M/S. KAIRALI AYURVEDIC HEALTH RESORT PRIVATE LIMITED V. THE COMMERCIAL TAX OFFICER

OP (TAX)/33/2016

AI Insights

The case revolves around the classification of Kairali Ayurvedic Health Resort Pvt. Ltd. under the Kerala Tax on Luxuries Act, 1976. The petitioner argued that their establishment should be classified as a hospital, which would subject it to different tax regulations under the Act. However, the Tribunal and the High Court found that the establishment functions more like a hotel, offering luxury accommodations and services, and not primarily for medical treatment. The court's decision was influenced by the facilities and services provided, the nature of the guests' visits, and the marketing of the establishment as a health resort rather than a hospital.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 726980 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 16-06-2016
• Assessment Year: misc
• Other Referred Cases: Kairali Ayurvedic Health Resort Pvt. Ltd. v. Commercial Tax Officer (Luxury Tax), Palakkad and others
• Laws Referred To: Kerala Tax on Luxuries Act, 1976
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: SHOBA EAPEN
• Assessee Lawyers: T M SREEDHARAN; V P NARAYANAN; DIVYA RAVINDRAN; V V VARGHESE
• Keywords: Assessment years; Luxury tax; Kerala Tax on Luxuries Act; Hospital vs hotel
• Section: 2(f); 2(e); 2(d); 2(fb); 4(e)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU THURSDAY, THE 16TH DAY OF JUNE 2016/26TH JYAISHTA, 1938 OP (TAX).No. 33 of 2016 (Q) ---------------------------- AGAINST THE ORDER/JUDGMENT IN TA 93/2015 of AGRL.I.T. ADDL.BENCH,PALAKKAD DATED PETITIONER(S): ------------------ M/S. KAIRALI AYURVEDIC HEALTH RESORT PRIVATE LIMITED, OLASSERY P.O., KODUMBU, PALAKKAD DISTRICT, REPRESENTED BY ITS MANAGING DIRECTOR, V.K. RAMESH. BY ADVS.SRI.T.M.SREEDHARAN (SR.) SRI.V.P.NARAYANAN SMT.DIVYA RAVINDRAN SRI.V.V.VARGHESE RESPONDENT(S): -------------------- 1. THE COMMERCIAL TAX OFFICER, (LUXURY TAX), DEPARTMENT OF COMMERCIAL TAXES, OFFICE OF THE DEPUTY COMMISSIONER, PALAKKAD-678 001. 2. THE DEPUTY COMMISSIONER (APPEALS)-I KOTTAYAM, (LOCAL AT ERNAKULAM) COMMERCIAL TAXES, ERNAKULAM - 682 011. 3. THE ASSISTANT ENGINEER, KERALA AGRICULTURAL INCOME TAX AND SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, NEAR SARADHA SANKARA KALYANA MANDAPAM, NURANI P.O, PALAKKAD - 678 001. R BY SMT. SHOBA ANNAMMA EAPEN, GOVERNMENT PLEADER THIS OP TAX HAVING COME UP FOR ADMISSION ON 16-06-2016, ALONG WITH O.P. (TAXES) NOS. 34 & 35 OF 2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: OP (TAX).No. 33 of 2016 (Q) -------------------------------- : 2 : APPENDIX PETITIONER(S)' EXHIBITS ----------------------- P1 TRUE COPY OF THE CERTIFICATE OF REGISTRATION DATED 16/03/2009 ISSUED BY THE COMMERCIAL TAX OFFICER (LUXURY TAX) PALAKKAD P2 TRUE COPY OF THE ASST. ORDER NO. LT 224/08-09 DATED 18/01/2013 FOR THE ASST. YEAR 2008-09 PASSED BY THE IST RESPONDENT P3 TRUE COPY OF THE ORDER PASSED BY THE 2ND RESPONDENT DATED 20/10/2015 IN LTA NO. 15/2013 FOR THE ASST. YEAR 2008-09 P4 TRUE COPY OF THE COMMON APPELLATE ORDER RELATING TO T.A 89, 93 AND 95/2015 DATED 30/01/2016 PASSED BY THE 3RD RESPONDENT RESPONDENT(S)' EXHIBITS: NIL -------------------------------- /True Copy/ P.A to Judge. rv ANTONY DOMINIC & DAMA SESHADRI NAIDU, JJ. ------------------------------------------- O.P.(Taxes) Nos. 33, 34 and 35 of 2016 ------------------------------------------ Dated this the 16th day of June, 2016. JUDGMENT Antony Dominic,J. These original petitions are filed by Messrs. Kairali Ayurvedic Health Resort Pvt. Ltd. impugning the common order passed by the Kerala Agricultural Income Tax and Sales Tax Appellate Tribunal, Additional Bench, Palakkad dismissing appeals filed by it challenging the appellate order passed by the second respondent confirming the orders of assessment passed under the Kerala Tax on Luxuries Act, 1976 ('the Act' for short) with modifications. A reading of the order passed by the Tribunal shows that the said order was passed rejecting the contention of the petitioner that it is a hospital as defined in Section 2(d)(e) of the Act and holding that it is a hotel as defined in Section 2(e) of the Act. 2. We heard the learned Senior counsel for the petitioner and the learned Government Pleader appearing for the respondents. 3. Briefly stated the facts of the case are that, the petitioner company has an establishment which is described as an ayurvedic O.P.(Taxes) Nos. 33,34 & 35 of 2016 -2- hospital. It has also obtained registration under Section 4(e) of the Act describing itself as an ayurvedic hospital, a copy of which is produced as Ext.P1. However, rejecting its contention that it is a hospital, the petitioner was assessed under the Act treating it as a hotel for the assessment years 2008-2009, 2009-2010 and 2010- 2011. That order was ultimately confirmed by the Tribunal by the impugned common order. It is this order which is challenged before us. 4. According to the learned Senior Counsel for the petitioner, a reading of the impugned order passed by the Tribunal shows that the Tribunal has restored its conclusion that the establishment is a hotel, entirely based on the judgment of this Court in the petitioner's own case, in Kairali Ayurvedic Health Resort Pvt. Ltd. (M/s.) v. Commercial Tax Officer (Luxury Tax), Palakkad and others1. Our attention was drawn to Section 2(de) of the Act, introduced by the Kerala Finance Act, 2008 inserting the definition of 'hospital' with effect from 01.04.2008. The said definition reads thus: “hospital” includes a nursing home, therapy centre, rejuvenation or recuperation centre, nature care or cure centre, 1 2013 KHC 142 O.P.