DIRECTOR OF INCOME TAX (EXEMPTON) vs. JAPAN CHAMBER OF COMMERCE & INDUSTRY IN INDIA

Whether Reporters of local papers may be allowed to see the judgment ?

To be referred to the Reporter or not ?

Whether the judgment should be reported in Digest ? Yes

The appeal before the Tribunal was preferred by the assessee, being aggrieved by the order passed by the Director of Income Tax (Exemptions), refusing to grant registration to the assessee under Section 12A of the said Act.

The assessee is the Japan Chamber of Commerce & Industry in India and has its office at No.7, Barakhamba Road, New Delhi. It is also registered with the Registrar of Societies under the Societies Registration Act, 1860. The aims and objects of the society, as indicated in the Memorandum of Association of the society, are as under:- “1. To undertake, encourage, facilitate and promote the development of trade, industry and commerce between India and Japan in general without any element of profit.

To facilitate economic cooperation and strengthen the relationship between India and Japan.

To establish and exchange social relationship among Members.

To promote education of young Japanese.

To promote mutual interest between Members.

To invite whenever desired intellectuals, industrialists, scholars, creative artists, etc. to address the seminars/ conferences conducted by the Society.

As per clause 3.1 of the rules and regulations, the membership of the society is open to Japanese companies and Japanese government institutions in India which have a direct or indirect interest in the aims and objects of the society and desire to become a member of the society subject to the approval of the governing body. Clause 7 of the rules and regulations empowered the society to alter, extend or 2008:DHC:3113-DB

The assessee had made an application on 23.03.2007 for registration under Section 12A of the said Act. The Director of Income Tax (Exemptions), by virtue of his order dated 28.09.2007, declined to grant registration to the assessee society. Essentially what the Director of Income Tax (Exemptions) held was that the aims and objects of the society were independent and distributive and that some of them did not fall within the ambit of the expression “charitable purpose” as defined under Section 2 (15) of the said Act. In particular, the Director of Income Tax (Exemptions) held that the object Nos. 3, 4 and 5 had nothing to do with the object Nos. 1 and 2 and that object Nos. 6 and 7 were independent of object Nos. 1 and 2. Consequently, he held that although object Nos. 1 and 2 were charitable, the other objects not being charitable and being independent of object Nos. 1 and 2, the society could not be regarded as having been established for a charitable purpose and was, therefore, not entitled for registration. He 2008:DHC:3113-DB

As indicated above, the assessee, being aggrieved by the said order preferred an appeal before the Income Tax Appellate Tribunal, which considered all the aims and objects in detail. The finding returned by the Tribunal is that the object Nos. 1 and 2 were the main objects of the assessee society and the other objects were ancillary and incidental in nature. With regard to object No. 4, the Tribunal noted that it was for the purposes of promoting education of young Japanese and education, per se, is a charitable purpose as indicated in Section 2 (15) of the said Act. The Tribunal was also of the view that object Nos. 3 and 5 were clearly linked with object Nos. 1 and 2 and did not exist in isolation. The object No. 6, which relates to inviting intellectuals, industrialists, scholars, artist etc. to address seminars and conferences conducted by the society, cannot be regarded as not being a charitable object. For this proposition, the Tribunal placed reliance on the decision of the Rajasthan High Court in the case of CIT v. Jodhpur Chartered Accountant Society: 258 ITR 548 wherein organizing of seminars and conferences to educate people in different fields of knowledge was held to be a charitable object of general public utility. As regards object No.7, the Tribunal took the view that 2008:DHC:3113-DB

The Tribunal also repelled the view taken by the Director of Income Tax (Exemptions) that the activities of the society were restricted to Japanese companies and the Japanese governmental institutions which alone could be members of the society. It was held that the society had been formed to promote development of trade and commerce between India and Japan and to facilitate economic cooperation between the two countries. Promotion of trade and commerce and industry between India and Japan would undoubtedly also benefit the Indian public at large. Consequently, the Tribunal held that the Director of Income Tax (Exemptions) was not justified in saying that the Indian public or any segment thereof would not be benefited by the activities of the society.

The Tribunal also took note of the fact that in the event of 2008:DHC:3113-DB

The learned counsel for the appellant argued that the charity should be in India and the benefit should be limited to the Indian public. With regard to the charity being in India, there is no doubt that the assessee society is registered in India. With regard to the benefit accruing to the public in India, although we do not find any statutory stipulation to this effect, the factual position is that the benefit would be derived by the public in India. It is also required to be noted that the question which arises in the present appeal relates only to the registration of the assessee as a society under Section 12A/ 12AA of the said Act. The question of exemption under Section 11 and 12 is to be dealt with separately by the Assessing Officer at the time of assessment for each year. In case any income of the assessee is applied outside India, it goes without saying that the provisions of Section 11 would apply and the Assessing Officer would deal with the situation accordingly. We are informed by the learned counsel for the respondent that pursuant to the order passed by the Tribunal, the Director of Income Tax (Exemptions) has granted registration by an order dated 15.10.2008 but has imposed various conditions. One of the conditions being that the registration did not confer any right of exemption upon the applicant under Sections 11, 12 and 13 of the said Act. Such an exemption from taxation would be available only after the Assessing Officer is satisfied about the genuineness of the activities 2008:DHC:3113-DB

In these circumstances, we do not see any reason to interfere with the well-reasoned order passed by the Tribunal. The findings of fact are unassailable. No substantial question of law arises for our consideration.