2014 (7) TMI 1098 - HC - VAT and Sales Tax

Exemption from tax under the provisions of Section 80G of the Income Tax Act 1961 - Held that - It is required to be noted that as such there are concurrent findings of fact given by both the authorities below that the property in question is being used by the petitioner - trust for the purpose other than religious and charitable purpose and is recovering huge amount by way rent / lease and/or or by any other mode i.e. for the purpose of marriage parties etc. The finding is also recorded by the revisional authority that considering the books of account of the petitioner-trust it appears that that the petitioner - trust is making huge profit out of the property in question. Considering the disputed facts and circumstances of the case and considering the object and purpose of granting exemption more particularly considering Section 132(1)(b) of the Bombay Provincial Municipal Corporation Act and now Gujarat Provincial Municipal Corporation Act the petitioner is rightly denied exemption of payment from general tax. - considering the activities of the petitioner of giving the property to other persons for the purpose of marriage parties etc. it cannot be said to be solely for religious and/or chargeable purpose and therefore the petitioner is not entitled to any exemption as claimed. - there is no substance in the present petition - Decided against assessee.

Summary

Issues:
1. Petition to quash orders of property tax exemption denial.
2. Trust's charitable status and exemption under Section 80G.
3. Property usage for profit-making activities.
4. Interpretation of Section 132(2)(b) of the Act.
5. Dismissal of Revision Application by State Government.
6. Exemption denial based on property usage and profit-making.

Analysis:
1. The petitioner, a trust engaged in charitable services, sought to quash orders denying property tax exemption. The trust ran a school with boarding facilities and had been exempted from property tax by the municipality since 1972. However, in 2003, the corporation demanded property tax, leading to a dispute. The Assistant Commissioner's order rejecting exemption was upheld by the revisional authority, prompting the present petition under Article 226.

2. The petitioner claimed exemption under Section 132(1)(b) of the Act, citing its charitable status and income generation through rent as license fees, not traditional rent. The respondent argued that the property was used for non-charitable purposes, such as hosting marriage parties for profit. The court noted the trust's profit-making activities and denied exemption, emphasizing the trust's failure to demonstrate exclusive charitable usage.

3. The court considered the trust's profit from the property, concluding that the income derived, whether as rent or license fees, did not qualify for exemption under Section 132(2)(b) of the Act. The trust's substantial profits from non-charitable activities, like renting the property for events, indicated a commercial motive inconsistent with charitable objectives, justifying the exemption denial.

4. Despite the trust's arguments regarding the nature of income and entitlement to exemption, the court upheld the denial based on the property's usage for profit-making ventures. The trust's activities, including leasing the property for non-charitable events, contradicted the spirit of charitable exemptions, leading to the dismissal of the petition and imposition of property tax obligations.

5. The court affirmed the concurrent findings of fact by lower authorities regarding the trust's profit-making activities and commercial usage of the property. The denial of exemption aligned with the Act's provisions, specifically Section 132(2), and the court found no grounds to intervene, ultimately dismissing the petition and discharging the rule without costs.

6. In conclusion, the court's decision to dismiss the petition was based on the trust's profit-oriented property usage, which negated its claim for charitable exemption under the Act. The judgment underscored the importance of demonstrating exclusive charitable purposes to qualify for tax exemptions, highlighting the trust's failure to meet this criterion.