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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI D.T. GARASIA & SHRI RAJESH KUMAR
Per D.T. GARASIA, Judicial Member:
The present appeal has been preferred by the Revenue against the order dated 21.07.2011 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2008-09.
The short facts of the case are as under: The assessee is registered under section 12AA of the Income Tax Act w.e.f. 17.02.2007. The assessee is also a registered trust
2 M/s. RBS Foundation India (ABN Amro Foundation India) under section 80G of the Act. The assessee filed the return of income for A.Y. 2008-09 with the office of the Assistant Director of Income Tax (Exemption) II(2) on 29.09.08 declaring a ‘Nil’ income. The return filed was selected for scrutiny. The Assessing Officer (hereinafter referred to as the AO) verified all the documents and the AO was of a view that assessee company, though, a company incorporated under section 25 of the Companies Act, has not used the group company RBS Bank India and ABN AMRO Foundation, Amsterdam to create a robust market for the micro finance industry being undertaken by RBS Bank India vigorously. The AO concluded that ABN AMRO Foundation and RBS Bank India are specified persons defined under caluse (a) and (b) of section 13(3) of the Act. The AO has verified that he has received the contribution to the tune of Rs.17,72,32,305/-. Out of this, only Rs.46,25,217/- has been spent and for the balance a form no.10 has been filed to accumulate and spent the same during the span of next 5 years. It could be ascertained that the foundation enters into an agreement with an organization named Microsave Consultancy P. Ltd, who receives the fund for the benefit of particular NGO. Micro Finance consultancy provides technical assistance, training to the NGOs so that the NGOs can work as an efficient MFIs. Apart from the training and making the NGOs sustainable for carrying out Micro Finance Business, the grant/donation received by the Micro Finance for the benefit of the NGOs is utilized for 18 months business plan. The Micro Finance though provides specific services for the foundation
3 M/s. RBS Foundation India (ABN Amro Foundation India) yet tax deductible by the foundation is not on record. However, incidental service charges are being paid by the Microsave Consultancy P.Ltd. From the copies of the agreement with the Micro Finance and respective beneficiary NGOs as mentioned in clause 2.3, 5.2, 5.3, 11.4 and 11.5 it can be easily understood that the foundation exercise 100% control over the disbursement made as donation. The foundation reserves its absolute rights to terminate the contract at any time according to its satisfaction. It also reserves the right to take back the donations made to the NGOs through the Microsave Consultancy Pvt. Ltd at any time. On the basis of the above information, the AO arrived at the following conclusion:-
“i. The fund which has been received by the foundation has come from a person i.e ABN Amro Bank and ABN Amro Foundation, Amsterdam which are specified persons under the provisions of Sec.13(3) clause ‘a' and 'b' of the I.T.Act, 1961. ii. As stated above under the heading information in respect of assessee, it can be ascertained that the foundation under scrutiny is being utilized for the direct or indirect benefit of the persons as mentioned under sec. 13(3) of the Act. iii. As a result, the foundation loses its rights to claim exemption u/s. 11 of the Act. iv. Moreover, provisions of Sec. 2(15) defines charitable purpose which include medical, education and relief to the poor and also any other object of general public utility without involving any motive to earn profit.”
Accordingly, the AO has concluded that the foundation though a Section 25 company is being used by group company i.e. ABN Amro Bank and ABN Amro Foundation, Amsterdam for creating a robust market for the Micro Finance Industry being undertaken by
Matter carried to the Ld. CIT(A) and the Ld. CIT(A) has allowed the claim by observing as under: “I have duly considered the submission of the appellant's AR and I find that the AO is not justified in denying exemption u/s./ 11 to the appellant only on the presumption that the ABN Amro Bank, India and ABN Amro Foundation, Amsterdam has created a robust market for the Micro Finance Industry in the garb of charitable activity of the appellant. The AR has clearly submitted that the ABN Amro Bank, India and ABN Amro Foundation, Amsterdam has no share holding in the appellant’s foundation i.e. ABN Amro Foundation (RBS Foundation). Therefore, the same cannot be regarded as specified persons u/s. 13(1)(c). The AO has not pointed out any benefit directly or indirectly accruing to ABN Amro Bank, India and ABN Amro Foundation, Amsterdam. Therefore, the AO is not justified in denying exemption to the appellant u/s. 11. Since there is no benefit directly or indirectly to the ABN Amro Bank, India and ABN Amro Foundation, Amsterdam, the AO is directed to allow exemption u/s. 11 to the appellant. This ground of appeal is allowed.”
The Ld. D.R. while arguing the matter has brought some evidence regarding Ms. Meera Sanyal, Director of the assessee trust and he has produced the profile of Ms. Meera Sanyal and submitted that he was formally serving in this bank and thereafter she has left the job and they have founded the trust named ABN AMRO Foundation and ABN AMRO Bank. Mr. Sunil Kumar is the head of RBS Bank India and was vice president of Royal Bank of Scotland Foundation and Ms. Meera Sanyal was chairperson and executive companies of India unit. Thus both persons are RBS key persons of foundation and AMRO bank. Though the assessee company is registered under section 25 they have created robust market for micro finance industry being undertaken by the bank. They have not used
On the other hand, the Ld. A.R. submitted that the RBS Bank is a foreign bank and they did not have directors in India. Assessee trust has independent director. Therefore, section 13(3) is not applicable to the facts of the case. The assessee has received only grant of Rs.50,000/- by RBS Bank India and balance of Rs.17,63,21,464/- has been received from ABN AMRO Bank, Netherlands and in the year under consideration the assessee has spent only Rs.50,000/- and remaining amount was used for charitable purpose by the assessee trust and assessee trust has not used this money but they have given this money to the trust and in turn the trust had used this money for micro finance project including set up of banking cooperatives and self help group, livelihood support of programme, supply of free medicine, free aid and money charitable activities for poverty alliviation and relief and rehabilitation and environment conservation programme have been carried out by this trust. Therefore, assessee has given all these details before the AO and the Ld. CIT(A). Therefore, the Ld. CIT(A) has rightly allowed the claim of the assessee.
We have heard the rival contentions of both the parties. Looking to the facts and circumstances of the case, we find that assessee is a limited share registered company under section 25 of the Act and is a separate and independent legal entity wherein RBS
6 M/s. RBS Foundation India (ABN Amro Foundation India) Bank India or ABN AMRO Foundation, Netherlands are neither the shareholders nor the promoters of the assessee. The assessee company has been formed with the primary objective of carrying out not for profit charitable activities involving interventions around the theme of financial inclusion, financial literacy and employee engagement. The assessee is governed by an independent board and is working with different objects than that of the RBS Bank India and ABN AMRO Foundation, Netherlands. The Ld. A.R. further submitted that the founders i.e. the signatories to the memorandum of the assessee do not hold any shares in the ABN AMRO Bank, India. This means that the founders do not have any substantial interest whatsoever in the ABN AMRO Bank during this year.
We find that during the year assessee has provided grants to 3 NGOs revolving around the theme of promoting relief programs in underserved districts/state, promoting sustainable livelihood through micro-enterprise promotion and improving the socio-economic conditions of the poor in such regions. The assessee has three directors Ms. Meera Sanyal and others and RBS Bank has no Board of Directors in India. The founder of the trust has no sufficient interest. We find that the assessee has received grant of Rs.50,000/- from RBS Bank and balance of money of Rs.17,63,21,464/- has been received from ABN AMRO Foundation, Netherlands. Therefore, we find that section 13(3) of the Act is not applicable and the Ld. CIT(A) has rightly granted the exemption. Therefore, our interference is not required.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 17.11.2017.