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LEGAL OPINION FOR ABC VACATION HOMES

Query 4: When can a property be termed as a hotel?


4.1 What is the general definition of a lodging house/ hotel and do residential homes
managed by ABC fall under it?
A hotel/ lodging house is defined differently under different legislations for the purpose of the
Act. For those legislations which do not define a hotel, the definition given by J. Subba Rao
and J. SK Das in the case of Associated Hotels Of India Ltd vs R. N. Kapoor, 1960 SCR (1)
368 can be kept in mind while categorizing an establishment as a hotel. Relevant paragraphs
have been produced hereunder:
J. SK DAS: It is sufficient to state that in its ordinary connotation the word 'hotel' means a
house for entertaining strangers or travellers: a place where lodging is furnished to transient
guests as well as one where both lodging and food or other amenities are furnished. It is worthy
of note that in a. 2(b) of the Rent Control Act three different words are used 'hotel', dharamshals'
or 'lodging house'.
Obviously, the three words do not mean the same establishment. In the cognate Act, the Bombay
Rents Hotel and Lodging House Rates Control Act, 1947, however, the definition clause gives the
same meaning to the words 'hotel' and lodging house'. In my view s. 2(b) of the Rent Control Act
by using two different words distinguishes a hotel from a lodging house in some respects and
indicates that the former is an establishment where not merely lodging but some other amenities
are provided.
J. SUBBA RAO: A hotel in common parlance means a place where a proprietor makes it his
business to furnish food or lodging, or both to travellers or other persons. A building cannot be
run as a hotel unless services necessary for the comfortable stay of lodgers and boarders are
maintained. Services so maintained vary with the standard of the hotel and the class of persons
to which it caters; but the amenities must have relation to the hotel business. Provisions for
heating or lighting, supply of hot water, sanitary arrangements, sleeping facilities, and such
others are some of the amenities a hotel offers to its constituents.

Again in the case of B. Vishwanatha Shetty vs P.N. Padmavathi, ILR 1992 KAR 2424, The
Karnataka High Court while reviewing the Karnataka Rent Control Act, 1961 held that:
The addition of the word by way of business, indicates that the Legislature has intended that
the provision for lodging although for monetary consideration should be by way of business.
The carrying on of business, implies repetition of acts and excludes an isolated transaction
which is not to be repeated. In other words, it must have a regularity and continuity of
transactions or acts. It is also necessary to remember that a boarding house which does not
provide lodging, is not covered by the definition. Whether the provision for lodging is the
principal object or the supplementary object or as necessary to the supply of board, if lodging
is provided it is a lodging house as defined. To provide a lodging' means 'to provide a
temporary abode or residence or a sleeping place.'
Therefore, it is clear that any place that provides lodging or a temporary abode and related
services by way of business through continuous transactions or acts falls under the general
definition of a hotel/ lodging house. The amenities provided depend upon the standard of the
hotel. Supply of heating, lighting, water and other such amenities fall under provision of
services.1 Also where various workmen like the liftmen, watchmen, sweepers, pump-attendant
etc. are employed to serve the tenants/ licensees/ lodgers they are considered as organized labor
and it is considered as provision of a service in addition to accommodation.2 Consequentially,
legally ABC will be considered as running a residential hotel/ lodging house.
4.2 What are Acts specifically defining a Hotel especially in the States of Haryana,
Himachal Pradesh and Goa?
A hotel is defined differently under different Acts that can be broadly categorized as those
governing management, maintenance, those governing labor laws applicable and those
determining tax payable.

1 Associated Hotels Of India Ltd vs R. N. Kapoor, 1960 SCR (1) 368


2 Rasheed A. Maskati and Others V. M.Abbas Ali Hussaini and Anr., 1991(1) LLJ 78; D. B. Khade
v. Ramsingh Jaysingh F.L.R. 1986 (52) 378; Kodali Nagaiah vs Sri Arani Kaniappa

Maistry ,(1990) IILLJ 537 AP

1. The State specific Shops and Establishments statutes

These legislations have been enacted to provide statutory obligation and rights to
employees and employers in the unorganized sector of employment, i.e. shops and
establishments.

In Haryana, the Punjab Shops and Commercial Establishments Act, 1958 defines
Commercial establishments under Section 2(iv) of the Act as commercial establishment means
any premises wherein any business, trade or profession is carried on for profit , and includes
journalistic or printing establishment and premises in which business of banking, insurance ,
stocks and shares , brokerage or produce exchange is carried on or which is used as hotel ,
restaurant , boarding or eating-house, theatre , cinema or other place of public entertainment or
any other place which the Government may declare , by notification in the Official Gazette , to
be a commercial establishment for the purposes of this Act

In Himachal Pradesh, the Himachal Pradesh Shops and Commercial Establishments


Act, 1969 defines Commercial establishments similarly under Section 2(iv) of the Act.

In Goa, Residential hotel is defined under Section 2(19) of the Goa, Daman and Diu
Shops and Establishments Act, 1973 as Residential hotel means any premises used for the
reception of guests and travellers desirous of dwelling or sleeping therein and includes a club.
This is much like the definition of a lodging house/ hotel that has been provided in Head no. 5.1
of the query and the cases mentioned therein would apply here

It is applicable to all persons employed in an establishment with or without wages, except


the members of the employer's family.

It is a State legislation and each State has framed its own rules for the Act. The State
Government can exempt, either permanently or for a specified period, any establishments from
all or any provisions of this Act.

