TRIVANDRUM CLUB Vs. SALES TAX OFFICER

JUDGEMENT

(1.) Trivandrum Club, a very old and reputed club in Thiruvananthapuram is the appellant challenging the judgment of the learned Single Judge upholding the levy and demand of luxury tax on rent and other charges collected by the appellant from guests allowed to stay in A/C cottages, A/C rooms and non A/C rooms attached to the club. The appellant has no dispute with regard to the club's liability to pay luxury tax payable under S.4(2A) of the Kerala Tax on Luxuries Act, 1976 (hereinafter referred to as the Act) which is at the rate of Rs. 100/- per member per year, which is collected from the members. However dispute is only with regard to the luxury tax demanded for the rent and other charges collected from guests residing in the above referred rooms and cottages attached to the club except on charges of food and liquor. According to the appellant the liability for luxury tax on room rentals and other charges for accommodation and facilities provided therein is applicable only for "hotels" and the appellant being only a club is not liable to pay luxury tax on the room rent However learned Single Judge held against the appellant, against which this Writ Appeal is filed. See Trivandrum Club v. Sales Tax Officer (Luxury Tax), 2012 3 KerLT 176 We have heard senior counsel Sri. T.M. Sreedharan appearing for the appellant and the learned Government Pleader appearing for respondents. As already stated, club is specifically made liable for luxury tax for luxury provided to the members which is at the rate of Rs. 100/- per member per year payable under S.4(2A) of the Act on which appellant has no dispute. However, the disputed question is as to whether luxury tax is payable for the rent and other charges collected from guests occupying rooms and cottages attached to the club. The question has to be considered with reference to the charging S.4(1) and S.4(2)(a) and also the definition clauses of the Act which are extracted hereunder for easy reference.

(2.) The short question that arises for consideration is whether the cottages and rooms attached to the club answer the description of "hotel" within the meaning of S.2(e) of the Act attracting liability for luxury tax. Admittedly the tariff charged by the appellant for the cottages and guest rooms attached to the club are above the limit that attracts luxury tax under the Act, if the collections attract tax applicable to hotel rooms. The contention raised by Senior counsel for the appellant is that unless accommodation is provided in the building as part of business against collection of rent, the building cannot be called "hotel". However, what we notice is that the "hotel" as defined under the above provision of the Act has a wide meaning because Explanation covers even guest house run by the Government or a company or a corporation. Appellant's contention is that provision for accommodation in cottages and rooms provided by the club is only to the guests of members or for members of affiliated clubs and, therefore, the rent collection is not in the form of business carried on by the club. Government Pleader opposed the contention by stating that guest houses of Government and companies which are brought within the meaning of "hotel" under the Explanation to the definition clause are not engaged in business and so much so, renting out of rooms by the club need not be as business to attract liability under the Act. We are in agreement with the contention of the learned Government Pleader because under the charging S.4(1)(i) luxury tax is leviable for the rent collected by clubs for auditorium, kalyanamandapam and hall attached to clubs. Club as a person liable to luxury tax is recognised by the charging sections and in fact, specific provisions stated above are there for charging luxury tax on clubs on membership fee at the rate of Rs. 100/- per member per year, and also on rent collected for auditorium, kalyanamandapam etc., attached to clubs. So much so, we feel there is no necessity for the department to prove that the accommodation provided to guests in cottages and rooms attached to clubs for residence is a business activity of the club to levy luxury tax thereon. Further, there is some force in the contention of the Government Pleader that there is no prohibition against club making profit by renting out cottages and rooms to it's members or to members of affiliated clubs, and such profit of the club will ultimately go to the benefit of the members. We are, therefore, of the view that cottages and rooms attached to clubs answer the description of "hotel" attracting tax under S.4(2)(a) of the Act. In fact, even though hotels are run as a business activity for earning profit, for the purpose of levy of luxury tax there is nothing to indicate that the hotel should in fact make profit from the sales and all what is required to prove is that the rooms are rented out in excess of the charges provided in the Act attracting liability for luxury tax. The principle is same for cottages and rooms attached to clubs by virtue of the wide meaning of "hotel" contained in the definition clause and in the charging section stated above. Senior counsel for the appellant contended that besides membership fees chargeable to luxury tax under S.4(2A), the clubs are liable for luxury tax only in respect of rent and other charges collected for hall, auditorium and kalyanamandapam attached to the clubs as provided in S.4(1)(i) of the Act and not on rooms and cottages available for letting out to members of other clubs and to guests of members of the club. We have to consider this in a realistic manner because all clubs are not providing cottages and guest rooms to their members or to guests. However, there are ever so many big clubs which extensively provide accommodation to their guests and to members of affiliated clubs. Such of the clubs which do not have rooms, cottages, auditorium or kalyanamandapam will be liable to luxury tax only on membership under S.4(2A) of the Act. On the other hand, those clubs which provide accommodation in cottages, rooms, auditorium, kalyanamandapam or halls for use of members or guests, will be liable to pay luxury tax not only for every member under S.4(2A) of the Act, but will also be liable for luxury tax as provided under S.4(1)(i) of the Act.