1994 (7) TMI 262 - SC - VAT and Sales Tax

Whether the appellant is required to prove that the income derived from the sale of the books was utilised for charitable purpose? Whether the amount should be utilised during that assessment year alone and the assessee would be entitled to set apart the income for utilisation for charitable purpose before the assessment year is completed? Held that - Appeal allowed. The necessary material has not been placed and that, therefore, an opportunity may be given to the appellant to prove that the income derived during the relevant years has been solely utilised for charitable purpose. Since the assessee is seeking an opportunity there can be no inconvenience to the Revenue to give an opportunity to the assessee to prove that the profits derived, during the relevant assessment years have been solely utilised for charitable purpose. The judgment of the High Court and that of the Tribunal and the appellate authority have been set aside.

Summary

Issues:
1. Whether the appellant is required to prove that the income derived from the sale of the books was utilized for charitable purpose.
2. Whether the amount should be utilized during that assessment year alone and whether the assessee would be entitled to set apart the income for utilization for charitable purpose before the assessment year is completed.

Analysis:
The case involved an appeal arising from the judgment of the Division Bench of the Kerala High Court related to the assessment years 1981-82 and 1982-83. The Sales Tax Officer assessed the income derived from the sales of books to sales tax, excluding the income used for charitable purposes. The Tribunal later accepted the appellant's case that the entire income went towards charitable purposes. However, the High Court held that the burden was on the assessee to prove the income was utilized for charitable purposes during the relevant assessment years. The High Court set aside the Tribunal's decision and confirmed the orders of the lower authorities.

The main contention revolved around whether the appellant needed to prove the income was utilized for charitable purposes and whether it had to be done within the assessment year itself. The notification under section 10 of the Kerala General Sales Tax Act provided an exemption for sales by charitable trusts solely utilized for charitable purposes. The burden of proof was on the assessee to demonstrate the profits were solely used for charitable purposes. The Government clarified that profits could be utilized during the year or set apart for charitable purposes, and failure to do so would disentitle the institution from the exemption.

The appellant argued that profits were used to purchase stock-in-trade, not for charitable purposes, but sought an opportunity to prove otherwise. The Supreme Court held that the focus should be on proving the profits were solely utilized for charitable purposes as per the notification. The Court set aside the previous judgments and remitted the case to the Sales Tax Officer for fresh assessment, subject to the appellant providing evidence of the profits being solely utilized for charitable purposes during the relevant years. The appeals were allowed, with each party bearing their own costs.