The Act provides for compulsory registration of shop/ establishment within 30 days of
commencement of work and all communications of closure of an establishment within 15 days
from its closing.

It also lays down the hours of work per day and week as well as the guidelines for spreadover, rest interval, opening and closing hours, closed days, national and religious holidays,
overtime work, etc.

2. State specific Luxury tax Acts


Under the current tax regime, every state has their individual luxury tax acts.

The Haryana tax on luxuries Act, 2007 defines hotel under section 2(h) as :"hotel" means
any premises or part of premises where lodging accommodation along with the lawns thereof,
with or without board is by way of business provided for a monetary consideration, and includes
a lodging house, club and holiday resorts;( explanation.- a club, a lodging house and a holiday
resort for which charges are collected for providing accommodation along with the lawns
thereof, whether or not in the course of business shall be deemed to be a hotel for the purpose of
this act)

The Himachal Pradesh tax on luxuries (in hotels and lodging houses) Act, 1979 under
section 2(d) defines hotel as any premises or part of premises including a house-boat,
restaurant, bar or a tent where lodging with or without board or any kind of eatables or beverages
or other services are by way of business provided for a monetary consideration, and includes
such premises as are given on rent during any period of a financial year( explanation.- for the
purpose of clause (d) wherever any accommodation in a hotel is provided under timeshare
agreement or under package deal agreement or under any such other system wherein the facility
of availing accommodation during a given period in a year is allowed under a lump-sum
payment, shall also be deemed to be a hotel.)

The Goa Tax on Luxuries Act, 1988 under Section 2(d) defines hotel as hotel ' includes
a residential accommodation, a lodging house, an inn, a public house or a building or part of
building, a club, a boat, vessel or any place where a residential accommodation is provided by
way of business;"Explanation- A residential accommodation provided under Timeshare
Agreement or under Package Deal Agreement or under any such system wherein the facility of
availing residential accommodation during a given period in a year is allowed upon a lumpsum
payment shall be deemed to be a "hotel" for the purposes of this Act.

Though previously it covered more categories of assessees, at present it covers only the
hotels as a taxable assessee.

The tax is levied on luxuries provided in hotels, lodging house, clubs and inns etc.
including residential accommodation but does not include the supply of food, drinks or other
services which is separately charged for under service tax or other taxes.
3. Expenditure Tax Act, 1987

It is a central legislation.

This Act shall apply in relation to any chargeable expenditure incurred in a hotel wherein the
room charges for any unit of residential accommodation at the time of incurring of such
expenditure or incurred in a restaurant are one thousand two hundred rupees or more per day per
individual 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; and (2) incurred in a restaurant.

Rate of tax is 20 %

It is a tax collected by the Central Government.


4. The Hotel- Receipts Tax Act, 1980

It is a Central Legislation
It looks to impose a special tax on gross receipts of certain hotels
Section 2(6) of the Act defines a hotel as a " hotel" includes a building or part of a building
where residential accommodation is, by way of business, provided for a monetary
consideration
4.3 Applicability of Acts specifically defining a hotel on the Residential Houses managed
by ABC
1. The State specific Shops and Establishments statutes

Out of the States of Himachal Pradesh, Haryana and Goa, Residential hotel has only been
defined under the Shops and Establishments Act in Goa, under Section 2(19) of the Goa, Daman
and Diu Shops and Establishments Act, 1973 as Residential hotel means any premises used
for the reception of guests and travellers desirous of dwelling or sleeping therein and includes a
club. This is much like the general definition of a lodging house/ hotel that has been provided in
Head no. 4.1 of the query and the cases mentioned therein would apply here.
Again, in absence of a specific definition being provided in the Punjab Shops and Commercial
Establishments Act, 1958 and in the Himachal Pradesh Shops and Commercial Establishments
Act, 1969, the general definition of a lodging house/hotel that has been provided in Head no. 4.1
and the cases mentioned therein would apply here.
It is clear that any place that provides lodging or a temporary abode and related services by way
of business through continuous transactions or acts falls under the general definition of a hotel/
lodging house. The amenities provided depend upon the standard of the hotel. Supply of heating,
lighting, water and other such amenities fall under provision of service. 3 Also where various
workmen like the liftmen, watchmen, sweepers, pump-attendant etc. are employed to serve the
tenants/ licensees/ lodgers they are considered as organized labor and it is considered as
provision of a service in addition to accommodation.4 Consequentially, legally ABC will be
considered as running a residential hotel/ lodging house under the State specific Shops and
Establishments statutes of the States of Himachal Pradesh, Haryana and Goa

2. State specific Luxury tax Acts


HARYANA: The Haryana tax on luxuries Act, 2007 defines hotel under section 2(h)
as :"hotel" means any premises or part of premises where lodging accommodation along with
the lawns thereof, with or without board is by way of business provided for a monetary
consideration, and includes a lodging house, club and holiday resorts;( explanation.- a club, a
3 Associated Hotels Of India Ltd vs R. N. Kapoor, 1960 SCR (1) 368
4 Rasheed A. Maskati and Others V. M.Abbas Ali Hussaini and Anr., 1991(1) LLJ 78; D. B. Khade
v. Ramsingh Jaysingh F.L.R. 1986 (52) 378; Kodali Nagaiah vs Sri Arani Kaniappa

Maistry ,(1990) IILLJ 537 AP

lodging house and a holiday resort for which charges are collected for providing
accommodation along with the lawns thereof, whether or not in the course of business shall
be deemed to be a hotel for the purpose of this act)

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