TaxTMI 
TaxTMI 
2005 (3) TMI 728
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....undation of the claims and their applicability. Advertence had also been made to a number of decisions, 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 a....
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....being 1992-93. There also the contention was that exhibit P1 (S.R.O. No. 342 of 1963) had been omitted 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 ....
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....s made in respect of tax payable under the KGST Act by pharmacies in regard to their turnover relating to purchase 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 i....
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....proceedings had been there, in respect of periods both before 1964 and thereafter, and the courts had uniformly upheld 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 Gove....
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....he primary and chief objective of the Trust was to facilitate functioning and development of the two institutions, namely, 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 iss....
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....ilt by the assessee, who put up such claims. It is submitted that the yardsticks for conferring the status of a charitable institution 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 pro....
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....731 of 1993, as amended by S.R.O. No. 506 of 1995, do not have materially altered the position as far as the present assessee is 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. Th....