Expenditure-tax Act, 1987

For levy of a tax on expenditure incurred in certain hotels or restaurants.

Expenditure Tax Act, 1987

[Act 35 of 1987]       [14th September, 1987]

An Act to provide for the levy of a tax on expenditure incurred in certain hotels [i][or restaurants and for matters connected therewith or incidental thereto]

Be it enacted by Parliament in the Thirty-eighth Year of the Republic of India as follows:—

Statement of Objects and Reasons.—The Bill seeks to impose a tax on expenditure incurred in hotels where the room charges for any unit of residential accommodation are four hundred rupees or more per day per individual. This tax will be levied at the rate of ten per cent of the expenditure incurred in connection with provision of any accommodation food, drinks, and certain other categories of services. This tax will not apply to expenditure incurred in foreign exchange or in the case of a person enjoying diplomatic privileges.

1. Short title, extent and commencement.

1. Short title, extent and commencement.— (1) This Act may be called the Expenditure-tax Act, 1987.

(2) It extends to the whole of India except the State of Jammu and Kashmir.

(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.

[Editor’s Note: This Act came into force w.e.f. 1-11-1987.]

2. Definitions.

2. Definitions.—In this Act, unless the context otherwise requires,—

(1) “assessee” means a person responsible for collecting the expenditure-tax payable under the provisions of this Act;

(2) “assessment year” means the period of twelve months commencing on the 1st day of April every year;

(3) “Board” means the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963);

(4) “chargeable expenditure” means the expenditure referred to in Section 5;

(5) “expenditure-tax” or “tax” means the tax chargeable under the provisions of this Act;

(6) “hotel” includes a building or part of a building where residential accommodation is, by way of business, provided for a monetary consideration;

(7) “Income Tax Act” means the Income Tax Act, 1961 (43 of 1961);

(8) “person responsible for collecting” means a person who is required to collect tax under this Act or is required to pay any other sum of money under this Act and includes—

(a) every person in respect of whom any proceedings under this Act have been taken, and

(b) every person who is deemed to be an assessee-in-default under any provision of this Act;

(9) “prescribed” means prescribed by rules made under this Act;

[ii][(9-A) “restaurant” means any premises, not being a restaurant situated in a hotel referred to in clause (1) of Section 3, in which the business of sale of food or drink to the public is carried on and such premises, at the beginning of any month, are equipped with, or have access to, facilities for air-conditioning;]

(10) “room charges” means the charges for a unit of residential accommodation in a hotel and includes the charges for—

(a) furniture, air-conditioner, refrigerator, radio, music, telephone, television, and

(b) such other services as are normally included by a hotel in room rent,

but does not include charges for food, drinks and any services other than those referred to in sub-clauses (a) and (b);

(11) all other words and expressions used herein but not defined and defined in the Income Tax Act shall have the meanings respectively assigned to them in that Act.

Other Contents of Expenditure-tax Act, 1987
Sections 1 to 13 Sections 14 to 33

3. Application of the Act.

[iii][3. Application of the Act.—This Act shall apply in relation to any chargeable expenditure—

(1) incurred [iv][before the 1st day of June, 2003] in a hotel wherein the room charges for any unit of residential accommodation at the time of incurring of such expenditure are [v][three thousand rupees or more per day] and where,—

(a) a composite charge is payable in respect of such unit and food, the room charges included therein shall be determined in the prescribed manner;

(b) (i) a composite charge is payable in respect of such unit, food, drinks and other services, or any of them, and the case is not covered by the provisions of sub-clause (a), or

(ii) it appears to the Assessing Officer that the charges for such unit, food, drinks or other services are so arranged that the room charges are understated and the other charges are overstated,

the Assessing Officer shall, for the purposes of this clause determine the room charges on such reasonable basis as he may deem fit; and

(2) incurred in a restaurant [vi][before the 1st day of June, 1992].]

