In a significant ruling Assistant Commissioner v. M/s Raj Mahal Palace Hotel, the Rajasthan High Court held that the rent collected by the hotels on leasing out of lawns for the purpose of functions are subject to Luxury Tax under the provisions of the Luxuries (Hotel & Lodging Houses) Act, 1990.
The assessee, is a luxury hotel under the provisions of the Rajasthan Tax on Luxuries (Hotel & Lodging Houses) Act, 1990. Assessment was passed against the assessee for the rent collected by them by leasing out the lawns for the purposes of marriage parties and for other occasions.
The assessee questioned the levy on renting of lawns and submitted that the levy is not sustainable since the lawn is separate, it has separate access and merely because there is one profit and loss account or a separate receipt has been issued of renting of the lawn, there is no reason to levy luxury tax when renting of lawn is not a luxury taking into consideration the definition under the Act.
Rejecting the above averments, the bench noted that the assessee is liable to pay luxury tax on “luxuries provided in the hotel”, which includes accommodation such as room or other place or lawn etc., by whatever name called and other servicesas per explanation II of s. 2(1)(i) of the Act.
Confirming the levy of tax and penalty, Justice Jainendra Kumar Ranka said, “what should be a luxury, is that the room charges in the hotel is per day or part thereof is Rs.1000/- or more and again in Explanation (ii) in sub clause(i), includes lawn to be part of room, though this may be the lawn which is said to be attached to the hotel. Sub-clause (u) defines “turnover” to include aggregate of the amounts of monetary consideration receivable by the hotelier in respect of luxuries provided in a hotel and the receipts by way of lawn is also a turnover of the assessee.”
Read the full text of the Judgment below.
