ADIT (E)-II(2), MUMBAI V. RBS FOUNDATION INDIA ( ABN AMRO FOUNDATION INDIA), MUMBAI

ITA 6489/MUM/2011

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8572 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 26-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 23-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B PRUSETH
• Keywords: Charitable institution
• Section: 80G; 12AA; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.6489/M/2011 ASSESSMENT YEAR: 2008-09 ADIT (E)-II(1), R.NO.507, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI - 12 VS. M/S. RBS FOUNDATION INDIA (ABN AMRO FOUNDATION INDIA), 31, 31, SAKHAR BHAVAN, NARIMAN POINT, MUMBAI - 21 PAN: AAGCA 2503B (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI PERCY PARDIWALA, SR. ADVOCATE SHRI NIRAJ SHETH, A.R. REVENUE BY : SHRI B. PRUSETH, D.R. DATE OF HEARING : 18.09.2017 DATE OF PRONOUNCEMENT : 17.11.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 21.07.2011 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2008-09. 2. THE SHORT FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE IS REGISTERED UNDER SECTION 12AA OF T HE INCOME TAX ACT W.E.F. 17.02.2007. THE ASSESSEE IS ALSO A REGISTERED TRUST ITA NO.6489/M/2011 M/S. RBS FOUNDATION INDIA (ABN AMRO FOUNDATION INDI A) 2 UNDER SECTION 80G OF THE ACT. THE ASSESSEE FILED T HE RETURN OF INCOME FOR A.Y. 2008-09 WITH THE OFFICE OF THE ASSI STANT DIRECTOR OF INCOME TAX (EXEMPTION) II(2) ON 29.09.08 DECLARING A NIL INCOME. THE RETURN FILED WAS SELECTED FOR SCRUTINY. THE AS SESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) VERIFIED ALL TH E DOCUMENTS AND THE AO WAS OF A VIEW THAT ASSESSEE COMPANY, THOUGH, A C OMPANY INCORPORATED UNDER SECTION 25 OF THE COMPANIES ACT, HAS NOT USED THE GROUP COMPANY RBS BANK INDIA AND ABN AMRO FOUNDATIO N, AMSTERDAM TO CREATE A ROBUST MARKET FOR THE MICRO F INANCE INDUSTRY BEING UNDERTAKEN BY RBS BANK INDIA VIGOROUSLY. THE AO CONCLUDED THAT ABN AMRO FOUNDATION AND RBS BANK IND IA 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 R S.46,25,217/- HAS BEEN SPENT AND FOR THE BALANCE A FORM NO.10 HAS BEE N FILED TO ACCUMULATE AND SPENT THE SAME DURING THE SPAN OF NE XT 5 YEARS. IT COULD BE ASCERTAINED THAT THE FOUNDATION ENTERS INT O 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 MI CRO FINANCE BUSINESS, THE GRANT/DONATION RECEIVED BY THE MICRO FINANCE FOR THE BENEFIT OF THE NGOS IS UTILIZED FOR 18 MONTHS BUSIN ESS PLAN. THE MICRO FINANCE THOUGH PROVIDES SPECIFIC SERVICES FOR THE FOUNDATION ITA NO.6489/M/2011 M/S. RBS FOUNDATION INDIA (ABN AMRO FOUNDATION INDI A) 3 YET TAX DEDUCTIBLE BY THE FOUNDATION IS NOT ON RECO RD. HOWEVER, INCIDENTAL SERVICE CHARGES ARE BEING PAID BY THE MI CROSAVE CONSULTANCY P.LTD. FROM THE COPIES OF THE AGREEMEN T WITH THE MICRO FINANCE AND RESPECTIVE