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Tata Trusts get Income Tax notice

The Income Tax Department had reportedly given ‘irregular’ exemption to Jamshetji Tata Trust and Navajbai Ratan Tata Trust involving tax impact of Rs 1,066.95 crore

Tata trusts on Friday were summoned by the Income Tax Department to explain the misuse of tax exemption that is meant for charities, Business Standard reported.  The move followed a Comptroller and Auditor General report from 2013, which showed the trusts earning large profits instead of using money for charitable purposes.

However, according to Economic Times, the Income-Tax department has asked two Tata Trusts to explain investments flagged by Parliament’s Public Accounts Committee. The Income Tax Department had reportedly given ‘irregular’ exemption to Jamshetji Tata Trust and Navajbai Ratan Tata Trust involving tax impact of Rs 1,066.95 crore.

The CAG report was said to have stated that the Ratan Tata-chaired trusts spent less money on charitable purposes, accumulating cash as surplus and then using it to create fixed assets for earning more profit or to transfer the money to other trusts. Twenty-two trusts reportedly earned surpluses of Rs 819 crore, ranging from 35.7% to 84.8% of their total income before the 2013 CAG report.

“Tata Trusts do not pay tax. It is permissible for them under the Income Tax Act,” a Tata Sons spokesperson told Economic Times.

The PAC report says this is against provisions of section 13 (1) (d) of the Income Tax Act and that I-T department should have levied the maximum marginal rate on the entire investment. Its failure to do so led to a shortfall of Rs 1,066.95 crore.

The I-T department’s notice comes as Tata Sons is embroiled in a huge controversy following its ousting of Chairman Cyrus Mistry. On October 24, Tata Sons had replaced Mistry with Ratan Tata as its interim chairperson.

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