| Facilities/ amenities provided by hotels to its customers is not subject to withholding tax |
| Tuesday, 23 June 2009 14:34 | |
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The Bombay High court has held that facilities/ amenities provided by hotels to its customers is not subject to withholding tax. The assessee company operated a number of five star hotels in India. The assessee company offered various facilities/ amenities to its customers which include highly trained / experienced multi-lingual staff, 24-hour service for reception, telephones, house-keeping, select restaurants, bank counter, beauty salon, barber shop, car rental, shopping centre, laundry / valet, health club, business centre services, etc. The issue before the HC was whether the facilities/amenities provided by the assessee company are subject to TDS under section 194C of the ITA (which applies or payments to contractors and sub-contractors). The HC held that the words ‘carrying out any work’ in section 194C of the ITA was limited to any work which ulminates into a product or result. In other words,the word ‘work’ in section 194C of the ITA was limited to doing something with a view to achieve the task undertaken or carry out an operation which produces some result. The HC held that facilities/ amenities provided by the assessee company to its customers could not be said to be covered under section 194C of the ITA as neither such a contract constitutes ‘work’ within the meaning of section 194C of the ITA nor hose contracts are in the nature of service contracts specifically included in the said section. Accordingly, the HC quashed the Circular No. 681 dated 8 March 1994 to the extent it holds that section 194C of the ITA applies to payments by the customers to the assessee company for availing the facilities/ amenities. East India Hotels Limited and Others v. CBDT, New Delhi and Others, WP 2104 of 1994 (Mumbai) |
