Strict proof for charitable tax exemption: profits must be positively applied to charity, not merely kept from non-charitable use.

A charitable institution seeking exemption under S.R.O. No. 342/63 had to prove strict compliance with the condition that the profit of the relevant assessment year was positively and solely applied for charitable purposes. Mere absence of non-charitable use was insufficient, because tax exemptions must be construed strictly and cannot be extended beyond the notification's express language. Investment of profits in books or stock-in-trade also did not amount to charitable utilisation. On that basis, the Tribunal's view was held legally erroneous, the revision succeeded, and the order granting exemption was set aside, restoring the tax assessments.

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Issues: Whether a charitable institution claiming exemption under S.R.O. No. 342/63 was required to prove that the profit of the relevant assessment year was positively and solely utilised for charitable purposes, and whether mere absence of non-charitable use was sufficient.

Analysis: Exemption from taxation must be strictly construed and cannot be extended beyond the express language of the notification. The notification granted exemption only where the profit of the charitable institution was solely utilised for charitable purposes. As sales tax is an annual levy on turnover, the assessee had to establish that the profit earned in each assessment year was in fact applied for charitable purposes in that year. Mere proof that the income was not used for non-charitable purposes did not satisfy the condition. Investment of the profit in books or stock-in-trade also did not amount to such utilisation.

Conclusion: The assessee was not entitled to exemption, and the Tribunal's view was legally erroneous.

Final Conclusion: The revision succeeded and the order granting exemption was set aside, restoring the tax assessments.

Ratio Decidendi: A tax exemption conditioned on profits being solely utilised for charitable purposes requires strict proof of positive application of the relevant year's profits to charitable use; absence of non-charitable use is insufficient.

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