BENEFICIARY NGOS AS MENTIONE D 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 TERMINAT E THE CONTRACT AT ANY TIME ACCORDING TO ITS SATISFACTION. IT ALSO RESERV ES THE RIGHT TO TAKE BACK THE DONATIONS MADE TO THE NGOS THROUGH THE MIC ROSAVE CONSULTANCY PVT. LTD AT ANY TIME. ON THE BASIS OF THE ABOVE INFORMATION, THE AO ARRIVED AT THE FOLLOWING CONCLU SION:- I. THE FUND WHICH HAS BEEN RECEIVED BY THE FOUNDATI ON HAS COME FROM A PERSON I.E ABN AMRO BANK AND ABN AMRO FOUNDA TION, AMSTERDAM WHICH ARE SPECIFIED PERSONS UNDER THE PRO VISIONS OF SEC.13(3) CLAUSE A' AND 'B' OF THE I.T.ACT, 1961. II. AS STATED ABOVE UNDER THE HEADING INFORMATION I N RESPECT OF ASSESSEE, IT CAN BE ASCERTAINED THAT THE FOUNDATION UNDER SCRUTINY IS BEING UTILIZED FOR THE DIRECT OR INDIRECT BENEFIT O F THE PERSONS AS MENTIONED UNDER SEC. 13(3) OF THE ACT. III. AS A RESULT, THE FOUNDATION LOSES ITS RIGHTS T O CLAIM EXEMPTION U/S. 11 OF THE ACT. IV. MOREOVER, PROVISIONS OF SEC. 2(15) DEFINES CHAR ITABLE PURPOSE WHICH INCLUDE MEDICAL, EDUCATION AND RELIEF TO THE POOR AND ALSO ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY WITHOUT INVO LVING ANY MOTIVE TO EARN PROFIT. ACCORDINGLY, THE AO HAS CONCLUDED THAT THE FOUNDATI ON THOUGH A SECTION 25 COMPANY IS BEING USED BY GROUP COMPANY I.E. ABN AMRO BANK AND ABN AMRO FOUNDATION, AMSTERDAM FOR CR EATING A ROBUST MARKET FOR THE MICRO FINANCE INDUSTRY BEING UNDERTAKEN BY ITA NO.6489/M/2011 M/S. RBS FOUNDATION INDIA (ABN AMRO FOUNDATION INDI A) 4 THE BANK VIGOROUSLY. ACCORDINGLY, HE HAS DENIED EXE MPTION U/S. I I TO THE ASSESSEE. 3. 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 APPELL ANT'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 AC TIVIT Y 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 A PPELLANTS 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 INDI RECTLY ACCRUING TO ABN AMRO BANK, INDIA AND ABN AMRO FOUNDATION, AMSTE RDAM. THEREFORE, THE AO IS NOT JUSTIFIED IN DENYING EXEMP TION TO THE APPELLANT U/S. 11. SINCE THERE IS NO BENEFIT DIRECT LY OR INDIRECTLY TO THE ABN AMRO BANK, INDIA AND ABN AMRO FOUNDATION, AMSTE RDAM, THE AO IS DIRECTED TO ALLOW EXEMPTION U/S. 11 TO THE APPELLAN T. THIS GROUND OF APPEAL IS ALLOWED. 4. THE LD. D.R. WHILE ARGUING THE MATTER HAS BROUGH T SOME EVIDENCE REGARDING MS. MEERA SANYAL, DIRECTOR OF TH E ASSESSEE TRUST AND HE HAS PRODUCED THE PROFILE OF MS. MEERA SANYAL AND SUBMITTED THAT HE WAS FORMALLY SERVING IN THIS BANK AND THERE AFTER SHE HAS LEFT THE JOB AND THEY HAVE FOUNDED THE TRUST NAMED ABN A MRO 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 COMP ANY IS REGISTERED UNDER SECTION 25 THEY HAVE CREATED ROBUS T MARKET FOR MICRO FINANCE INDUSTRY BEING UNDERTAKEN BY THE BANK. THE Y HAVE NOT USED ITA NO.6489/M/2011 M/S. RBS FOUNDATION INDIA (ABN AMRO FOUNDATION INDI A) 5 THE MONEY FOR CHARITABLE PURPOSE. THEREFORE, TRUST WAS RIGHTLY DENIED THE EXEMPTION. 