For the purpose of Expenditure Tax Act, 1987 the convention center managed by a hotel is an extension of the hotel itself and therefore, rent collection from the convention center shall be eligible for the levy of expenditure tax.

CASE LAW DETAILS

Decided by: ITAT, COCHIN BENCH, COCHIN,  In The case of: Mfar Hotels Ltd. v. ACIT,  Appeal No.: ETA No. 01(Coch)/2008, Decided on: April 20, 2009

RELEVANT PARAGRAPH

7. The hotel business carried on by the assessee and the convention centre carried on by the assessee cannot, be treated as a single business only for the reason that both of them situate in a single compound. But the case of the Revenue is not built up on the above factor. Keeping separate accounts and keeping separate facilities for the convention centre, on the other hand, do not make the convention centre a business different from that of the hotel on these grounds. Apart from these physical and technical points, one has to examine the substance over the form. As per the language employed in the statute, hotel includes a building or a part of a building where business is carried out mainly for a monetary consideration. The main business of the assessee is running a hotel and without any dispute the assessee is liable for chargeable expenditure in respect of the hotel business. Section 3(1) further provides for any expenditure incurred in respect of any accommodation, residential or otherwise. The expression “otherwise” used in the statute makes the ambit of the charging section so wide that any facility of accommodation provided by a hotel is liable for expenditure tax. The accommodation need not be in the form .of a residential accommodation. The accommodation for conducting conferences, programmes, functions, meetings, accommodation provided for essential purposes, etc. all are covered by the meaning given in the statute whereby any form of accommodation provided by a hotel as part of its business is liable for considering in an assessment of expenditure tax. This position is very clear from one of the items of explanations provided in the Act in clause (iii) where it is stated that “…… any expenditure incurred in any shop or any office which is not owned by the managed person who carries on the business of hotel”. The enlarged meaning of this explanation is that any accommodation other than shop or office which is owned and managed by the person who carries on the business of a hotel is a subject matter of expenditure tax. This is very crucial in deciding the validity of the contention raised by the assessee. The convention centre is owned by the assessee and managed by the assessee who is carrying on the business of a hotel as well. To go further, the convention centre is not any shop or office even. Therefore, for the purpose of Expenditure Tax Act, the convention centre managed by the assessee is an extension of the hotel itself and therefore, rent collection from the convention centre shall be eligible for the levy of expenditure tax.