(Taxes) Nos. 33,34 & 35 of 2016 -3- ayurvedic cure or care centre, sidha centre or any other treatment centre, personal care centre and beauty treatment centre by whatever name called.” 5. The counsel also contended that as per Section 2(fb) introduced by the Finance Act, 2008, luxury provided in a hospital has been defined as accommodation for residence for use of amenities and services provided in a hospital at the rate of charges of which, excluding the charges of food, medicine and professional services, is `1000/-per day or more. He has also invited our attention to Section 4(e) of the Act providing that in respect of a hospital, levy and collection of tax shall be for charges of accommodation for residence for use of amenities and services at the rate of 10% per room where the gross charges, excluding charges of food, medicine and professional services, is `1,000/- per day or more. The counsel contended that these provisions were introduced to the Act with effect from 01.04.2008. Therefore, according to him, the aforesaid judgment of this Court in the petitioner's case rendered in the context of the unamended Section 2(e) of the Act defining the expression 'hotel' did not have any relevance insofar the assessment years in question are concerned. For that reason, the counsel contended that O.P.(Taxes) Nos. 33,34 & 35 of 2016 -4- the statutory authorities misdirected themselves in levying tax on the petitioner treating it as a hotel. 6. We have considered the submissions made. The term 'hotel' has defined in Section 2(e) of the Act which reads thus: “hotel” means a building or part of a building where residential accommodation is by way of business provided for monetary consideration and includes a lodging house.” It was in the light of the aforesaid definition of the term 'hotel' that the case of the petitioner was appreciated by this Court in the judgment in Kairali Ayurvedic Health Resort Pvt. Ltd. In that judgment, this Court has made reference to the order of the Tribunal impugned therein, wherein the facilities provided by the petitioner have been noticed thus: “11. Tribunal went into the facilities provided by the petitioner and has found that the following facilities are provided: (a) 30 luxurious air conditioned villas with satellite TV, direct dial phones, refrigerators,attached bathrooms with bath tubs. (These villas are classified as Deluxe, Classic, Royal and Maharaja according to the facilities provided in each villa) (b). Swimming pool, Tennis and badminton courts, Indoor recreation and card room. (c). Internet and personal laundry services. (d). Billiards room and facilities for pedicure and manicure. (e). Exotic herbs and vegetable garden. O.P.(Taxes) Nos. 33,34 & 35 of 2016 -5- (f). Yoga and mediation centre. (g). Variety of sightseeing and cultural programmes. (h). Fully equipped conference hall, board room and art gallery. (i). workshop and training on panchakarma and Ayurveda. (j). Services of astrologer and palmist. 12. After referring to the aforesaid facilities provided, Tribunal has answered the petitioner's case that the aforesaid facilities are provided to solve the health problems of the present day population, thus:- “But satellite TV and direct dial phones,refrigerators, swimming pool, tennis court, badminton courts, card rooms, billiard rooms, conference hall, art gallery, services of astrologer and palmist, pedicure and manicure facilities, cultural programmes and sightseeing tours etc, are special features associated with the amenities and services provided in a hotel and health resorts rather than that of a hospital. It is seen that these facilities amenities and services were provided by the assessee to satisfy the customers who are coming for rest and to bring back freshness or to revitalize the body and soul, along with luxury.” 13. Tribunal made reference to the guest registration card details and connected documents kept at the petitioner's office and found that the majority of the guests have filled up the concerned column by stating that the purpose of visit as “holiday, vacation, pleasure, leisure, sight seeing etc.,”. On this basis Tribunal concluded that the guests had arrived at the petitioner's establishment with no intention for treatment for any disease but to enjoy holidays. 14. The impugned order shows that the Tribunal has accepted the fact that Ayrvedic treatment is also provided in the establishment. However, Tribunal found that the Hospital is a place intended to cure the patients and a patient is a person suffering O.P.