SPENCES HOTEL PVT. LTD. AND ANR. versus STATE OF WEST BENGAL AND ORS.

Citation: [1991] 1 S.C.R. 429 · Decided: 15-02-1991 · Supreme Court of India · Bench: K.N. SAIKIA · Disposal: Dismissed

Cited by 1 judgment(s) · cites 8 · see the full citation network in Lexace

Judgment (excerpt)

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SPENCES HOTEL PVT. LTD. AND ANR. 
v. 
STATE OF WEST BENGAL AND ORS. 
FEBRUARY 15, 1991 
A 
[K.N. SAIKIA AND MADAN MOHAN PUNCHHI, JJ.J 
B 
West Bengal Entertainments and Luxuries (Hotels and Restau-
-(. rants) Tax Act, 1972-Section 4-Luxury Tax-Imposition of fiat or 
fixed rate on basis of air-conditioned floor space-Whether permissible, 
valid and legal. 
--· 
The appellant company was carrying on the business of running a 
hotel, bar and restaurant where it had provided air-conditioning. The 
second respondent, Collector of Calcutta, sought to levy luxury tax on 
the company under the provisions of the West Bengal Entertainments 
and Luxuries (Hotels and Restaurants) Tax Act, 1972 calculated at the 
flat or fixed rate of an annual sum of Rs.100 for every 10 Sq. meters of 
the floor area provided with air-conditioning. The appellant's represen-
tation showing that the tax was discriminatory was rejected by the 
Collector. There-upon, the appellants filed a petition in the High Com1. 
The appellants in their writ petition inter alia contended that the 
Act had imposed a flat rate on a specified air-conditioned floor space in 
hotels and restaurants which may be differently situated with reference 
to their localities, clientele, services and amenities rendered, the Act 
made no distinction on any of these bases, as such it did not even 
attempt a reasonable classification of these. different types or categories 
of hotels and restaurants, hence it suffered from the vice of discrimina-
tion under Art. 14 of the Constitution. 
-~ Before this Court, the appellants while reiterating the contentions 
urged before the High Court, argued that the legislature while imposing 
D 
E 
F 
a tax was bound under the Constitution to make appropriate classifica-
tion and failure to do so resulting in clubbing dissimilar hotels and 
restaurants for the purpose of luxury tax amounted to an error by G 
inaction; where the incidence of a tax was distributed in a manner 
which was irrational or arbitrary or where lack of classification created 
";, , ,._ inequality, the tax would be violative of Article 14; and the provision for 
air-conditioning had no direct nexus with the income earned by the 
different hotels and restaurants, and on the same ground section 4 of 
the luxury tax Act must be declared violative of Article 14 of the H 
Constitution. 
429 
A 
B 
c 
D 
F 
G 
430 
SUPREME COURT REPORTS 
[1991] 1 S.C.R. 
On behalf of the respondents it was contended that the legislature 
had made the classification in selecting the hotels and restaurants for 
the purposes of luxury tax in as much as only the air-conditioned hotels 
and restaurants had been subjected to tax; that the legislature had the 
widest latitude in the matter of such classification; and that a system of 
taxation need not be absolutely perfect and micro division and mini 
classification may not always be made. 
Dismissing the appeal this Court, 
HELD: (1) A taxing statute will be struck down as violative of Art. 
14 if there is no reasonable basis behind the classification made by it, ~ 
or, if the same class of property, similarly situated, is subjected to 
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unequaltaxation. [442G] 
Kunnathat Thathunni Moopil Nair v. The State of Kerala, [1961] 
3 SCR 77; /. T. 0. v. Lawrence Singh, AIR (1968) SC 658=(1968) 2 SCR 
165; State of Andhra Pradesh v. Nalla Raja, AIR (1967) SC 
1458= [1967] 3 SCR 28, referred to. 
(2) The luxury tax charged under section 4 of the Act is a tax 
on the mere provision for luxury and not on the hotel property or 
equipment. The measure or unit and the rate of taxation are uniform 
for all within the group subjected to tax. Further classification within 
the group was not considered necessary by the legislature which had 
wide latitude in the matter of classification keeping in view the nature 
of the taxable event. The tax therefore could not be said to be discri-
minatory. [4470-F] 
(3) Whether a particular tax is discriminatory or not must neces-
sarily be considered in light of the nature and incidence of that particu-
. ,... 
Jar tax and cannot be judged by what has been held in the context of ._.,,r 
other taxes except the general propositions. The precedents relating to 
property taxes such was as land tax, building tax, plantation tax, and 
even income tax or a service tax will not be of direct relevance to a 
luxury tax, a~ it is neither a property tax, nor an income tax but a tax on 
the provision for luxury. In case of tax on provisi

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