IMPORTANT POINTS
The Act does not permit any estimation of the amounts charged by the assessee for the luxury provided, when there is sufficient material to show the actual charges levied. The measure of tax being clear there was no cause for the Assessing Officer to resort to best judgment. The computation adopted to determine the room rent per day on an artificial basis is an error apparent from the order itself, especially in the face of there being contrary evidence; in the form of the agreement, the receipt of the total amounts for residence in consonance with the agreement, as also the vouchers for the luxury tax collected issued to ascertained guests sponsored by the time share company.

JUDGMENT :

T.R.Ravi, J.

Sri Mithun Davis, the owner of Edassery Kayal Resorts, leased out his property to M/s. Prestige Holiday Resorts Pvt.Ltd (hereinafter referred to as the lessee company), who in turn entered into a management agreement with M/s.Royal Goan Beach Resorts LLP, the petitioner herein, for running the hotel. The petitioner entered into an agreement with M/s. Regal Vacation Concepts Private Ltd(hereinafter referred to as Time share company), who is doing business of Timeshare, agreeing to provide accommodation to the guests who are booked through the time share company, at the rate of Rs.1,600/-per night, provided the company makes a minimum booking of at least 500 nights in a year. The lessee company, the petitioner and the Time share company are all sister concerns. The business module, though it looks very impressive and can be a study material for a business management student on its viability; we are not called upon to research into such intricacies. We are only expected to answer a challenge to an order passed by the assessing authority, confirmed in appeal before the Tribunal, whereby the petitioner has been assessed to luxury tax.

2. The assessment relates to the year 2014-15. The assessment was completed by fixing the rental value of the rooms let out to guests at an average rate of Rs. 3,562/-per night. According to the petitioner the amount received by them for the rooms which were booked through the time share company was only at the rate of Rs.1,600/-per night. It is contended that the petitioner was catering to two types of guests viz, Walk-in guests and Member guests, the member guests being the guests who were booked through the time share company. Noting that there are no invoices to prove that the guests were charged at Rs.1,600/-per day and there was no ledger accounts showing the receipt of Rs. 92,40,312/-received from members, the assessing officer concluded that no reasonable and prudent man could have run a business in the manner contended by the petitioner. The assessing officer proceeded to assess to the best of his judgment by estimating the total receipts for 6334 nights of declared occupancy at the rate of Rs. 3,562/-per day for a room. The assessing officer adopted the rate at which the walk-in guests were billed, as the average rate for arriving at the amounts received from the guests booked by the time share company.

3. On receipt of the notice regarding the above proposal, the petitioner filed a reply pointing out that the petitioner, the lessee company and the time share company are three different entities, who have entered into agreements regarding the manner in which the resort is to be run. It was pointed out that the guests of the time share company are provided accommodation by the petitioner on the basis of an agreement entered into between the petitioner and the time share company, agreeing on a subsidised rate of Rs.1,600/-per night. According to the petitioner, a sum of Rs.200/-representing the luxury tax portion for occupancy of the room alone, is being collected from such guests, since the consideration for accommodating such guests is paid directly by the time share company. As such, no invoices are raised against the guests separately showing that the rental is Rs.1,600/-for each day of their occupancy. It was contended that the Kerala Tax on Luxuries Act does not permit imposing luxury tax on the basis of an estimated rental, instead of the actual amount received for letting out the rooms. According to the petitioner, a sum of Rs. 92,40,312 received from the time share company represents the amount received for accommodating the guests who were booked through them.

4. The assessing officer found that the receipt of the amount from the time share company leads to an inference that the assessee has used colourable devices to avoid tax, as envisaged in M/s. Mc Dowells Company Ltd., reported in [AIR 1986 SC 649]. The other reasons stated in the order are that the assessee h