A C I T Vs. KHANDARI HOTELS P LTD
INCOME TAX APPELLATE TRIBUNAL
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D. Manmohan, Judicial Member -
(1.) THESE appeals by the Revenue are directed against the order dt. 29.10.1997 passed by the Commissioner of Income Tax (Appeals), Vijayawada, and they pertain to the assessment years 1992-93 and 1993-94. As the issue involved in both these appeals is common, we proceed to dispose of these appeals by a combined order for the sake of convenience.
(2.) The assessee company is engaged in the business of running a hotel. During the previous year relevant to assessment year under consideration, the assessee maintained a restaurant in the premises of Hotel Kandhari International, Vijayawada, which is equipped with machines, which condition temperature. As per the Expenditure Tax Act, 1987 (ET Act), which was in force at the relevant point of time, the assessee who is maintaining air conditioned restaurant has to collect tax so as to pay to the Government under the ET Act, on the food and beverages served in the restaurant. Though the assessee maintained air conditioned restaurant, it did not file returns under the ET Act and thus the Assessing Officer initiated proceedings against the assessee company in response to which it was submitted that the hotel is not equipped with air conditioners and it is merely equipped with machines producing air-cooling effect and thus it is not liable to pay any tax under the ET Act.
The Assessing Officer was not convinced with the explanation. He observed that the hotel was fitted with four air-conditioners for the purpose of regulating the temperature of the restaurant. The assessee had collected expenditure tax amounting to Rs. 1,25,337/- during the previous year relevant to assessment year 1993-94 which in itself shows that the company is liable to pay expenditure tax. He further observed that in India air-conditioning equipment is used in restaurants to generate cooling effect only and the machines fitted in the restaurant would fall within the meaning of the term "air conditioners". He accordingly completed the assessment by bringing to tax the gross turnovers declared by the assessee under the ET Act.
(3.) AGGRIEVED, the assessee contended before the first appellate authority that as per the Penguin Modern English Dictionary, "air conditioners" means 'an apparatus regulating temperature and humidity of air used in ventilation." The machines fitted in the restaurant do not fall within the afore-mentioned description because they can only give cooling effect and cannot control the temperature in winter. The first appellate authority accepted the contention of the assessee. He observed that since the machines installed in the restaurant cannot warm the temperatures, they do not qualify for being considered as air conditioners and therefore he concluded that ET Act is not applicable to the restaurant run by the assessee.;
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