Delhi High Court Affirms Tax Liability of Delhi Gymkhana Club under Delhi Tax on Luxuries Act, 1996

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Court emphasized that, based on the factual context, the case fell within the purview of the 1996 Act and not the subsequent 2012 Act

The Delhi High Court affirmed on Friday last week that the Delhi Gymkhana Club is subject to tax liability under the Delhi Tax on Luxuries Act, 1996 (DTL Act).

The Commissioner of Entertainment and Luxury Tax had held the club responsible for luxury tax payments for the assessment years 2009–10, 2010–11, and 2011–12.

The court emphasized that based on the factual context the case falls within the purview of the 1996 Act and not the subsequent 2012 Act.

The bench, consisting of Justice Yashwant Varma and Justice Ravinder Dudeja, observed, "In fact, the word 'luxury' did not even exist on the statute book prior to its insertion by virtue of the 2012 Amendment Act. In view of the above and bearing in mind the statutory position which prevailed at the time when the assessment orders came to be passed, we find no justification or ground to interfere with the ultimate conclusion arrived at by the first respondent."

Advocate Ayush A. Mehrotra represented the petitioners, the Delhi Gymkhana Club, while Additional Standing Counsel Rajeev Aggarwal appeared for the respondent, the Commissioner of Luxury Tax.

The petitioner, registered as a not-for-profit company under Section 25 of the Companies Act, 1956, operated as a social club. The club had not obtained registration under the DTL Act and had not paid any tax under it.

The Assessing Authority deemed the club liable for luxury tax, a decision upheld by the First Appellate Authority. The club then appealed to the Commissioner, who affirmed the liability. Challenging this order, the petitioner approached the High Court.

The court noted that the DTL Act, in its original form, taxed hotels offering residential accommodation, including the petitioner's club categorized as an "establishment" under Section 2(g). The term "hotelier" was linked to Section 2(g), making the club liable for tax under Section 3.

The court further observed that the 2012 amendment expanded the tax to cover banquet halls, gyms, hotels, and spas. Additionally, the bench highlighted that the term "receipt" is defined as monetary consideration received from any luxury provided in the establishment. For tax applicability, the assessee must qualify as an establishment and derive income or receipts from the provision of a luxury.

The court concluded that the Act, in its pre-2012 amendment form, would be applicable to the case's facts. Accordingly, the court affirmed the order and dismissed the petition.

Case Title: Delhi GymKhana Club v. Commissioner (Luxury Tax), New Delhi & Ors.