Staff Reporter

BANGALORE: In what could be termed as a major victory for the State, the Karnataka high Court on Thursday upheld the tax levied by the Commercial Tax Department on duty-free shops.

The judgment, delivered by a Division Bench comprising Justice V. Gopala Gowda and Justice Ravi Malimath clears the way for the State to collect tax from duty-free shops at international airports and other locations.

The Bench passed the judgement on an appeal by Hotel Ashok (India Tourism Development Corporation) which had challenged a single judge order of February 11, 2009. The single judge had upheld the levy of Rs. 4.20 crore by the Commercial Tax Department on products sold through ITDC’s duty-free shops in the State.

ITDC contention

ITDC contended that it was exempt from paying any tax under Section 5 (2) of the Customs Act. It said it was a Government of India undertaking set up to promote hotels, cafeterias, restaurants, duty free shops at major international airports.

The Bench said ITDC could not claim any exemption and that it is liable to pay the tax due to the State.