The Supreme Court, today stayed the Income Tax Department’s decision to levy 20% Tax on Hotel room tariffs as per 1995 and 2002 circulars. The circular in 1995 was amended by the Department in the year 2002 to include clarifications regarding the applicability of TDS provisions on hotel rent paid by the customers. The action was taken by the Apex Court in an appeal preferred by the Federation of Hotel and Restaurant Association of India.
Earlier, the Delhi High Court and the Madras High Court dismissed the petition filed by different hotel associations on the same issue. The Delhi High Court, in a petition filed by the by Federation of Indian Hotel, observed that the services provided by the hotliers including room charges, are subject to TDS provisions since the same falls within the definition of the term “rent” under section 194-I of the Income Tax Act, 1961. As pointed out by the Court, TDS provisions are applicable to every hotliers and the burden to prove that they are outside the ambit of section 194-I, will be on the concerned hotel. The present appeal is against the same order contending that the room charges paid by the Customers are not subject to TDS since it is not covered under section 194-I of the Act.
While granting the stay, the Court issued notices to the Income Tax Department restricting them to take any further action till any further orders from the Court.
The order can be accessed below.
