2008 (4) TMI 350 - AT - Income Tax

Summary

Issues Involved:
1. Whether the objects of the society are charitable u/s 12A of the Income-tax Act, 1961.
2. Whether the restriction of membership to Japanese entities affects the charitable nature of the society.
3. Whether the absence of provisions regarding the disposal of assets upon dissolution affects the registration.

Summary:

Issue 1: Charitable Nature of Objects
The Director of Income-tax (Exemptions) refused registration u/s 12A on the grounds that the society's objects were independent and some were non-charitable. The Tribunal held that the main objects of promoting trade, commerce, and industry between India and Japan without profit motive are charitable, as per the Supreme Court's judgment in CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722. The other objects, such as promoting social relationships, education, and environmental protection, were deemed incidental and supportive of the main charitable objects. Thus, the Tribunal concluded that all objects collectively serve a charitable purpose.

Issue 2: Membership Restriction
The Director argued that the society's restriction to Japanese entities meant it did not benefit the Indian public. The Tribunal disagreed, stating that promoting trade and economic cooperation between India and Japan indirectly benefits the Indian public. The benefits accruing to members would percolate to the Indian public through industrial and economic advancements.

Issue 3: Disposal of Assets Upon Dissolution
The Director raised concerns about the absence of provisions for asset disposal upon dissolution. The Tribunal noted that the society's rules and regulations, as per Article 13, comply with sections 13 and 14 of the Societies Registration Act, ensuring that any remaining property after dissolution would not be distributed among members but given to another society. This compliance reinforces the society's charitable nature, ensuring no profit distribution among members.

Conclusion:
The Tribunal directed the Director of Income-tax (Exemptions) to accord registration to the society u/s 12A, as the society's objects are charitable, its activities benefit the Indian public, and its rules ensure no profit distribution among members. The appeal was allowed with no order as to costs.