Constitution of India, 1950: Articles 14 and 19(1)(g)-Hotel Receipts Act, 1980-Whether violative of.

Articles 246, 248 and 254 & Schedule VII-Entries in legislative list-Whether to be construed in a wide and comprehensive connotation.

Hotel Receipts Act, 1980: Sections 3, 5 and 6-Legislative competence-Whether falls under Entry 82, List 1.

The Hotel Receipts Tax Act, 1980 came into force on 9.12.1980. The Act imposed a special tax of 15% on the gross receipts of certain hotels, where the room charges for residential accommodation provided to any person during the previous year were Rs.75 or more per day per individual. The levy commenced from the assessment year 1981-82 but was discontinued from 27.2.1982. Charges received from persons within the purview of certain Vienna Conventions were exempt from the tax.

The constitutional validity of the said Act was challenged in these writ petitions, on grounds of lack of legislative competence and of violation of Articles 14 and 19(1)(g).

It was contended on behalf of the petitioners that the reliance on Entry 82, List 1 in support of the tax was wholly misconceived and the tax in pith and substance was an impost under Entry 62, List II reserved to the States. It was also contended that the Act is patently violative of Article 14 since the basis of classification has no nexus with the object of the tax, in that other hotels which have much higher gross receipts are left out. It was contended by the petitioners that the law imposed unreasonable burden on their freedom of business and constituted a violation of Article 19(1)(g) of the Constitution.

On behalf of the Respondent it was contended that the said tax falls under Entry 82, List I and the word 'income' should not be read in a narrow and pedantic sense, but must be given its widest amplitude. The challenge to the Act on the ground that it was violative of Articles 14 and 19(1)(g), was also resisted by the Respondent.