TMI Blog2005 (3) TMI 728X X X X Extracts X X X X X X X X Extracts X X X X ..... s, where the petitioner itself was a party, as the issue relating to their claims as a charitable trust, had come to be noticed by the Income-tax Department and such questions stood resolved by the Supreme Court of India. The department nevertheless was of the view that the assessee could not claim the benefits admissible by the notifications. 2.. Learned Senior Counsel Mr. Natarajan, appearing on instructions on behalf of the petitioner, submitted that perhaps it may not be necessary for any adjudication on the claims raised in O.P. No. 22648 of 1998, which pertained to the assessment of Central sales tax for the years 1985-86 and 1986-87. Therefore, the above case is delinked and dismissed as one not pressed. 3.. The assessing officer had issued assessment orders, which were followed by demand notices, both under the Kerala General Sales Tax Act, 1963 (hereinafter referred to as "the KGST Act") and under the Central Sales Tax Act, 1956 (hereinafter referred to as "the CST Act") declining claims of exemption. On reference, a division Bench had admitted the original petition and had granted interim order of stay pending further orders in the original petition. Rest of the origi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be taken notice of, as coming to their assistance. 6.. O.P. No. 4726 of 1999 is filed challenging the revised assessment orders passed for the years 1987-88 to 1993-94 under the KGST Act and under the CST Act. The plea was centered round the impact and protection of S.R.O. No. 342 of 1963, S.R.O. No. 105 of 1967 and S.R.O. No. 987 of 1976 [exhibits P1, P1(a) and P18] in respect of goods at the point of last purchase in the State by pharmacies. In O.P. No. 27566 of 1999, provisional assessment and demand notices for tax and surcharge, again on the basis of the said S.R.Os. were agitated. 7.. S.R.O. No. 1727 of 1993, issued under the KGST Act, came into force with effect from January 1, 1994 and the amendment thereof vide S.R.O. No. 427 of 1995 came into force with effect from April 1, 1995. Similarly S.R.O. No. 1731 of 1993, issued under the CST Act came into force with effect from January 1, 1994 and the amendment thereof vide S.R.O. No. 506 of 1995 came into force with effect from April 21, 1995. The benefit of S.R.O. No. 342 of 1963 is made available to sales by any charitable trust or charitable institution profit of which is solely utilised for charitable purposes. S.R.O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase of goods which are subject to tax at the point of last purchase in the State subject to the condition that the goods so purchased are used by the pharmacies in the manufacture or preparation of goods for sale by them. 8.. By exhibit P5, the petitioner had addressed the Assistant Commissioner (Assessment) on May 7, 1994 about the proposal for exemption from sales tax from June 1, 1994, as a charitable institution. The officer had required production of supporting documents and a certificate of utilisation. Details, as requested for, were supplied by exhibts P7 and P8. The assessing officer, however, took a stand that where the profit set apart for utilisation for charitable purpose is utilised for purposes other than charitable, the institution shall disentitle itself for exemption from S.R.O. No. 1727 of 1993. He had advised them that "exemption under the notification shall not be available to trust or institution created or established for the benefit of any particular religious community or caste or for the benefit of the trustee or the founder or manager of the institution or the benefit of a member or members of the family of such author, founder, trustees or manager". ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pheld the position that up to the year 1964 only 60 per cent of the profit, from Trust funds, qualifies for exemption under the Income-tax Act. 12.. The counsel highlights that after 1964, the entire income was to be allowed as exempted from income-tax. With reference to the judgments in Commissioner of Income-tax v. P. Krishna Warrier [1964] 53 ITR 176 (SC), Commissioner of Income-tax v. P. Krishna Warrier [1972] 84 ITR 119 (Ker), and as overruled by the decision reported in [1981] 127 ITR 192 (Ker) (P. Krishna Warrier v. Commissioner of Income-tax) by a Full Bench of this Court, it had been conclusively held that when the predominant purpose was charitable in nature, the exemption as claimed under the Income-tax Act was always admissible. Mr. Natarajan also submits that the charitable nature of the trust as coming under the Kerala Land Reforms Act also had been upheld by a division Bench of this Court in the decision reported in (1989) 2 KLN 127 (Arya Vaidya Sala, Kottakkal v. State of Kerala). According to the counsel, it was diabolical therefore for the State Government to contend that the Trust pertaining to Arya Vaidya Sala was not a charitable institution. 