State Taxation Tribunal - Tamil Nadu
Woodlands Hotel Private Ltd. vs Joint Commissioner (Ct) on 26 June, 2000
Equivalent citations: [2001]122STC95(TRIBUNAL)
JUDGMENT
J. Kanakaraj, J. (Chairman)
1. This tax appeal case is against the order of the Joint Commissioner for the assessment years 1983-84 and 1984-85. The appellant was assessed on a total and taxable turnover of Rs, 10,58,004, Rs. 3,75,326, Rs. 11,54,319 and Rs. 4,70,575 respectively. Two appeals were filed on the ground that item 150 of the First Schedule had been struck down by the Madras High Court in [1985] 60 STC 125 (Sangu Chakra Hotels Private Limited v. State of Tamil Nadu) and even otherwise the appellants never applied for or granted recognition by the Tourism Department of Government of India, making the said entry inapplicable to the appellants. The first appellate authority decided the two appeals by a common order dated March 4, 1987. The first appellate authority allowed the appeals upholding the contention of the assessee as follows :
"I conclude that the appellants' hotel has not been recognised by the Department of Tourism as an approved hotel. The item 150 of the First Schedule has been struck down by the High Court of Madras in the case of Sangu Chakra Hotels Private Limited reported in [1985] 60 STC 125. The hotels are exempted from taxation under Section 17 of the Act. Therefore, the assessments made by the assessing officer for the years 1983-84 and 1984-85 are illegal and unjustified and are set aside."
2. We have to look into only one aspect of the first appellate order. The other aspects do not survive for consideration any longer. One Hotel Dwaraka was functioning in the same premises and it was an approved hotel by the Tourism Department. The appellants are doing business in the same place as lessee of Hotel Dwaraka, though in a different name. Therefore, the Revenue contended item 150 of the First Schedule stands attracted. The Appellate Assistant Commissioner held as follows :
"It is not on record to show that the appellant-hotel was classified or approved by the Government of India. Therefore, the assumption of the department that the lessee should be continued under the same classification are not correct and not maintainable. Hotel Dwaraka is different from Woodlands Hotel Pvt. Ltd. These two hotels are having separate legal entity. Tvl. Woodlands Hotel Private Ltd., has not been classified as an approved hotel by the Government of India. Therefore, the assessment made on the appellants on the presumption of the Hotel Dwaraka is not correct."
3. The Joint Commissioner took up suo motu revision and set aside the order of the Appellate Assistant Commissioner. His reasoning was as follows :
"It was seen that the entire premises, fixtures, fittings and utensils of Hotel Dwaraka, a two star category hotel were taken by the appellants from the owners under a document of lease deed dated April 14, 1977 and the lessees, viz., Woodlands Hotel Private Limited are in possession of the premises and were running the hotel business boarding and lodging which was in continuation with the hotel business of the lessors. According to item 150 of the First Schedule the articles of food and drinks sold in hotels classified or approved by the Government were liable to tax at 10 per cent. Hotel Dwaraka was a two star category hotel approved by the department of Tourism, Government of India and it was still in existence and continues to function as per the official records of the Tourism Department. So the articles of food and drinks sold in hotel were liable to tax under Section 3(2) of the Tamil Nadu General Sales Tax Act, 1959."
4. The Joint Commissioner also held that no new permission was required for the appellant and the recognition given to Dwaraka Hotel will ensure and hold good for the appellant also. The appellants have filed these two appeals.
5. Mr. K.J. Chandran, the learned counsel for the appellants, argues that by no stretch of imagination, the recognition given to Dwaraka Hotel can be treated as recognition given to the appellants because the recognition contemplates certain obligations and condition to be fulfilled before the grant of recognition. It is futile to argue that the appellants are also approved by the Department of Tourism, Government of India. He has also produced the lease deed executed by the appellants and the guidelines and incentives for hotel industries in India containing the criteria for classification of hotels and the approval by the Department of Tourism. On the other hand, Mr. R. Mahadevan, the learned counsel for the Revenue, argues that the entire premises, fixtures, fittings of the lessor, Dwaraka Hotel were taken over by the appellants and therefore, the recognition granted to Dwaraka Hotel automatically ensures to the appellants. At the relevant point of time, namely, with effect from June 15, 1981, the item 150 of the First Schedule reads as follows :
"Articles of food and drink other than those specified elsewhere in this Schedule, sold to customers in hotels classified or approved by the Department of Tourism, Government of India,"
It is not disputed that the appellants, by themselves were not recognised by the Department of Tourism. It is also not disputed that the appellants never even applied for such recognition. Further, the lessor Hotel Dwaraka is a different entity from the appellants known as Woodlands Hotel Private Limited. The constitution of the two institutions are totally different and the appellants cannot for any reasons, be held responsible for the actions or omissions of the lessor Hotel Dwaraka. These being the admitted position. We can look into the lease deed between Hotel Dwaraka and the appellant dated April 14, 1977. The preamble portions say that the lessor were discontinuing their lodging business called Hotel Dwaraka and were terminating the services of all their workmen and employees working in the said Hotel Dwaraka. The lease is for a period of 10 years renewable on the terms and conditions mentioned in the lease deed. The property demised is described in the Schedules A, B and C and they comprise of the land, the building, the furniture, the electrical fittings, vessels, etc. It is not necessary to go into more details in the lease deed. We will now turn to the guidelines for approval of hotels by the Department of Tourism. First and foremost the approval by the Ministry of Tourism is optional. Therefore, the appellants, not having opted for approval by the Department of Tourism cannot be brought within the item 150 of the First Schedule mentioned above. Secondly, the criteria for classification of a two star hotel are enumerated in the booklet furnished to us. It shows that the rooms must have a broad carpet area, that at least 75 per cent of the bed-rooms should have attached bath-room, 50 per cent of the bath-room should have western style closets, 25 per cent of the rooms should be air-conditioned and so on and so-forth. We have referred to these criteria only to show that they are personal to the institution which runs the hotel. There is no guarantee that the appellants as lessees would maintain the same standards as prescribed for the lessors while granting approval to the lessors. We are very clear in our mind that the approval granted by the Department of Tourism, Government of India, is personal to the institutions to which it is granted. The approval depends upon the efficiency and capability of the institutions to maintain the standards prescribed by the Department of Tourism. Therefore, it is idle to contend that when a lease was granted by Hotel Dwaraka, the approval was also automatically transferred to the lessee (appellant), In fact there is no reference to the approval in the lease deed. Further, we have seen that Hotel Dwaraka totally discontinued their boarding and lodging business and terminated the service of all their workmen and employees. Therefore, the exercise of the institutions Hotel Dwaraka was certainly not available after their stopping business. The appellants as lessees, if at all should have applied for approval once again to the Department of Tourism. That being optional and the appellants not having applied for approval it is impossible to accept the case of the Revenue that the appellants can be brought within item 150 of the First Schedule. The reasons given by the Joint Commissioner for accepting the order of the Appellate Assistant Commissioner are not acceptable. For the foregoing reasons we set aside the order of the Joint Commissioner dated May 29, 1991 and restore that of the Appellate Assistant Commissioner dated March 4, 1987 for the assessment years 1983-84 and 1984-85. The appeals are accordingly allowed.
And this Tribunal doth further order that this order on being produced be punctually observed and carried into execution by all concerned.
Issued under my hand and the seal of this Tribunal on June 26, 2000.