RENAISSANCE Vs. COMMERCIAL TAX OFFICER (LUXURY TAX)

JUDGEMENT

(1.) The original petition has been filed by the assessee who is a hotelier providing accommodation for residence and is registered under the Kerala Tax on Luxuries Act, 1976 (hereinafter referred to as 'the Act'). For the year 2006-07, the assessment was initially completed vide order dated 30.08.2009 and tax was paid accordingly. On subsequent verification of records, the Assessing Officer noted that a sum of Rs.8,99,059/- being the differential amount received on conversion of foreign currency received towards rentals and services, has escaped assessment. The Officer proceeded to complete assessment to the best of judgment by adding the above amount to the turnover and issued Ext.P1 assessment order. The petitioner challenged Ext.P1 in appeal before the Deputy Commissioner (Appeals), Ernakulam. The appeal was allowed as per Ext.P2 order, finding that the loss or profit arising from the floating value of currency in the exchange market does not come within the purview of Kerala Tax on Luxuries Act. The Revenue challenged Ext.P2 before the Sales Tax Tribunal and by Ext.P3 order, the Tribunal allowed the appeal finding that the foreign currency received can only be linked to the luxury provided in the hotel particularly since the petitioner is not a person involved in the currency exchange or in the business in money transfer. The Tribunal also found that any income derived incidentally or ancillary to the main business, will form part of the turnover of the main business of the assessee, attracting levy of tax. Aggrieved by Ext.P3 order of the Tribunal, the assessee has come up with this original petition.

(2.) Heard Sri K.N.Sreekumaran, counsel for the petitioner and Senior Government Pleader Sri Mohammed Rafiq on behalf of the Revenue.

(3.) The petitioner contends that under Section 2(f) of the Kerala Tax on Luxuries Act, luxury provided in a hotel takes in only the charges for accommodation for residence and other amenities and services and hence, the benefit accrued to the hotelier on account of variation in the price of the currency in the exchange market cannot be included in the definition of luxuries and brought to tax. He submits that the foreign currency paid against the invoices raised on the customer would be based on the exchange rate prevailing on the date of checking out of rooms. According to him, the margin money received on the conversion of the foreign currency on a later date when the market price is more beneficial, cannot be termed as luxury charges. He further contends that the finding of the Tribunal that any income derived which is ancillary to the main business will form part of the turnover is against the provisions of the Tax on Luxuries Act, particularly since the Act does not contain any provisions akin to those in the Sales Tax Act defining sale in the course of business.