Charitable-purpose sales tax exemption requires proof of sole use of profits, with evidence allowed before assessment is finalised.

Exemption under the Kerala General Sales Tax Act sales tax notification was conditional on proof that profits from the notified sales were solely applied to charitable purposes, and the burden of proving that condition lay on the assessee. The Court rejected the view that the Revenue had to disprove charitable use. It further held that utilisation need not be confined to the same accounting year; profits could be set apart for charitable purposes and shown before the assessment order was completed. The assessments were therefore set aside and the matters remitted for fresh assessment, with exemption depending on proof of sole charitable application or valid setting apart before assessment.

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Issues: (i) whether the assessee seeking exemption under the notification issued under section 10 of the Kerala General Sales Tax Act, 1963 had to prove that the profits from the sale of books were solely utilised for charitable purposes; (ii) whether such utilisation had to take place within the same assessment year, or whether the profits could be set apart for charitable purposes and proved before completion of assessment.

Issue (i): whether the assessee seeking exemption under the notification issued under section 10 of the Kerala General Sales Tax Act, 1963 had to prove that the profits from the sale of books were solely utilised for charitable purposes.

Analysis: The exemption notification was held to be conditional upon proof that the profits derived from the sale of the notified goods were solely utilised for charitable purposes. The burden lay on the assessee, since exemption from tax was being claimed. The object of the notification was not concerned with any particular charitable activity, but only with proof that the profits were in fact applied to charitable purposes.

Conclusion: The assessee bore the burden of proving sole utilisation of the profits for charitable purposes, and the view that the burden lay on the Revenue was rejected.

Issue (ii): whether such utilisation had to take place within the same assessment year, or whether the profits could be set apart for charitable purposes and proved before completion of assessment.

Analysis: The later notification clarified that profits may be utilised during the year or set apart for charitable purposes. Reading the exemption provision in a practical manner, the Court held that utilisation need not be confined to the precise accounting period, provided that before the assessment order is passed there is proof that the profits of the relevant year were solely utilised for charitable purposes or set apart for that purpose. Since the assessee sought an opportunity to produce further evidence, the assessments and earlier orders were set aside and the matters were remitted for fresh assessment.

Conclusion: The assessee was entitled to prove utilisation or setting apart of profits before completion of assessment, and the matter was remitted for fresh consideration.

Final Conclusion: The appeals succeeded to the extent of securing a fresh assessment opportunity, but exemption would depend on proof that the relevant profits were solely applied to charitable purposes or validly set apart for that purpose before assessment.

Ratio Decidendi: Exemption under the charitable-purpose sales tax notification is available only on proof that the relevant profits were solely utilised, or validly set apart and established before assessment, for charitable purposes.

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