IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.M.JOSEPH TUESDAY, THE 19TH SEPTEMBER 2006 / 28TH BHADRA 1928 ST.Rev..No. 167 of 2004() ------------------------- TA.228/2001 of S.T.A.TRIBUNAL,ADDL.BENCH,KZD. .................... REVISION PETITIONER/RESPONDENT/ASSESSEE --------------------------------------------------------------------- PAPPINISSERY VISHA CHIKILASA SOCIETY, PAPPINISSERY, REPRESENTED BY ITS SECRETARY. BY ADV. SRI.T.R.RAMACHANDRAN NAIR RESPONDENT: APPELLANT/REVENUE ----------------------------------------------------- STATE OF KERALA, REPRESENTED BY ITS CHIEF SECRETARY TO GOVERNMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. BY GOVT. PLEADER SRI. GEORGEKUTTY MATHEW. THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 19/09/2006, ALONG WITH S.T.RV. 168/2004, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & K.M.JOSEPH, JJ. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - S.T.REV.CASE Nos. 167 & 168 OF 2004 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the day of February, 2006. JUDGMENT Ramachandran Nair. J. Heard counsel for the petitioner and the learned Government Pleader. The question involved in both the cases is whether the petitioner is entitled to benefit of sales tax exemption on sales turn over of Ayurvedic medicines and other items by virtue of notification SRO.1727/93 for the years 1995-96 and 1996-97. On going through the notification, we find that the main condition therein is that the profit derived by the charitable institution claiming exemption should be utilised for charitable purposes in the relevant year or otherwise set apart for utilisation in subsequent year. It is specified in the notification that if profit set apart for utilisation in charitable purpose is not so used later and it is diverted for any other purpose, then the exemption granted will be forfeited to the organisation and tax will be payable in that year which obviously means the year in which the amount is utilised for any other purpose, that is, purpose other than charitable. The further condition is introduced with effect from S.T.REV.CASE. 167 & 168/2004. 2 29.7.1996, whereunder the organisation will forfeit the exemption if turn over during the year is above Rs.Ten Lakhs. The Tribunal has declined exemption for the reason that the amounts were not utilised for charitable purposes during the relevant years. However, the case of the petitioner is that the petitioner has not diverted the profits for any other purpose and in the course of time the amounts were utilised for charitable purposes. The Tribunal has of course relied on the decision of this court and that of the Supreme Court in Carmel Book Stall v. Deputy Commissioner of Sales Tax ((1994) 95 STC 306). The Supreme Court has held that the amount should be utilised for charitable purpose atleast by the time the assessment is completed. So far as the subsequent year 1996-97 is concerned, it is to be noted that under SRO.35/99 a note was introduced to the third condition in the notification whereunder turnover upto 28.7.1996 have to be excluded for the purpose of considering whether the charitable institution has exceeded turnover of Rs.Ten Lakhs for rest of the year. In fact the main reason for disallowing exemption is that the petitioner has taken the profit to the capital account. We do not think the accounting of the S.T.REV.CASE. 167 & 168/2004. 3 profit will determine the issue of exemption because notification specifically retains exemption if profit set apart is utilised for charitable purpose in later years. We are therefore of the view that the Tribunal should have remanded the case to the Officer for considering all these matters with reference to the accounts and expenditure incurred by the petitioner for charitable purpose later particularly in the light of the decision of the Supreme Court to the extent applicable to the facts of this case. In such circumstances, we dispose of the Revisions and set aside the orders of the Tribunal with direction to the Officer to reconsider the assessment afresh in the light of the observations above and after verifying the income and expenditure statements of the petitioner for these years and later years. (C.N. RAMACHANDRAN NAIR, JUDGE) (K.M. JOSEPH, JUDGE) sb K.S.RADHAKRISHNAN & K.M.JOSEPH, JJ. - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - W.A. No. OF 200 - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - JUDGMENT Dated this the day of February, 200.