IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN TUESDAY, THE 27TH MAY 2008 / 6TH JYAISHTA 1930 OTC.No. 21 of 2006() -------------------- AITA.5/2004 of AGRL.I.T.A.T., ADL.BENCH II,ERNAKULAM .................... REVISION PETITIONER/APPELLANT/REVENUE : ----------------- STATE OF KERALA, REP. BY JOINT COMMISSIONER (LAW) IN CHARGE, COMMERCIAL TAXES, ERNAKULAM. BY GOVERNMENT PLEADER SRI. TEKCHAND RESPONDENT/RESPONDENT/ASSESSEE: ------------- M/S. BETHEL FOUNDATIONS, COCHIN. BY ADV. SRI.V.P.SUKUMAR THIS OTHER TAX CASES HAVING BEEN FINALLY HEARD ON 27/05/2008, ALONG WITH OTC 22,23, & 24/2006 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR & V.K. MOHANAN, JJ. -------------------------------------------- 0.T.C. No.21,22, 23 & 24 OF 2006 -------------------------------------------- Dated this the 27th day of May, 2008 JUDGMENT Ramachandran Nair,J. These Tax Revision Cases are filed by the State against the order of the Agricultural Income Tax Appellate Tribunal pertaining to agricultural income tax assessments of respondent for the assessment years 1995-96, 1996-97, 1997-98 and 1998-99. 2. Respondent-assessee is a charitable institution running mainly orphanage for the poor and destitute children. Agricultural income is stated to be used for charitable purposes for which the organisation is formed. Even though exemption was originally allowed, the assessing officer noticed that the assessee has income from other sources and considering such income and the total expenditure, there is no proof of utilisation of agricultural income for charitable purposes and consequently he has revised assessments. However, the first appellate authority cancelled the revised assessments and the Tribunal confirmed 2 the same. 3. We have heard Government Pleader appearing for the State and counsel appearing for the respondent-assessee. The contention of the revenue is that Section 16 of the Agricultural Income Tax Act authorises exemption only in respect of income actually applied for charitable purposes. According to him, since the assessee has other income which itself leads to surplus after meeting the expenditure, the entire agricultural income is liable to be assessed. On other hand, counsel for the assessee contended that respondent-assessee is solely formed for charitable purpose and it is income, both agricultural and non-agricultural, that is applied for charitable purposes and surplus is retained for expenditure in future. We are unable to uphold the order of the Tribunal. Contrary to the finding of Tribunal, Section 16 of the Act provides for exemption for the income actually applied for charitable purposes. In fact the provisions of Section 16 of the AIT Act are similar to provisions of Section 11 of the I.T. Act. Provisions under both the statutes provide for exemption for actual income incurred in the previous year for charitable purposes and permit accumulation of 3 income for future years. The revision of AIT assessments arose only because the assessing officer noticed income received by the assessee from other sources. We therefore feel that the matter has to be considered afresh by the assessing officer after calling for accounts of the assessee pertaining to income and expenditure, both from agricultural and non-agricultural and after verifyisng the assessment orders under the Central Income-tax Act. The Tax Revision Cases are allowed vacating the orders of the Tribunal and that of the authorities below and remanding the matter to the assessing officer to make fresh assessment as stated above. All contentions are left open for the assessee to raise before the assessing officer. (C.N.RAMACHANDRAN NAIR) Judge. (V.K.MOHANAN) Judge. kk 4