The Kerala High Court has ruled that Ayurvedic treatment provided in a resort is liable to taxation. ''The main activities of the assessee, as per the brochures produced before the assessing officer, are canoeing, motor boat cruises, houseboat stay, trekking, Alleppey beach visit, coir factory visit, elephant ride, Kathakali, temple dance, dramas, Mohiniyattam and Kalaripayattu.

"Therefore, the main activities of the assessee are not running the hospital but providing a resort and other facilities, and the Ayurvedic treatment is only incidental to that of the facilities,'' observed the Division Bench of Justices A K Jayasankaran Nambiar and Easwaran S. In this case, the appellant/assessee operates an Ayurvedic hospital under S D Pharmacy Private Limited, which is also engaged in manufacturing Ayurvedic medicines.

The assessing authority determined that the primary business of the assessee involved offering accommodation to tourists, alongside providing Ayurvedic treatment for both sick and non-sick people. It was noted that the majority of the revenue was generated from accommodation services.

Based on this assessment, the authorities concluded that the wellness treatments offered in combination with accommodation were subject to taxation. Consequently, an order for tax assessment was issued. Unhappy with this decision, the assessee filed statutory appeals before the Deputy Commissioner (Appeals), which were subsequently dismissed. The assessee then took the matter to the appellate tribunal.

The tribunal upheld the assessment but modified the penalty, limiting it to the tax payable. Challenging this verdict, the assessee filed a writ petition in the High Court. The Division Bench concurred with the Single Judge’s ruling, pointing out that the assessee had failed to provide its books of accounts to demonstrate that rental income from accommodation was secondary to the Ayurvedic treatment offered to inpatients.

The court further noted that ''the tariff rate of the rooms described are inclusive of the breakfast and other facilities. Hence, the tribunal was of the view that while imparting Ayurvedic treatment to the inpatient, though a special diet is given in accordance with the treatment and the medicine given, the fact that an extra person is accommodated in the resort is charged with a rate and the fact that the breakfast, lunch, and dinner have been provided, shows that the assessee is not running an ayurvedic treatment centre but a resort where the incidental facility of ayurvedic treatment is being given to the occupants.'' In light of these findings, the court dismissed the appeal.
(With LiveLaw inputs)