KRISHNA OBEROI Vs. UNION OF INDIA UOI

JUDGEMENT

(1.) The petitioner, Krishna Oberoi, which is a division of Novopan Industries Limited is a company registered under the Indian Companies Act, 1956, with its registered office at Banjara Hills, Hyderabad. The writ petition was filed initially seeking mandamus declaring that the charges paid/payable to the petitioner company by its customers on account of room charges are not in the nature of rent within the meaning of Section 194-1 of the Income Tax Act. Later, that prayer was amended by filing WPMP No. 13783 of 1996 and that WPMP was ordered by this Court on 7-10-1996. The amended prayer reads as follows:

(2.) Along with WPMP No. 13783 of 1996, the petitioners had also filed WPMP No. 13782 of 1996 to implied Indian Airlines Limited, Begumpet, Hyderabad and Asian Paints India Limited, Goregaon (West), Bombay as party-respondents to the writ petition. That WPMP was also ordered by this Court on 7-10-1996. Accordingly, they are added as parties -respondents 4 and 5 respectively to the writ petition.

(3.) The facts leading to filing of the writ petition as set out in the writ affidavit be summarised as follows : The 1st petitioner is engaged in hospitality business and is running a Five-star hotel under the name and style of Krishna Oberoi at Hyderabad. At the hotel, the 1st petitioner provides to its customers various types of furnished rooms with certain other facilities for a consideration which is normally known as "room charges". The room charges is composite in nature and it includes the charges for various services catered by the hotel. Therefore, the consideration received by the hotel management cannot be treated as rent within the meaning of Section 194-I of the Income Tax Act, 1961 (for short 'the Act'). Indian Airlines Limited and Asian Paints India Limited, respondents 4 and 5 respectively, are few of the 1st petitioner's regular customers. Indian Airlines Limited had entered into an agreement with the 1st petitioner to utilise the 1st petitioner hotel services for accommodating their cock-pit crew and Indian Airlines officials. As against the normal room tariff of Rs. 2,000.00 per day, the Indian Airlines crew are provided with accommodation for a sum of Rs.825/-only. The 1st petitioner had approached Indian Airlines Limited requesting not to deduct TDS under Section 194-I of the Act as those provisions have no application to the payments that are being made to the 1st petitioner-Hotel by the management of Indian Airlines Limited. However, the Indian Airlines Limited had refused to accede to the request of the 1st petitioner for the fear of prosecution proceedings under Section 201 of the Act At certain point of time, the 1st petitioner had approached the 2nd respondent, seeking a clarification under Section 197 of the Act with respect to payments receivable from Indian Airlines Limited. But, that did not yield any useful result and that the process of applying for and obtaining certificate under Section 197 of the Act is cumbersome and time consuming. Due to the deduction of TDS at 23%, the petitioners are receiving only about 2/3rd's of the actual amount, thus, the 1st petitioner deprived of the working capital which is paralysing the day to day functioning of the petitioner's hotel. The 1st petitioner had addressed a letter to the official respondents explaining the hardship caused to the petitioners with a request to issue necessary clarifications in exercise of their power under the Act. In particular, requests were made to the Central Board of Direct Taxes, 2nd respondent herein constituted under Section 116 of the Act to issue Circular/ Clarification with regard to the applicability of Section 194-I of the Act to the hotel industry. The requests made to the 2nd respondent are pending consideration and in the meanwhile, the customers of the petitioner continued to deduct the TDS and on account of this, the petitioner would not be able to carry their business, in the above circumstances, the petitioners have filed the writ petition seeking the relief already noticed.