« Top Headlines » Open DEMAT Account in 24 hrs  Mock Test Papers Series - I & II for Students appearing in CA Foundation January 2027 Examination.  Income Tax Rules 2026: CBDT Introduces Revised Form 161 for Penalty Waiver, Clarifies Misreporting Categories and Taxpayer Relief  ITR Filing and Income Tax Audit Deadline Extended: 5 Critical Things Taxpayers Must Know  Filing Belated ITR for AY 2026-27? Know Which Losses You Can Carry Forward and Which You May Lose  CBDT Extends Tax Audit Report Deadline to October 21, ITR Filing Last Date to November 21 for AY 2026-27  CBDT Extends AY 2026-27 ITR Filing Deadline for Tax-Audit Cases: New Dates and Key Compliance Details  Foreign Assets Missing From Your ITR? Income Tax Department Opens One-Time Disclosure Window  Tax Audit Deadline September 30: Why AIS, TDS and GST Figures May Not Match Your ITR and What Taxpayers Should Do  Tax audit deadline September 30: Common mistakes taxpayers should avoid  Your ITR says ‘verified’, but the refund hasn’t arrived? 5 reasons why your money could be stuck  Missed the ITR Deadline but TDS Refund Is Due? Here’s How You Can Still Claim Your Money «  RBI warns against realty asset bubble... Money laundering Act to get more teeth to snap at terror... » Service charges not wages: SC December, 06th 2007 Sets aside judgments of Karnataka HC, ESI court.   The Supreme Court ruled today that tips or service charges paid by customers to the hotel staff did not amount to wages and could not be taken into account for payment of premium to the Employees State Insurance (ESI) Corporation by the industrial establishment.   The court, thus, set aside the judgment of the Karnataka High Court and the ESI court, which had maintained that the amounts were part of the wages.   In this case, Quality Inn Southern Star argued that the basic question was whether the service charge collected by the hotel management from customers and distributed among employees amounted to wages within the meaning of Section 2(22) of the ESI Act.   According to the hotel, service charges did not constitute wages.   On the other hand, the ESI Corporation contended that the three-star hotel compulsorily collected 10 per cent of the total bill as service charge and included it in the bills. The service charges so collected are distributed among employees every quarter.   The ESI Court and the Karnataka High Court held that the nature of the service charges shows these are not directly paid by the customers to the employees but form part of the bills that the customers are obliged to pay without any option.   The hotel had total control over the distribution of the amount and this was distinguishable from tips. It was, in any event, covered by the expression additional reimbursement.   The Supreme Court, however, ruled that the amounts received by employees were not in the nature of wages, as they were not given to the employees under the terms of the contract of employment.   The appointment letters expressly stated that employees were not entitled to any other remuneration. Thus, the distribution of service charges was expressly excluded from the wages.   Reacting to the courts verdict, Dinesh Khanna, President of the Federation of Hotel and Restaurant Associations of India (FHRAI), said: It is a step in the right direction. However, only 50 per cent of the tips or service charges collected should be constituted as wages and not the rest of it.   FHRAI is the apex body of the four regional associations representing the hospitality industry.   Added Rajiv Kaul, senior vice-president, The Leela Palaces and Resorts, We welcome the courts decision as we believe that tips and service charges are distinct from wages and should not be legislated at all.   Barring resort hotels, most hotels have done away with the tradition of collecting service charges. The choice to pay tips the acronym for To Insure Prompt Service has been left to customers.   A general manager of a Mumbai-based five star hotel, who requested anonymity, said: Internationally tips and service charges have been a practice, but not yet in India so we believe it should not be taxed and we welcome the courts decision.