Delhi H.C : The petitioners are persons who are carrying on business in various hotels in Delhi in shops which have been taken by them either on hire or on licence basis.

Counsel Appeared

Mukul Rohatgi, for the Petitioners : B. Gupta, R. C. Pandey & Rakesh Sawhney & Shyam Kishore for Respondents

KIRPAL, J.:

Rule D. B. As the question involved in this bunch of writ petitions is a short one, we proceed to dispose of the writ petitions immediately.

The petitioners are persons who are carrying on business in various hotels in Delhi in shops which have been taken by them either on hire or on licence basis. The grievance of the petitioners is that on the money which is paid by them to the hotels in respect of the accommodation which is used by the petitioners, no tax is payable under the provisions of the Expenditure-tax Act, 1987.

In order to examine the aforesaid contention, it is necessary to refer to a few provisions of the said Act. Sec. 4 is the charging section and this provides that there shall be charged a tax at a specified rate on the chargeable expenditure. “Chargeable expenditure” is explained in s. 2(4) as meaning expenditure which is referred to in s.

5. Sec. 5 reads as under : “5. Meaning of Chargeable expenditure.—For the purposes of this Act, chargeable expenditure means any expenditure incurred in, or payments made to, a hotel to which this Act applies, in connection with the provision of,- (a) any accommodation, residential or otherwise ; or (b) food or drink by the hotel, whether at the hotel or outside, or by any other person at the hotel ; or (c) any accommodation in such hotel on hire or lease ; or (d) any other services at the hotel, either by the hotel or by any other person, by way of beauty parlour, health club, swimming pool or other similar services, but does not include-(i) any expenditure which is incurred, or the payment for which is made, in foreign exchange ; (ii) any expenditure incurred by persons within the purview of the Vienna Convention on Diplomatic Relations, 1961, or the Vienna Convention on Consular Relations, 1963 ; (iii) any expenditure incurred in any shop or in any office which is not owned or managed by the person who carries on the business of a hotel ; (iv) any expenditure by way of any tax, including tax under this Act. Explanation.—For the purposes of this section, (a) expenditure incurred or any payment made in Indian currency obtained by conversion of foreign exchange into Indian currency shall in such cases and in such circumstances as may be prescribed be deemed to have been incurred or, as the case may be, made in foreign exchange ; and (b) ‘ foreign exchange ‘ and ‘ Indian currency ‘ shall have the meanings respectively assigned to them in cls. (h) and (k) of s. 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973). “

The other relevant provision is s. 7, which pertains to collection and recovery of expenditure-tax. The relevant portion of the same is as under : “(i) if such expenditure relates to any of the services, specified in cls. (a) to (d) of s. 5, provided by the hotel, the person who carries on the business of such hotel ; and (ii) if such expenditure relates to any of the services, specified in cl. (b) to cl. (d) of s. 5, provided by the other person referred to therein, such other person,…”

It is clear that in order to determine whether a tax is chargeable or not, the important provisions are s. 5 and s. 7. These two provisions read together clearly show that tax is payable not on every expenditure which is incurred in a hotel. Chargeable expenditure is what is contained in s. 5(a) to 5 (d). This would include any money received by the hotel under cls. (a) to (d) and any money received under cls. (b) and (d) by any other person in respect of the provisions contained therein. As far as the petitioners are concerned, they have obtained accommodation in the hotels. The payment in respect of the said accommodation is a chargeable expenditure by virtue of the provisions of s. 5(c) of the Act.

It is contended by learned counsel for the petitioners that having a shop is not an integral part of running of a hotel. We are not here concerned with the question as to whether a shop is an integral part of a hotel or not, but we have to consider the Act as has been framed. Even if the shop is not an integral or necessary part of the hotel, nevertheless, the Act provides for tax being paid under s. 5(a) on any accommodation, residential or otherwise, and further, in respect of any accommodation in such hotel on hire or on lease under s. 5(c). The insertion of cl. (c) in addition to cl. (a) in s. 5 clearly shows that cl. (c) was meant to provide for chargeable expenditure which was different from what was provided for under s. 5(a). Sec. 5(a) clearly pertains to residential or other accommodation like hire charges for a banquet hall. Sec. 5(c), on the other hand, is meant for providing tax to be levied on such portion of the accommodation of the hotel which was let out on hire or on lease. Even if cls. (a) and (c) overlap, to some extent, there is no escape from the conclusion that cl. (c) clearly covers the case of the petitioners.

It was then contended by learned counsel for the petitioners that no tax is leviable in respect of any expenditure which is incurred in any shop, provided that the shop is not owned or managed by the hotel. The submission was that the petitioners should be at liberty to pass on to their customers the expenditure-tax which is levied on the petitioners in respect of the hire money or the licence money which they pay. The Act does not expressly prohibit the passing on of the incidence of this tax to any other persons, including the customers of the petitioners and like any prudent businessmen, we are inclined to believe that in working out their costs and selling price, the petitioners must be doing so. However, the petitioners may be at liberty to pass on the incidence of the expenditure-tax to their customers like other taxes such as sales tax, but we express no final opinion on this because what we are really called upon to do in this case is to interpret s. 5 and other relevant provisions of the Act. Sec. 5 makes it clear that expenditure incurred in any shop, which is not owned or managed by the person who carries on the business of the hotel, is exempt from tax.

We find no merit in this petition. The petition is dismissed.

[Citation :180 ITR 643]