Director Of Income Tax Delhi ... vs Japan Chamber Of Commerce & ...
2008 Latest Caselaw 2072 Del

              THE HIGH COURT OF DELHI AT NEW DELHI

%                                    Judgment delivered on: 25.11.2008


+              ITA 1322/2008

DIRECTOR OF INCOME
TAX DELHI (EXEMPTION)                                    ... Appellant

                                    - versus -

JAPAN CHAMBER OF COMMERCE &
INDUSTRY IN INDIA                                        ... Respondent

Advocates who appeared in this case:

For the Appellant     : Ms Prem Lata Bansal with Mr M. P. Gupta and
                        Mr Sanjeev Rajpal
For the Respondent    : Mr Piyush Kaushik


CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE RAJIV SHAKDHER

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

2. To be referred to the Reporter or not ? Yes

3. Whether the judgment should be reported in Digest ? Yes

BADAR DURREZ AHMED, J (ORAL)

1. The present appeal under Section 260-A of the Income Tax

Act, 1961 (hereinafter referred to as the „said Act‟) impugns the order

dated 25.04.2008 passed by the Income Tax Appellate Tribunal

whereby the Director of Income Tax (Exemptions) was directed to

accord registration to the assessee society under Section 12A of the

said Act.

2. 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.

3. 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.

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

3. To establish and exchange social relationship among Members.

4. To promote education of young Japanese.

5. To promote mutual interest between Members.

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

7. To collect and discuss among its Members information pertaining to environment protection

and conservation or any other matters related thereto."

The Memorandum of Association also clearly stipulates that all the

income, earnings, movable/ immovable property, member‟s

subscription, and contributions of the society are to be solely utilized

and applied towards the promotion of its aims and objects only, as set

forth in the memorandum and cannot be utilized for the purposes of

making of profit. It also stipulates that no profit shall be paid or

transferred directly or indirectly by way of dividends, bonus, profits or

in any manner whatsoever to the present or the past members of the

society or to any other person claiming through any one or more of the

present or the past members. And, that no member of the society shall

have any personal claim on any movable or immovable property or

profit or accumulation of the society by virtue of the membership.

4. 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

abridge the purpose, aims and objects of the society in the manner

provided by section 12 of the Societies Registration Act, 1860. Clause

8 provided that all the assets and funds are to belong to the society and

not to any individual member. Importantly, clause 12 provides that in

case the society is dissolved, it shall be done in accordance with the

provisions of Sections 13 and 14 of the Societies Registration Act,

1860.

5. 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

also held that the beneficiaries of the society are not likely to be the

Indian public or a segment thereof.

6. 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

dissemination of information pertaining to environment protection and

conservation amounted to an object of general public utility in the

current global scenario where not only countries but even individuals

and pressure groups are deeply concerned about preservation of

environment. The Tribunal came to the conclusion that the Director of

Income Tax (Exemptions) was not justified in his conclusion that the

objects of the society were independent of each other and that except

for the first two objects the others were non-charitable in nature.

7. 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.

8. The Tribunal also took note of the fact that in the event of

dissolution of the society, the members are not to receive any of the

proceeds thereof. In fact, the proceeds after clearing all the debts, are

to be distributed in the manner provided in Sections 13 and 14 of the

Societies Registration Act, 1860, which has been specifically

incorporated in terms of Clause 12 of the rules and regulations, as

indicated above. The Tribunal also took note of the Supreme Court

decision in the case of CIT v. Andhra Chamber of Commerce: 55 ITR

722 wherein the Supreme Court observed that the expression "object of

general public utility" was not restricted to objects beneficial to the

whole of mankind and that an object beneficial to a section of the

public was also an object of general public utility. The Supreme Court

further observed that to serve as a charitable purpose, it was not

necessary that the object should be to benefit the whole of mankind or

even all persons living in a particular country or province and that it

was sufficient if the intention was to benefit a section of the public as

distinguished from specified individuals. It is apparent that in the

present case the benefit that is to be derived from the activities of the

society would not be enjoyed by any specified individuals and it is for

the general public. The Tribunal has already returned a finding that the

objects would be for the benefits of the Indian public at large as the

development of trade and commerce between the two countries would

undoubtedly lead to such a conclusion.

9. 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

promised or claimed to be carried out in each financial year relevant to

the assessment year and upon all the provisions of law being complied.

10. 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.

The appeal is dismissed.

BADAR DURREZ AHMED, J

RAJIV SHAKDHER, J November 25, 2008 SR