4. Charge of expenditure-tax.

[vii][4. Charge of expenditure-tax.—Subject to the provisions of this Act, there shall be charged on and from—

(a) the commencement of this Act [viii][but not after the 31st day of May, 2003], a tax at the rate of [ix][ten] per cent. of the chargeable expenditure incurred in a hotel referred to in clause (1) of Section 3:

Provided that nothing in this clause shall apply in the case of a hotel referred to in [x][clause (a) of sub-section (7) of Section 80-IB] of the Income-tax Act during the period beginning on the 1st day of April, 1991 and ending on the 31st day of March, 2001:

[xi][Provided further that nothing in this clause shall apply in the case of a hotel referred to in [xii][clause (a) of sub-section (7) of Section 80-IB] of the Income Tax Act, 1961 (43 of 1961) during the period beginning on the 1st day of April, 1998 and ending on the 31st day of March, 2008.]

(b) the 1st day of October, 1991 [xiii][but not after the 31st day of May, 1992], a tax at the rate of fifteen per cent. of the chargeable expenditure incurred in a restaurant referred to in clause (2) of Section 3.]

5. Meaning of chargeable expenditure.

[xiv][5. Meaning of chargeable expenditure.—For the purposes of this Act, chargeable expenditure,—

(1) in relation to a hotel referred to in clause (1) of Section 3, means any expenditure incurred in, or payments made to, the hotel in connection with the provision of—

(a) any accommodation, residential or otherwise; or

[xv][* * *]

(c) any accommodation in such hotel on hire or lease; or

[xvi][* * *],

but does not include—

(i) any expenditure which is incurred, or payment for which is made, in foreign exchange [xvii][before the 1st day of October, 1992];

(ii) any expenditure incurred by persons within the purview of the Vienna Convention on Diplomatic Relations, 1961or the Vienna Convention on Consular Relations, 1963;

(iii) any expenditure incurred in any shop or in any office which is not owned or managed by the person who carries on the business of a hotel;

(iv) any expenditure by way of any tax, including tax under this Act.

Explanation.—For the purposes of this clause,—

(a) expenditure incurred or any payments made in Indian currency obtained by conversion of foreign exchange into Indian currency shall in such cases and in such circumstances as may be prescribed be deemed to have been incurred or, as the case may be, made in foreign exchange; and

(b) “foreign exchange” and “Indian currency” shall have the meanings respectively assigned to them in clauses (h) and (k) of Section 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973);

(2) in relation to a restaurant referred to in clause (2) of Section 3, means any expenditure incurred in, or payments made to, a restaurant in connection with the provision of food or drink by the restaurant, whether at the restaurant or outside, or by any other person in the restaurant, but does not include any expenditure referred to in sub-clauses (ii) and (iv) of clause (1).]

6. Tax authorities.

6. Tax authorities.—[xviii][(1) Every Director General of Income Tax, Chief Commissioner of Income Tax, Director of Income Tax, Commissioner of Income Tax, Commissioner of Income Tax (Appeals), [xix][Additional Director of Income Tax, Additional Commissioner of Income Tax,] [xx][Joint Director of Income Tax, Joint Commissioner of Income Tax] Deputy Director of Income Tax, Deputy Commissioner of Income Tax, Assistant Director of Income Tax, Assistant Commissioner of Income Tax, Income Tax Officer, Tax Recovery Officer and Inspector of Income Tax shall have the like powers and perform the like functions under this Act as he has and performs under the Income Tax Act, and for the exercise of his powers and the performance of his functions, his jurisdiction under this Act shall be the same as he has under the Income Tax Act.]

(2) All officers and persons employed in the execution of this Act shall observe and follow the orders, instructions and directions of the Board:

Provided that no such orders, instructions or directions shall be issued—

(a) so as to require any tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or

(b) so as to interfere with the discretion of the Commissioner (Appeals) in the exercise of his appellate functions.

(3) Every Income Tax Officer employed in the execution of this Act shall observe and follow the orders, instructions and directions issued for his guidance by the [xxi][Director General or Director or by the Chief Commissioner or Commissioner] or by the [xxii][Additional Commissioner of Income Tax or] [xxiii][Joint Commissioner] within whose jurisdiction he performs his functions.

