Kerala High Court
Deputy Commissioner Of Sales Tax (Law), ... vs Carmel Book Stall on 20 February, 1989
Equivalent citations: [1989]74STC89(KER)
Author: K.S. Paripoornan
Bench: K.S. Paripoornan
JUDGMENT K.A. Nayar, J.
1. These tax revision cases are against a common order in T.A. Nos. 578 and 579 of 1985 dated 20th February, 1987 of the Kerala Sales Tax Appellate Tribunal, Trivandrum. The respondent in the revision cases is a charitable institution, assessed to sales tax under the Kerala General Sales Tax Act by the Sales Tax Officer for the assessment years 1981-82 and 1982-83 negativing the claim of the institution for exemption under a notification, S.R.O. No. 342/63. The said notification was made pursuant to Section 10 of the Act by which the tax payable in regard to the turnover of sales by a charitable institution the profit of which is solely utilised for charitable purposes is exempted. The assessee's appeals before the Appellate Assistant Commissioner were also dismissed on the ground that the assessee has not utilised the profits for charitable purposes. The assessee filed a second appeal before the Tribunal as T.A. Nos. 578 and 579 of 1985 and the Tribunal by a common order dated 20th February, 1987 allowed the appeals against the Kerala general sales tax assessments for the years 1981-82 and 1982-83 (in fact, the said order related to 4 appeals, 2 being under the Central Sales Tax Act which we are not concerned in these tax revision cases).
2. The Tribunal held that there was no time-limit prescribed in the exemption notification, S.R.O. No. 342/63 for utilisation of profit, that the amount utilised for augmenting the assets of the charitable institution is itself a utilisation for charitable purpose and that the expression "the profit of which is solely utilised for charitable purposes" in the notification is not indicative of the period but indicative of the purpose for which amounts are to be utilised. It ultimately held that as long as the purpose of the institution is charitable and there is no utilisation of income for non-charitable purposes, the utilisation of profit is for charitable purposes for the purpose of the notification and therefore the assessee is entitled to exemption. As stated above, it is against the said common order that the department has come up in revision.
3. We heard counsel for the department as well as counsel for the assessee.
4. The relevant portion of the exemption notification reads as under :
S.R.O. No. 342/63.-In exercise of the powers conferred by Section 10 of the Kerala General Sales Tax Act, 1963 (Act 15 of 1963), the Government of Kerala, having considered it necessary in the public interest so to do hereby make an exemption in respect of the tax payable under the said Act on the sale or purchase of the goods specified in Schedule I hereto appended and by persons specified in Schedule II hereto appended in regard to their turnover on the sales of goods specified therein subject to the conditions specified therein :
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20. Sales by any charitable trust or charitable institution, the profit of which is solely utilised for charitable purposes.
It is submitted on behalf of the revision petitioner that the tax payable in regard to the turnover of sales by the charitable institution will be exempted only if the profit is "solely" utilised for charitable purposes. Utilisation should be in the same year, as what is exempted is "the tax payable in regard to a turnover" of the sales by the charitable institution. The Sales Tax Officer found that for the year 1981-82 the profit earned from Trivandrum head office is Rs. 1,91,190.91 and from Ernakulam branch is Rs. 1,962.42. The Sales Tax Officer stated that no evidence has been produced that the net profit earned has been solely utilised for charitable purposes. Similarly, for the year 1982-83 he found that as per profit and loss account there was a net profit of Rs. 1,18,930.85 in the head office and another net profit of Rs. 3,193.18 in Ernakulam branch. There was nothing on record to prove that the net profit has been utilised for charitable purposes. In that view of the matter, exemption has been denied. That view has been confirmed in appeal. The Tribunal allowed the appeals holding that as long as the purpose of the institution is charitable and there is no utilisation of income for non-charitable purposes, utilisation of the profit is for charitable purposes. The Government Pleader submits that the Tribunal committed an error in law in holding that the assessee is entitled to exemption under the notification. In T.R.C. No. 265 of 1986 a Bench of this Court held :
The burden of proof is on the assessee-society to prove that the entire profit is solely utilised for charitable purposes. The society has failed to prove this basic requirement. The plea of the assessee, that on a perusal of the accounts it will be evident that the society has not utilised any income for non-charitable purposes, will go to show that the society is entitled to the exemption, is not acceptable.
5. It is well-known that exemption in a statute has to be strictly construed. When exemption from taxation is claimed they should not be extended beyond the express requirement of the language of the provision (see Union of India v. Commercial Tax Officer [1956] 7 STC 113 (SC) and Kedarnath Jute Manufacturing Co. v. Commercial Tax Officer AIR 1966 SC 12). Arguments urging upon the broadening of a tax deduction statute beyond its plain meaning to avoid harsh results are more properly addressed to the legislature than courts (see Helvering, Commissioner of Internal Revenue v. Ohio Leather Company 87 L Ed 113). Since all exemptions from taxation increase the burden on other members of the community they should be deprecated except to the extent permissible by the express language of the statute itself. In that view of the matter also, the exemption provision should get a strict interpretation [see Commissioners of Inland Revenue v. James Forrest (1890) 15 AC 334]. If the assessee is liable to sales tax provided if he is not covered by the exemption, it is for him to show that he is exempted and that in the case in question the assessee can do only by showing that the profit of the assessee in the year in question has been utilised solely for charitable purposes.
6. It is stated on behalf of the assessee that the assessee has invested the profit in books, i.e., "stock-in-trade". This cannot be considered as "utilisation of the profit solely for charitable purposes". The finding of the Tribunal that the assessee has not utilised the income for non charitable purposes and, therefore, the utilisation of the profit is for charitable purposes is erroneous in law. Sales tax is an annual tax on turnover and in order to get exemption under the Notification S.R.O. No. 342/63, it is not enough that the assessee is a charitable institution but it is also required that the profit of the year should be solely utilized for charitable purposes. It is not sufficient to qualify for exemption to show that there was no utilisation for non-charitable purposes. There must be a positive action of the assessee resulting in utilisation of the income for charitable purposes in the assessment year in question. The exemption given by the notification is subject to a condition and so long the condition, namely, utilising the profit solely for charitable purposes is not satisfied in any assessment year, the institution will not qualify for exemption.
In view of this, we set aside the order of the Appellate Tribunal in T.A. Nos. 678 and 579 of 1985 dated 20th February, 1987 and allow T.R.C. Nos. 213 and 214 of 1987.