act No. 5 of 2000 with effect from April 1, 2000. Explanation.--If any question arises whether any charges are charged for lodging, such question shall be referred to the State Government and the decision of the State Government shall be final and shall not be called in question in any court ;"
( 6 ) SUB-
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