Trust is Eligible for Exemption u/s 11 even though Confusion Exists regarding the Specified Persons: ITAT [Read Order]

Trust

Mumbai bench of Income Tax Appellate Tribunal recently held that a registered trust is eligible for exemption under Section 11 of the Income Tax Act even though even though there is a confusion regarding the specified persons.

Assessee in the instant case was registered under Section 12AA of the Income Tax Act and also registered trust under Section 80G of the Income Tax Act. The assessee filed its returns for the assessment year declared as a nil income. In the light of various findings the Assessing Officer (AO) has contended that some specified persons defined under clause (a) and (b) of section 13(3) of the Act has incorporated a company to create a robust market for the micro finance industry.

For the year under consideration, the AO found that the assessee 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 is clear that the specified persons of the trust entered into an agreement with an organization accordingly the micro finance received donations and charges on certain services provided by them. Therefore, the AO denied the exemption under section 11 of the Act.

On appeal, the CIT (A) found that the aforesaid specified persons namely ABN Amro Bank, India and ABN Amro Foundation, Amsterdam have no shareholding in the appellant’s foundation. Therefor the same cannot be regarded as specified persons under section 13 (1) (C) of the Act. The AO has not pointed out any benefit directly or indirectly accruing to ABN Amro Bank, India and ABN Amro Foundation, Amsterdam and he cannot denied the exemptions under section 11 of the act. Hence the AO has directed to allow the said exemptions to the trust.

The bench consists of Judicial Member D.T.Garasia and Accountant Member Rajesh Kumar upheld the order of the CIT (A) while hearing the submissions of both parties.

The bench held that in the light of the relevant material facts and records it is clear that the aforementioned persons have no shareholding in the assessee’s company, hence they cannot be considered as specified persons of the trust. Accordingly the trust is eligible for exemption under section 11 of the Act.

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