Circular No. 650 — 650 dated 31 05 1993

What this is

Circular No. 650 was issued by the Central Board of Direct Taxes on 31 May 1993. Its subject is 650 dated 31 05 1993.

This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.

What it does

Narrows the phrase "such other taxes" used in circular No. 645 dated 15 March 1993, which had said that luxury tax and such other taxes levied by State Governments form part of "room charges" for deciding whether the Expenditure-tax Act, 1987 applies to a hotel. The Board says the phrase must be read ejusdem generis, so it covers only a tax that is in the nature of a luxury tax, by whatever name it is called. A State levy of a different character therefore does not go into room charges for the threshold test.

Why it was issued

Doubts had been expressed about what "such other taxes" in the earlier circular meant for the purpose of computing room charges.

Who it reaches

Hotels near the room charge threshold for expenditure-tax liability
State levies described by names other than luxury tax
Officers applying the Expenditure-tax Act, 1987 to hotels

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

OTHER ACTS

EXPENDITURE TAX ACT, 1987
Clarification on applicability of the Expenditure Tax Act, 1987

The Board, vide Circular No. 645, dated March 15, 1993 has clarified that luxury tax and such other taxes levied by the State Governments will form part of the "room charges" for the determination of applicability of the Expenditure-tax Act to any particular hotel.
Some doubts have been expressed about the meaning of "such other taxes" which are to be taken into account for computing the "Room charges".
The phrase "such other taxes" would require to be construed ejusdem generis. Therefore, the phrase "such other taxes" would only mean any tax (by whatever name called) which is in the nature of luxury tax.
Circular : No. 650, dated 31-5-1993.

What to watch

This is a circular under the Expenditure Tax Act, 1987, not an income-tax circular.
It cannot be read alone; the rule it qualifies is in circular No. 645 dated 15 March 1993.
The test is the character of the levy, not its name, so a differently named luxury levy is still included.
The Expenditure-tax Act itself has since ceased to operate in practice, so the threshold question it addresses arises only for the years that Act covered.

Where you meet it

In an expenditure-tax assessment of a hotel where the room charge computation, and so the applicability of the Act, turns on which State levies are added in.

← Circular No. 651 · Circular No. 649 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.