Ayurvedic Treatment Centre Classified As 'Hospital', Not 'Hotel', Luxury Tax Cannot Be Imposed: Kerala High Court

The Kerala High Court has held that an Ayurvedic Treatment centre is to be classified as a 'hospital' and not 'hotel', and therefore, luxury tax cannot be imposed. Justices A. Muhamed Mustaque and Harisankar V. Menon stated that the Ayurvedic Treatment Centre admits patients undergoing prescribed Ayurvedic treatment for a minimum duration, without offering hotel amenities, it qualifies as a hospital and luxury tax is not liable under the Luxury Tax Act. In this case, the assessee/petitioner has set up a full-fledged Ayurvedic hospital by obtaining on lease the 'Kollengode Palace', offering specified therapeutic Ayurvedic treatment. Proceedings were taken under the provisions of the Kerala Tax on Luxuries Act, 1976, proposing to demand tax thereunder, treating the activity of the assessee as that of a 'hotel'. The assessee contended that it does not come within the definition of 'hotel', since it does not provide accommodation to anyone except those who are ready to undergo treatment for a minimum period of 14 days and are admitted. The assessee also highlighted that there is no restaurant, no separate tariff for food, and only dietary food available; that there are no swimming pools or shops provided, etc. However, by assessment order, the Commercial Tax Officer finalised the assessment, both on 'room rent' and 'treatment charges', levying tax at the rate of 15%. As per the department, the amount collected by the assessee attracts tax under the statute. The bench observed that the amendment made to the Luxury Tax Act pursuant to the Finance Act, 2008, by which 'luxury provided in the hospital' has been made subject to tax under the Luxury Tax Act. When that is so, there cannot be any dispute as regards the assessee's liability to the luxury tax for the period subsequent to the amendment as above. The bench noted that the reference to the comment/review by the 'guest' definitely goes on to show that the assessee is to be treated as a hospital alone. This is especially so, since the comments specifically make reference to the involvement of the Doctors, which has improved the general health and well-being of the guests. The bench found that the guest is required to stay for the required period of time in tune with the 'package' for the 'room' granted. There is a difference in the amount being collected depending on the 'accommodation'. This also shows that it is not as if a tourist obtains a reservation and goes to the hotel for a stay. To be read along with the afore is the fact that the treatment charges collected are more than the room rent, as is evident from the assessment order. The combined room rent for the 4 years was to the extent of Rs.3,33,23,102/-, and the treatment charges were to the extent of Rs.4,98,47,420/-. The bench held that on the basis of the factual aspects, the assessee can only be considered to be a 'hospital' and assessed accordingly. In view of the above, the bench allowed the petition. Case Title: M/s Escapade Resorts Pvt. Ltd. v. The Commercial Tax Officer Case Number: WP(C) NO.18245 OF 2008Citation: 2025 LiveLaw (Ker) 797 Counsel for Petitioner/Assessee: Joseph Kodianthara Counsel for Respondent/Department: Dr. Thushara James Click Here To Read/Download Order

Ayurvedic Treatment Centre Classified As 'Hospital', Not 'Hotel', Luxury Tax Cannot Be Imposed: Kerala High Court

Mehak Dhiman

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