Parliamentary panel says Tata trust broke laws to get income-tax exemption

A parliamentary panel has rapped a Tata trust for allegedly misusing laws to get income-tax (I-T) exemption for its $100-million grants to Harvard Business School and Cornell University projects. 

It recommended setting up a group by the I-T department to probe these supposed infringements by the trust.

In its action taken report submitted in Parliament on Thursday, the Public Accounts Committee (PAC) said, “The committee, therefore desires that an expert group under the income tax department may be constituted to look into violations committed by the Tata Trusts afresh, with a view to devising a procedure for proper and systematic evaluation of such trusts.” 

The Tata Trusts, on the other hand, rebutted the charges, saying there were no violations and all grants made by them were in accordance with laws. The PAC, headed by Congress leader Mallikarjun Kharge, said the contributions by the Tata Education and Development Trust (TEDT) to the two US institutes did not conform to Indian I-T laws.

Through a notification in November 2015, the department had retrospectively exempted contributions made by the TEDT from the income tax. 

Before the notification, the Central Board of Direct Taxes (CBDT) had rejected the claim of the trusts for exemption in 2014, saying there was no international welfare where India's interests were served by these funds. "There was no reason for reversing the decision taken in 2014, in November, 2015...as there was no change in the provisions of the Act (income tax) nor the purpose of the grant of exemption underwent any change so as to attract international welfare in which India was interested,” the report said. 

The PAC said assessments already decided prior to the issue of the CBDT's order were reopened under section 154 of the Act, which was irregular. 

The contributions were made by the TEDT in eight rounds since 2009-10. These were also spent on constructing a building named, Tata Hall, in Harvard Business School.

“It is seen that tax exempted public charity money is being funnelled outside the country to fund rich foreign universities by TEDT as opposed to being used for the benefit of the people of the country,” the report said.

According to the panel, construction of “Tata Hall” in Harvard did not amount to charity or international welfare in which India was interested.

The report said the exemption given by the Central Board of Direct Taxes (CBDT) to TEDT did not conform to Indian I-T laws.

“Given the repeated nature of these violations, these trusts (Tata Trust) do not meet the criteria for holding exemption under section 12 AA of the Income Tax Act,” the report said.

In a statement, the Tatas said the development of education in India is their prime objective and they have historically devoted support to the cause. “In the last two years itself, the Trusts have disbursed over ~2.5 billion for the development of education in India,” the statement said.

Tata Trusts also said institutions, like the Tata Institute of Social Sciences, Tata Memorial Hospital, the Indian Institute of Science and the Tata Institute of Fundamental Research were all historically established by the Trusts towards the cause of nation building.