STATE OF KERALA, vs. M/S.VIVANTA BY TAJ MALABAR,
What did the High Court hold?
The Tribunal found merit in the assessee's contention regarding the duplication of miscellaneous income from the banquet hall. It directed the Assessing Authority to verify the quantum of miscellaneous income and, if found to be part of the banquet hall income for which tax was duly paid, to delete the same. This was considered a remand for assessment upon verification. Regarding the second issue, the Tribunal held that the Kerala Tax of Luxuries Act, 1976, does not empower the Assessing Authority to make fictional bifurcation of banquet hall income by applying Rule 3C, especially after the omission of Section 4(2B) of the Act by the Kerala Finance Act, 2006, rendering Rule 3C inoperative from 01.07.2006. The Tribunal relied on its previous order in TA Nos. 70 & 71/2014. The High Court agreed with the Tribunal's findings on both issues, finding the direction for verification correct and the ground regarding Rule 3C untenable, leading to the dismissal of the petition.
What were the facts?
The State of Kerala, represented by the Deputy Commissioner of State Tax, is the petitioner, challenging an order of the Kerala Agricultural Income Tax & Sales Tax Appellate Tribunal. The respondent is M/s. Vivanta by Taj Malabar. The dispute pertains to the Kerala Tax of Luxuries Act, 1976. For the assessment year 2010-11, the Assessing Officer included banquet hall income in the taxable turnover. This was upheld by the Deputy Commissioner (Appeals) but set aside by the Tribunal. The Tribunal's order, dated 14.09.2019, in TA Nos. 43 & 44/2016, is under challenge. The Tribunal considered issues regarding miscellaneous income from banquet halls and the applicability of Rule 3C of the KTL Rules.
What were the issues?
1. Whether the Tribunal erred in directing the Assessing Authority to verify the quantum of miscellaneous income received from the banquet hall and delete it if it was part of the banquet hall income and tax had been duly paid, in accordance with Rule 3C of the KTL Act, even if no actual rent was collected? (Mixed law and fact, concerning Section 4(2)(c) and Rule 3C of the Kerala Tax of Luxuries Act, 1976). Assessee's Contention (as per Tribunal's excerpt): The receipts amounting to Rs.76,52,079/- were confirmed at 15% by the first appellate authority, but the addition of Rs.9,94,300 and Rs.17,700 amounted to duplication. The actual banquet hall receipt was Rs.66,40,029.61, and the alleged turnover addition of Rs.76,22,079/- was a mistaken sum of Rs.66,40,029.61, Rs.9,94,300, and Rs.17,700/-. Revenue's Contention (as per Tribunal's excerpt): The Assessing Officer included banquet hall income to the taxable turnover under the Act. The Tribunal also considered the application of Rule 3C of the KTL Rules and the issue of fictional bifurcation of banquet hall income.
Which sections of the Income-tax Act were involved?
Section 4(2)(c), Rule 3C, Section 4(2B)
AI-generated summary — verify with the full judgment below
Heard together (2 matters)
Read from the judgment's own cause title. This page is filed under one of them.
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI WEDNESDAY, THE 4TH DAY OF JANUARY 2023 / 14TH POUSHA, 1944 OP (TAX) NO. 3 OF 2020 AGAINST THE ORDER TA 43/2016 OF S.T.A.T.ADDITIONAL BENCH, ERNAKULAM PETITIONER/S:
STATE OF KERALA, REPRESENTED BY THE DEPUTY COMMISSIONER OF STATE TAX (LAW), DEPARTMENT OF KERALA STATE GOODS AND SERVICE TAX, ERNAKULAM.
BY GOVERNMENT PLEADER M M JASMIN RESPONDENT/S:
M/S.VIVANTA BY TAJ MALABAR, WILLINGTON ISLAND, COCHIN-682009.
BY ADVS. SRI.KURYAN THOMAS SRI.M.GOPIKRISHNAN NAMBIAR SRI.K.JOHN MATHAI; SRI.JOSON MANAVALAN SRI.PAULOSE C. ABRAHAM; SRI.RAJA KANNAN THIS OP TAX HAVING COME UP FOR ADMISSION ON 04.01.2023, ALONG WITH OP (TAX).4/2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
O.P.(Tax) No.3 & 4/2020
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IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI WEDNESDAY, THE 4TH DAY OF JANUARY 2023 / 14TH POUSHA, 1944 OP (TAX) NO. 4 OF 2020 AGAINST THE ORDER TA 44/2016 OF S.T.A.T.ADDITIONAL BENCH, ERNAKULAM PETITIONER/S:
STATE OF KERALA, REPRESENTED BY THE DEPUTY COMMISSIONER OF STATE TAX (LAW), DEPARTMENT OF KERALA STATE GOODS AND SERVICE TAX, ERNAKULAM.
BY GOVERNMENT PLEADER M M JASMIN RESPONDENT/S:
VIVANTA BY TAJ MALABAR WILLINGTON ISLAND, COCHIN-682 009.
BY ADVS. SRI.KURYAN THOMAS SRI.M.GOPIKRISHNAN NAMBIAR SRI.K.JOHN MATHAI; SRI.JOSON MANAVALAN SRI.PAULOSE C. ABRAHAM; SRI.RAJA KANNAN THIS OP TAX HAVING COME UP FOR ADMISSION ON 04.01.2023, ALONG WITH OP (TAX).3/2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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J U D G M E N T [OP (TAX) Nos.3/2020, 4/2020]
S.V. Bhatti, J.