5. ON THE OTHER HAND, THE LD. A.R. SUBMITTED THAT T HE RBS BANK IS A FOREIGN BANK AND THEY DID NOT HAVE DIRECTORS IN I NDIA. 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 B ANK, NETHERLANDS AND IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SPENT ONLY RS.50,000/- AND REMAINING AMOUNT WAS USE D FOR CHARITABLE PURPOSE BY THE ASSESSEE TRUST AND ASSESSEE TRUST HA S NOT USED THIS MONEY BUT THEY HAVE GIVEN THIS MONEY TO THE TRUST A ND IN TURN THE TRUST HAD USED THIS MONEY FOR MICRO FINANCE PROJECT INCLUDING SET UP OF BANKING COOPERATIVES AND SELF HELP GROUP, LIVELI HOOD SUPPORT OF PROGRAMME, SUPPLY OF FREE MEDICINE, FREE AID AND MO NEY CHARITABLE ACTIVITIES FOR POVERTY ALLIVIATION AND RELIEF AND R EHABILITATION AND ENVIRONMENT CONSERVATION PROGRAMME HAVE BEEN CARRIE D OUT BY THIS TRUST. THEREFORE, ASSESSEE HAS GIVEN ALL THESE DET AILS BEFORE THE AO AND THE LD. CIT(A). THEREFORE, THE LD. CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT ASSESSEE IS A LIMITED SHARE REGISTERED COMPANY UNDE R SECTION 25 OF THE ACT AND IS A SEPARATE AND INDEPENDENT LEGAL ENT ITY WHEREIN RBS ITA NO.6489/M/2011 M/S. RBS FOUNDATION INDIA (ABN AMRO FOUNDATION INDI A) 6 BANK INDIA OR ABN AMRO FOUNDATION, NETHERLANDS ARE NEITHER THE SHAREHOLDERS NOR THE PROMOTERS OF THE ASSESSEE. TH E ASSESSEE COMPANY HAS BEEN FORMED WITH THE PRIMARY OBJECTIVE OF CARRYING OUT NOT FOR PROFIT CHARITABLE ACTIVITIES INVOLVING INTE RVENTIONS AROUND THE THEME OF FINANCIAL INCLUSION, FINANCIAL LITERACY AN D EMPLOYEE ENGAGEMENT. THE ASSESSEE IS GOVERNED BY AN INDEPEN DENT BOARD AND IS WORKING WITH DIFFERENT OBJECTS THAN THAT OF THE RBS BANK INDIA AND ABN AMRO FOUNDATION, NETHERLANDS. THE LD. A.R. FUR THER 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 SUBSTA NTIAL INTEREST WHATSOEVER IN THE ABN AMRO BANK DURING THIS YEAR. 7. WE FIND THAT DURING THE YEAR ASSESSEE HAS PROVIDE D 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 ASSESS EE HAS THREE DIRECTORS MS. MEERA SANYAL AND OTHERS AND RBS BANK HAS NO BOARD OF DIRECTORS IN INDIA. THE FOUNDER OF THE TRUST HA S NO SUFFICIENT INTEREST. WE FIND THAT THE ASSESSEE HAS RECEIVED GR ANT OF RS.50,000/- FROM RBS BANK AND BALANCE OF MONEY OF RS.17,63,21,4 64/- HAS BEEN RECEIVED FROM ABN AMRO FOUNDATION, NETHERLANDS. TH EREFORE, WE FIND THAT SECTION 13(3) OF THE ACT IS NOT APPLICABL E AND THE LD. CIT(A) HAS RIGHTLY GRANTED THE EXEMPTION. THEREFOR E, OUR INTERFERENCE IS NOT REQUIRED. ITA NO.6489/M/2011 M/S. RBS FOUNDATION INDIA (ABN AMRO FOUNDATION INDI A) 7 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.11.2017. SD/- SD/- (RAJESH KUMAR) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 17.11.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.