2005 (3) TMI 791 - SC - Income Tax

Summary

Issues Involved:
1. Entitlement to exemption from urban land tax for the period 1965-1976.
2. Applicability of Government Orders (G.O.) for exemption.
3. Retrospective application of Income Tax exemption.
4. Compliance with exemption norms and guidelines.
5. Legal principles governing exemption under Tamil Nadu Urban Land Tax Act, 1966.

Detailed Analysis:

1. Entitlement to Exemption from Urban Land Tax for the Period 1965-1976:
The appellant-Trust sought exemption from paying urban land tax for the period 1965-1976 under the Tamil Nadu Urban Land Tax Act, 1966. The appellant claimed that the land held by it should be exempted as it was recognized as a public charitable trust under Section 12A(a) of the Income Tax Act by an order dated 29.4.1977. However, since the recognition came after the period for which the exemption was sought, the claim for exemption was not valid. The court held that the order recognizing the trust as charitable could not be given retrospective effect.

2. Applicability of Government Orders (G.O.) for Exemption:
The appellant argued that the exemption should be granted based on the norms laid down in G.O.Ms. No. 2625 (Rev) dated 27.12.1976, which provided that institutions recognized as charitable under the Income Tax Act would be exempt from urban land tax. The court noted that while considering the claim for exemption, the authorities were obliged to consider all existing G.Os, including G.O.Ms. No. 1834 dated 29.10.1983, which laid down additional conditions for exemption. The court found that the authorities rightly applied the norms from G.O.Ms. No. 1834 dated 29.10.1983.

3. Retrospective Application of Income Tax Exemption:
The appellant contended that the recognition of the trust as charitable under Section 12A(a) of the Income Tax Act should entitle it to exemption for the period 1965-1976. The court rejected this argument, stating that the recognition by the Income Tax Department on 29.4.1977 could not be applied retrospectively to grant exemption for the earlier period.

4. Compliance with Exemption Norms and Guidelines:
The court examined whether the appellant-Trust complied with the norms and guidelines for exemption. The trust failed to demonstrate that it spent 90% of its income towards its objectives and purposes during the relevant years. Additionally, the lands were used for commercial purposes such as running a cinema theatre, saw mill, and godowns, rather than for charitable purposes. The court emphasized that exemption under Section 27 of the Act required specific application and recommendation by the Empowered Committee, which the appellant did not fulfill.

5. Legal Principles Governing Exemption under Tamil Nadu Urban Land Tax Act, 1966:
The court differentiated between exemptions under Sections 27 and 29 of the Act. Section 27 grants discretionary power to the government to exempt lands or persons from tax if payment causes undue hardship, based on specific application and satisfactory material. Section 29 provides automatic exemption for certain lands owned by specified authorities or institutions. The court held that the appellant did not satisfy the conditions for exemption under either section.

Conclusion:
The court dismissed the appeals, concluding that the appellant-Trust was not entitled to exemption from urban land tax for the period 1965-1976. The authorities correctly applied the norms from G.O.Ms. No. 1834 dated 29.10.1983, and the appellant failed to meet the required conditions for exemption. The recognition of the trust as charitable under the Income Tax Act could not be applied retrospectively, and the trust did not make a specific application for exemption as required under the Act.