13.. Counsel s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mely, the Arya Vaidya Sala and the Arya Vaidya Hospital. Preparation of ayurvedic medicines was to be an objective of the Arya Vaidya Sala. Medicines were required for treatment of the sick; manufacture of medicines also was to be an activity ancillary to the main objective of the establishment. This alone could have sustained the Trust, giving it power to generate funds for meeting the avowed objectives. One other objective was to maintain the Ayurveda Patasala, which had grown as an Ayurveda College, where research in ayurveda is practiced. This had added new dimensions in improving the skills, systems and acceptability of the branch of treatment, in consonance with the objective of the Trust, and wishes of the propounder. 16.. The salient features of S.R.O. No. 1727 of 1993, according to the counsel, was that by clause 6, exemption was to be granted on the turnover of sale or purchase of goods to or by charitable institutions, subject to certain conditions. Similar notification as S.R.O. No. 1731 of 1993 under section 8(5) of the CST Act also had come to be issued. It was in this context, that the petitioner had informed the department about its intention to avail of the exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titution under the Income-tax Act and the Sales Tax Act are distinct and different. For example, he submits that if there are circumstances to show that a portion of the profits by a charitable institution had been earmarked for charitable work, the Income-tax law provided that exemption in respect of that part of the profit could be claimed as admissible by the assessee. But, as far as the KGST Act and CST Act are concerned, the notifications were specific, when they point out that for any year, if there was no utilisation of the profits to the full extent, the resultant position would have been that for the year concerned the exemption would have been wholly forfeited. The submission is that the issue had been so approached by the assessing authority and the original petition therefore was wholly misconceived and liable to be rejected. 20.. The Special Government Pleader had adverted to the decision in Ahmedabad Manufacturing and Calico Printing Co. Ltd. v. S.G. Mehta, Income-tax Officer AIR 1963 SC 1436, and especially paragraph 20 thereof, for the proposition that the principle laid down in a decision rendered with reference to one statute may not be applicable on all fours, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned. In respect of sale of goods manufactured within the State by any charitable trust or charitable institution, the profit is entitled to exemption, if the profit, if any, is solely utilised for charitable purpose during the year or set apart to be utilised for charitable purpose. The "charitable purpose " is defined in wide terms. The amendment to Schedule VII, in serial number 5, in column (2), was substitution of the words "by any Charitable Trust or Charitable Institution" by the words "by any Charitable Trust or Charitable Institution where such manufacturing is incidental to the main objective of such institution which shall be predominantly charitable". Manufacturing of medicines, as far as the petitioner-assessee is concerned, cannot but be termed otherwise than as incidental to the main objective of the institution. The will refers to the manufacture as one of the areas where the Trust is to engage. The propounder has foreseen that sustenance of the organisation cannot be guaranteed, other than by continuous generation of income. The existence of the establishment, the objectives of the trust and the usefulness to the community is closely linked to the producti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, the above position did not find acceptance. The court held that additional sales tax is in the nature of surcharge over and above what is due and payable by an assessee under the principal Act. It was held that it may be necessary to read and construe the Acts together, as if the two Acts were one. 25.. This appears to be an authority for the proposition that it may not be permissible for the Revenue to insist for payment of turnover tax or additional tax, though they are statutorily authorised, but such demands have to be subservient to the exemption granted under the principal Act. 26.. We hold that the claims put up by the Revenue, subjected to challenge in the rest of the original petitions as well are not sustainable. The original petitions therefore, stand allowed and the impugned orders are set aside. 27.. In the aforesaid view taken, we do not think it is necessary to go in detail with respect to the contentions that have been raised in O.P. No. 4567 of 1993. The challenge is against the demand notice for turnover tax and penal interest for the year 1992-93. O.P. No. 4726 of 1999 is filed challenging the revised assessment orders urging eligibility for exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X
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