Recently, while examining the character of Ayurvedic treatment facilities under the Luxury Tax Act, the Kerala High Court held that an Ayurvedic treatment centre functioning as a therapeutic institution cannot be classified as a ‘hotel’. Emphasising the nature of services rendered, the Bench observed that reference to guest comments and treatment programmes “definitely goes on to show that the petitioner is to be treated as a hospital alone,” thereby displacing the tax authority’s assessment that had treated the establishment as a luxury hotel.
Brief facts:
The case stemmed from an assessment initiated under the Kerala Tax on Luxuries Act, 1976, through which the Commercial Tax Officer classified the petitioner’s Ayurvedic treatment centre, operating from the leased Kollengode Palace, as a ‘hotel’ for the assessment years 2004–05 to 2007–08. Proceeding on this premise, the authority levied a luxury tax at 15% on both room rent and treatment charges. Challenging this classification, the petitioner approached the High Court, asserting that the establishment functioned as a full-fledged Ayurvedic hospital admitting only patients undergoing prescribed treatment for a minimum of 14 days, without offering amenities characteristic of a hotel. The writ petition was therefore filed to contest the legality of the assessment order and to seek recognition of the centre as a ‘hospital’ for the relevant assessment period.
Contentions of the Petitioner:
The petitioner argued that its establishment functioned exclusively as an Ayurvedic hospital and therefore could not be brought under the definition of a ‘hotel’ for the purpose of the luxury tax. It asserted that the centre admitted only those undergoing therapeutic Ayurvedic treatment for a minimum prescribed duration and did not offer accommodation to casual visitors or tourists. The Petitioner highlighted the absence of hotel-like facilities, no restaurant, no separate food tariff, only dietary food based on the doctor’s directions, and no recreational amenities such as swimming pools or shops. It emphasised that the treatment programmes involved structured medical supervision, and the charges collected were primarily towards therapeutic care, which exceeded the room rent component. To strengthen its case, the Petitioner pointed out that for subsequent assessment years, the establishment had already been categorised as a hospital by the competent appellate authority, and therefore, the contrary view taken in the impugned order could not stand. Based on these factors, it argued that the assessment order treating it as a hotel was unsustainable.
Contentions of the Respondent:
The State defended the assessment, contending that the authority had examined the activities carried out by the petitioner and concluded that the collections, both for accommodation and treatment, fell within the taxable ambit of a hotel under the statute. The Respondents argued that the earlier judgment cited by the Petitioner was based on factual circumstances relating to subsequent years and could not automatically govern the period under scrutiny in the present writ petition. It was submitted that the assessment order had specifically considered the petitioner’s brochures, guest reviews, and package rates, and that combining room rent with treatment charges justified treating the establishment as one providing taxable luxuries. Accordingly, the State urged that the impugned order required no interference.
Observation of the Court:
The Bench noted that the authority had relied on guest reviews and descriptions of treatment programmes to conclude that the centre operated like a hotel. Extracting the very findings of the assessing officer, the Court highlighted that “In short, M/s. Kalarikovilakom is not a hospital and what is offered therein to the guests is not treatment in true medical sense… The relation between the occupants and Kalarikovilakom is not that like a patient to hospital but like guest to hotel… There is no treatment as administered in a full-fledged hospital to patients to combat diseases.”
The Court held that “The reference to the comment/review by the ‘guest’ definitely goes on to show that the petitioner 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 also relied on the authority’s own recording of the treatment packages and tariff structure, stating that “This all inclusive package tariff does changes depending upon the type of suite the prospective person selects.” It further stated that “For example, for availing stress relief (Manshanthy) guest has to pay Rs.2,65,650/- if he stays in Kovilakom suites but he has to pay Rs.3,54,200/- if he stays in Vengunad Suites even if the treatment is same.”
Further, the Court emphasised that even the figures recorded in the assessment order pointed decisively toward a therapeutic establishment rather than a hotel. It highlighted the authority’s own findings that “The combined room rent for the 4 years were to the extent of Rs.3,33,23,102/-, and the treatment charges were to the extent of Rs.4,98,47,420/-. ” These numbers, the Bench observed, demonstrated that treatment, not accommodation, formed the core of the petitioner’s activity. Placing the factual record in perspective, the Court concluded that “Thus, it has been categorically found by the Division Bench of this Court that on the basis of the factual aspects, the assessee can only be considered to be a ‘hospital’ and assessed accordingly.”
The decision of the Court:
In light of the foregoing discussion, the Bench allowed the writ petition, setting aside the impugned assessment order and directing the Commercial Tax Officer to issue a fresh order treating the petitioner as a hospital. The Court noted that the earlier appellate determination had already settled the petitioner’s status for subsequent years, and the factual record in the present case was fully consistent with that categorisation.
Case Title: M/S.Escapade Resorts Pvt. Ltd. Vs. The Commercial Tax Officer (Wc & Lt) And Anr.
Case No.: WP(C) No.18245 of 2008
Coram: Hon’ble Mr. Justice A.Muhamed Mustaque, Hon’ble Mr. Justice Harisankar V. Menon
Advocate for the Applicants: Sr. Adv. Joseph Kodianthara, Advs. Mathews K.Uthuppachan And Terry V.James
Advocate for the Opposite Party: Sr. Govt. Pleader Dr.Thushara James
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