7. Collection and recovery of expenditure-tax.

[xxiv][7. Collection and recovery of expenditure-tax.—(1) Where any chargeable expenditure is incurred in a hotel referred to in clause (1) of Section 3,—

(a) if such expenditure relates to any of the services, specified in sub-clauses (a) to (d) of clause (1) of Section 5, provided by the hotel, the person who carries on the business of such hotel; and

(b) if such expenditure relates to any of the services, specified in sub-clause (b) or sub-clause (d) of clause (1) of Section 5, provided by the other person referred to therein, such other person,

shall collect the expenditure-tax at the rate specified in clause (a) of Section 4.

(2) Where any chargeable expenditure is incurred in a restaurant referred to in clause (2) of Section 3 [xxv][before the 1st day of June, 1992] in relation to any services specified in clause (2) of Section 5 and where such services are—

(a) provided by the restaurant, the person who carries on the business of such restaurant; and

(b) provided by the other person, such other person,

shall collect the expenditure-tax at the rate specified in clause (b) of Section 4.

(3) The tax collected during any calendar month in accordance with the provisions of sub-section (1) and (2) shall be paid to the credit of the Central Government by the 10th of the month immediately following the said calendar month.

(4) Any person responsible for collecting the tax, who fails to collect the tax in accordance with the provisions of sub-section (1) or sub-section (2) shall, notwithstanding such failure, be liable to pay the tax to the credit of the Central Government in accordance with the provisions of sub-section (3).]

8. Person responsible for collecting tax to furnish prescribed return.

8. Person responsible for collecting tax to furnish prescribed return.— (1) Every person responsible for collecting the tax shall before the expiry of four months from the 31st day of March in each year, furnish or cause to be furnished to the Income Tax Officer in the prescribed form and verified in the prescribed manner, a return in respect of the immediately preceding financial year showing—

(a) the aggregate of the payments received in respect of chargeable expenditure;

(b) the amount of the tax collected;

(c) the amount of the tax paid to the credit of the Central Government; and

(d) such other particulars as may be prescribed.

(2) In the case of any person who, in the opinion of the Income Tax Officer, is responsible for collecting tax under this Act and who has not furnished a return under sub-section (1), the Income Tax Officer may, before the expiry of the financial year in which the return is to be furnished, issue a notice to him and serve the same upon him, requiring him to furnish within thirty days from the date of service of the notice the return in the prescribed form and verified in the prescribed manner setting forth such other particulars as may be prescribed.

(3) Any person responsible for collecting the tax who has not furnished the return within the time allowed under sub-section (1) or sub-section (2), or having furnished a return under sub-section (1) or sub-section (2), discovers any omission or wrong statement therein, may furnish a return or a revised return, as the case may be, at any time before the assessment is made.

9. Assessment.

9. Assessment.— (1) For the purpose of making an assessment under this Act, the Income Tax Officer may serve on any person who has furnished a return under Section 8 or upon whom a notice has been served under sub-section (2) of Section 8 (whether a return has been furnished or not) a notice requiring him on a date therein to be specified, to produce or cause to be produced such accounts or documents or other evidence as the Income Tax Officer may require for the purposes of this Act and may, from time to time, serve further notices requiring the production of such further accounts or documents or other evidence as he may require.

(2) The Income Tax Officer, after considering such accounts, documents or other evidence, if any, as he has obtained under sub-section (1) and after taking into account any relevant material which he has gathered, shall, by an order in writing, assess the chargeable expenditure and the amount of tax payable on the basis of such assessment.

10. Best judgement assessment.

10. Best judgement assessment.—If—

(a) any person fails to make the return required by any notice given under sub-section (2) of Section 8 and has not made a return or a revised return under sub-section (3) of that section, or

(b) any person having made a return fails to comply with all the terms of a notice issued under sub-section (1) of Section 9, or

(c) the Income Tax Officer is not satisfied with the correctness or the completeness of the accounts of the assessee,

the Income Tax Officer, after taking into account all the relevant material which he has gathered, shall, by an order in writing, make the assessment of the chargeable expenditure to the best of his judgement and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment.