The state of Kerala/Department is the petitioner. M/s. Vivanta by Taj Malabar, Willington Island/Dealer is the respondent. The issue arises under the Kerala Tax of Luxuries Act, 1976 (for short, the Act). The Department assails the common order dated 14.09.2019 in T A Nos. 43 & 44/2016 of Kerala Agricultural Income Tax & Sales Tax Appellate Tribunal (for short, the Tribunal). O.P.(Tax) No.3/2020 has been treated as the lead case for disposing of both the O.Ps. O.P.(Tax) No.3/2020
The instant petition relates to the return filed by the Dealer for the year 2010-11. On 03.03.2015, the Assessing Officer issued a notice under Section 6(2) of the Act proposing to include the turnover on the banquet hall under Section 4(2)(c) of the Act.
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On 26.03.2015, the assessment order was made by the Assessing Officer. The Assessing Officer included the banquet hall income to the taxable turnover under the Act. The appeal filed before the Deputy Commissioner (Appeals) resulted in dismissal. Thus T.A. No.43/2016 was filed by the Dealer before the Tribunal. The Tribunal, through the impugned order, set aside the order of assessment. Hence the petition.
The Department raises two issues: the miscellaneous income received from the luxury provided in the banquet hall and the application of Rule 3C of the KTL Rules. Before we take up the objection pointed out by the Department, to shorten the narrative, we excerpt the consideration of both aspects by the Tribunal through the order under challenge. “17) The appellant again contended that the 1st appellate authority erred in confirming the assessment of receipts amounting to Rs.76,52,079/- @ 15% because the addition of Rs.9,94,300 and Rs.17,700/- amounts to duplication and the actual receipt of banquet Rs.66,40,029.61. The alleged turnover addition of Rs.76,22,079/- is the sum of Rs.66,40,029.61, Rs.9,94,300 and Rs.17,700/- which was
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mistakenly taken by the assessing authority for the assessment purpose. 18) On a perusal of the income statements produced by the appellant, we feel that there is having some merit in the above contentions because all the figures of alleged miscellaneous income received tally with the figure in the copies of the financial statement and the banquet hall income ledger relied on by the appellant. Hence, we direct the assessing authority to verify the quantum of miscellaneous income received and if it is found that the miscellaneous income received is part of the banquet hall income and the appellant has duly paid the tax for the said banquet hall income in accordance with Rule 3C of the KTL Act, eventhough, no actual rent is collected by them the assessing authority shall delete the same. T.A.No.44/2016(2011-12) Regarding the next issue related to the assessment of banquet hall income by making fictional bifurcation, we feel that the KTL Act does not provide any right to the assessing authority to make fictional bifurcation by applying Rule 3C of the KTL Act. Rule 3C is not having any independent existence after the omission of Section 4(2B) of the Act by the Kerala Finance Act, 2006 with effect from 1-7- 2006. This Tribunal has already upheld the above legal position in TA Nos.70 & 71/2014 dated 29-9-2016 and decided in favour of the appellant. Hence, on the basis of the provisions in the KTL Act 1976
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and also in view of the above order of this Tribunal, we delete the assessment made through fictional bifurcation of banquet hall income applying Rule 3C which has already been inoperative with effect from 01-07-2006. Order accordingly.”
3.1 From the above, it is clear that the Tribunal has accepted the income from the luxury provided by the Dealer after verifying the financial statement and the banquet hall income ledger relied on by the Dealer. The Tribunal, thereafter, directed the Assessing Authority to ascertain the quantum of miscellaneous income received from the banquet hall. The finding of the Tribunal is more a remand to the Assessing Officer for assessment upon verification of the record. The direction issued while remitting the matter to the Assessing Officer is correct, and no ground against such consideration could successfully be laid or established.
3.2 The second issue arises under Rule 3C of the KTL Rules. We have considered a similar point in O.P.(Tax) No.6/2019 tagged with these two years. While expressing our agreement with the finding recorded on the independent standing of Rule 3C after the
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amendment to Section 4(2)(b), we have dismissed the revision filed by the Department. The same analogy applies to the finding recorded by the Tribunal in this behalf. Therefore, the said ground is not tenable, warranting our interference. For the above reasons, the petition fails and is dismissed. O.P.(Tax) No.4/2020
For the reasons considered above and the conclusions recorded, the instant petition fails and is accordingly dismissed.
Sd/- S.V.BHATTI JUDGE
Sd/- BASANT BALAJI JUDGE
jjj
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APPENDIX OF OP (TAX) 4/2020
PETITIONER EXHIBITS EXHIBIT P1 A TRUE COPY OF THE ASSESSMENT ORDER DATED 31.08.2015 BY THE COMMERCIAL TAX OFFICER (LT), MATTANCHERRY FOR THE YEAR 2011-12. EXHIBIT P2 TRUE COPY OF THE ORDER PASSED BY THE DEPUTY COMMISSIONER (APPEALS) I, ERNAKULAM, IN LTA NOS.46 AND 71 OF 2015 DATED 28.09.2016. EXHIBIT P3 TRUE COPY OF THE ORDER PASSED BY THE KERALA AGRICULTURAL INCOME TAX AND SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, ERNAKULAM IN TA NOS.43 AND 44 OF 2016 DATED 14.09.2019.
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APPENDIX OF OP (TAX) 3/2020
PETITIONER EXHIBITS EXHIBIT P1 A TRUE COPY OF THE ASSESSMENT ORDER DATED 26.3.2015 BY THE COMMERCIAL TAX OFFICER (LT), MATTANCHERRY FOR THE YEAR 201-11. EXHIBIT P2 TRUE COPY OF THE ORDER PASSED BY THE DEPUTY COMMISSIONER (APPEALS)-I, ERNAKULAM LTA NOS.46 & 71 OF 2015 DATED 28.9.2016. EXHIBIT P3 CERTIFIED COPY OF THE ORDER PASSED BY THE KERALA AGRICULTURAL INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, ERNAKULAM IN T.A.NOS.43 & 44 OF 2016 DATED 14.9.2016.
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