Law:

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Section 5 of the Hotel-Receipts Tax Act, 1980 - Charge of tax - Whether the Act is constitutionally invalid either on ground of lack of legislative competence or on ground of violation of articles 14 and 19(1)(g) of Constitution - Held, no FACTS The petitioners, who were hoteliers, challenged by way of writ petitions the constitutional validity of the Act, which imposed a special tax on the gross receipts of certain category of hotels, on the following grounds : (a) That in pith and substance, the law is one imposing a tax on luxuries provided in hotels and, therefore, the law is one under entry 62, List I of the Seventh Schedule to the Constitution and outside the Union power ; (b) That, at all events, the Act is patently violative of article 14 in that the basis of classification of hotels on the dividing line of room charges, though in itself an intelligible one, has, however, no nexus, let alone any rational nexus with the objects of the law, viz.,to impose a tax on income ; While hotels which collect room charges of Rs. 75 per day from any individual in the previous year fall within the tax net, other hotels which have much higher gross-receipts are left out. The classification does not include all persons who, from the point of view of the objects of the Act, are similarly situated. (c) That the law imposes unreasonable burden on the petitioners' freedom of business and constitutes a violation of article 19( l)(g) . HELD The expression 'income' in entry 82, List I, cannot be subjected, by implication, to any restriction, by the way in which that term might have been deployed in a fiscal statute. A particular statute enacted under the entry, might, as a matter of fiscal policy, seek to tax some species of income alone. The definitions would, therefore, be limited by the consideration of fiscal policy of a particular statute. But expression 'income' in the legislative entry has always been understood in a wide and comprehensive connotation to embrace within it every kind of receipt or gain either of a capital nature or of a revenue nature. The 'taxable-receipts' as defined in the statute cannot be held to fall outside such a 'wider connotation' of 'income'…

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