(Taxes) Nos. 33,34 & 35 of 2016 -6- from a disease or disorder. Tribunal further found that as per the records in the establishment, guests or customers frequented the place for holidays, leisure and recreation. 15. Insofar as the licence obtained by the petitioner from the Panchayat is concerned, Tribunal held that these licenses entitled the petitioner to run a canteen, hospital and to store and sell Ayurvedic medicines in the buildings specified therein. After recognizing this, Tribunal found that it did not mean that in “the entire 50 acres of bush greenery with 30 exclusive villas”, an Ayurvedic Hospital was functioning. Therefore, Tribunal concluded that this is a case where an Ayurvedic Centre is also functioning within a health resort for providing Ayurvedic treatment. 16. Tribunal found that different tariff is fixed for accommodation with single occupancy and double occupancy, which is not the practice in a Hospital. Tribunal also found that the charges for each Ayurvedic package is pre-fixed depending on the type of accommodation opted by the guests, and that in a Hospital, the final bill depended upon the treatment received by the patient, cost of medicines, charges for clinical tests etc., and that the period of treatment is decided in each case by the Doctor who treats the patient. On facts the Tribunal found that in this case, the Doctor had no role in fixing the period of treatment or selecting the package required for the guests and that it depended entirely upon the customers' choice. It was also found that the petitioner offered commission to middle men and tour operators, which is not the practice in a Hospital. 17. The Tribunal made reference to the guests registration cards and found that in the 'House Rules' the establishment has been described as a 'Hotel' and the inmates as 'guests'. From the brochures perused, it was found that the petitioner provided trekking and hiking programmes, sightseeing programmes etc., and that there was no condition for accommodation that the inmates should undergo any treatment. Tribunal also found that the O.P.(Taxes) Nos. 33,34 & 35 of 2016 -7- conference hall in the petitioner's establishment was let out on rent. Certain bills which were made available to the Tribunal were also perused and the Tribunal found that only in a very few bills, amount has been collected for treatment. On this basis, Tribunal inferred that if the guests were treated for any ailment, amount will be collected separately in addition to the charges for the package opted. 18. Tribunal has also gone into the details of Ayurveda packages and leisure packages and found that the charges realized differs depending upon the type of villa, one has opted for. Tribunal has given the details of the charges collected and found that the lion portion of the package is related to the room rent alone. 19 Section 2(e) defines 'hotel' as a building or part of a building where residential accommodation by way of business is provided for monetary consideration and includes a lodging house. The expressing “luxury provided in a hotel” is defined in Section 2(f) of the Act to mean accommodation for residence or use and other amenities and services, provided rupees one hundred and fifty or more, is charged daily, excluding for food and liquor. The expression 'luxury' has been defined in Section 2(ee) of the Act to mean a commodity or service that ministers comfort or pleasure. The factual findings arrived at by the Tribunal show that the petitioner's establishment answers the definition of 'hotel' as defined in the Act and that the accommodation, amenities and services provided satisfied the definition “luxury provided in a hotel”. Such hotels are liable to be taxed under Section 4(2) of the Act.” 7. The correctness of these factual findings or the existence of the facilities noted in the judgment are not disputed by the petitioner. It is, therefore, obvious that that the predominant activity that is O.P.(Taxes) Nos. 33,34 & 35 of 2016 -8- carried on in the establishment is not running of an ayurvidic care centre to call it as a hospital as defined in Section 2(d)(e) of the Act and on the other hand, this is a case where an ayurvedic centre is also functioning in the hotel of the petitioner. If that be so, the factual finding of the Tribunal that the petitioner's establishment is a hotel as defined in Section 2(e) of the Act cannot be said to be erroneous for any reason. We, therefore, are of the view that in the light of the judgment of this Court in the petitioner's own case, despite the amendments that are brought into the statute with effect from 01.04.2008, the petitioner still continues to be a hotel. Therefore, the conclusion of the Tribunal as reflected in the impugned common order does not suffer from any infirmity for interference in a proceedings under Article 227 of the Constitution of India. Accordingly, these original petitions are dismissed. ANTONY DOMINIC, JUDGE. DAMA SESHADRI NAIDU, JUDGE. Rv O.P.(Taxes) Nos. 33,34 & 35 of 2016 -9- "