11. Chargeable expenditure escaping assessment.

11. Chargeable expenditure escaping assessment.—If—

(a) the Income Tax Officer has reason to believe that by reason of omission or failure on the part of the assessee to make a return under Section 8 for any assessment year or to disclose wholly and truly all material facts necessary for his assessment for any assessment year, chargeable expenditure for that year has escaped assessment or has been underassessed, or

(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income Tax Officer has, in consequence of information in his possession, reason to believe that chargeable expenditure assessable in any assessment year has escaped assessment or has been underassessed,

he may, in cases falling under clause (a), at any time, and in cases falling under clause (b), at any time within four years from the end of that assessment year, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under Section 8 and may proceed to assess or reassess the chargeable expenditure, and the provisions of this Act shall, so far as may be, apply, as if the notice was a notice issued under that section.

12. Rectification of mistake.

12. Rectification of mistake.— (1) With a view to rectifying any mistake apparent from the record, the tax authority referred to in Section 6 which passed any order under the provisions of this Act may, within four years of the date on which such order was passed, amend the order.

(2) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided.

(3) Subject to the other provisions of this section, the authority concerned—

(a) may make an amendment under sub-section (1) of its own motion, and

(b) shall make such amendment if any mistake is brought to its notice,—

(i) by the assessee; or

(ii) where the authority concerned is the Commissioner (Appeals), by the Income Tax Officer.

(4) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this section unless the authority concerned has given notice to teh assessee of its intention so to do and has allowed the assessee a reasonable opportunity of being heard.

(5) Where an amendment is made under this section, an order shall be passed in writing by the tax authority concerned.

(6) Subject to the other provisions of this Act, where any such amendment has the effect of reducing the assessment, the Income Tax Officer shall make any refund which may be due to such assessee.

(7) Where any such amendment has the effect of enhancing the assessment or reducing the refund already made, the Income Tax Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable and such notice of demand shall be deemed to be issued under Section 20 and the provisions of this Act shall apply accordingly.

13. Time limit for completion of assessment and reassessment.

13. Time limit for completion of assessment and reassessment.— (1) No order of assessment shall be made under Section 9 or Section 10 at any time after expiration of a period of four years from the end of the assessment year in which the chargeable expenditure was first assessable, or one year from the date of the filing of the return or revised return under Section 8, whichever is later.

(2) No order of assessment or reassessment shall be made under Section 11,—

(a) where the assessment or reassessment is to be made in a case falling within clause (a) of Section 11 for which a notice has been served upon the assessee, at any time after the expiration of a period of four years from the end of the assessment year in which the said notice was served;

(b) where the assessment or reassessment is to be made in a case falling within clause (b) of Section 11, for which a notice has been served, after the expiration of a period of—

(i) four years from the end of the assessment year in which the chargeable expenditure was first assessable, or

(ii) one year from the date of service of such notice,

whichever is later.

(3) Notwithstanding anything contained in sub-sections (1) and (2), an order of fresh assessment in pursuance of an order passed under Section 21, Section 22 or Section 23, setting aside or cancelling an assessment, may be made at any time before the expiry of four years from the end of the financial year in which the order under Section 21 is passed by the [xxvi][the Commissioner, or the order is received by the Chief Commissioner or Commissioner, as the case may be, under Section 22 or Section 23.]

(4) The provisions of sub-sections (1) and (2) shall not apply to the assessment or reassessment made in consequence of, or to give effect to, any finding or direction contained in an order under Section 21, Section 22, Section 23 or any order of [xxvii][the National Tax Tribunal or of] a High Court or Supreme Court in a proceeding by way of reference or appeal under this Act or any order of any court in a proceeding otherwise than by way of an appeal or reference under this Act and such assessment or reassessment may, subject to the provisions of sub-section (3), be completed at any time.

Explanation.—In computing the period of limitation for the purposes of this section, the period during which the assessment proceeding is stayed by an order or injunction of any court shall be excluded.

References

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