Tata Trusts get I-T summons for tax evasion
Mumbai,Nov18:The Income tax (I-T) department has summoned TataTrusts to explain the misuse of tax exemption granted to the trusts for charitable purposes. The action by the I-T department is based on a Comptroller and Auditor General (CAG) report of 2013 that said the trusts are earning a huge profit instead of using it for charitable purposes. The executive trustee of Tata trusts, R Venkataramanan, will have to explain to the I-T department on Friday evening in Mumbai.
According to the CAG, the trusts, chaired by Ratan Tata, are making huge profits by spending less on charitable purposes and accumulating it as surplus. The surplus funds are then used for creating fixed assets for earning more profit or are transferred to other trusts rather than for charitable purposes to avoid tax. The CAG audit pointed out that the 22 trusts under scrutiny have accumulated surpluses of Rs 819 crore.
Furthermore, the CAG report said the I-T department allowed irregular exemptions to Jamshetji Tata Trust and Navajbai Ratan Tata Trust, which invested Rs 3,139 crore in prohibited modes arising from accumulations of capital gains which involved tax effect of Rs 1,066.95 crore.
According to the report, Jamshetji Tata Trust and Navajbai Ratan Tata Trust earned Rs 1,905 crore and Rs 1,234 crore on account of capital gains during assessment year 2009 and assessment year 2010, respectively. Further, they invested the same in prohibited mode of investments, which is in contravention to the provisions of Section 13(1)(d) of the Income Tax Act.
“Thus, the assessment officer should have brought investments aggregating Rs 3,139 crore to taxat maximum marginal rate as per provision under section 164(2) read with proviso there under. It resulted in short levy of tax of Rs 1,066.95 crore,” the report said.
The Ministry of Finance had promised to take action and the income tax summons issued on Friday are a part of that action.