Tata trusts given irregular tax exemptions: CAG

The auditor has noticed 14 Trust cases involving tax liability of Rs 1,090 cr

The Comptroller and Auditor General (CAG) on Friday pulled up the income tax department (ITD) for allowing irregular tax exemption to two Tata Group trusts, involving tax implication of a little over Rs 1,000 crore.

“ITD allowed irregular exemptions to Jamshetji Tata Trust and Navajbai Ratan Tata Trust, who invested Rs 3,139 crore in prohibited modes arising from accumulation of capital gains which involved tax effect of Rs 1,066.95 crore,” said the CAG report tabled in Parliament.

The CAG has given notice to 14 Trust cases involving tax liability of Rs 1,090 crore, wherein accumulation arising from capital gains was either not invested in the specified mode or computed incorrectly. Moreover, the CAG added, in some cases “they were not fully utilised... Proceeds for acquiring capital assets. The ITD allowed exemption irregularly in these assessments completed after scrutiny”.

Referring to a particular case, the auditor said 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 years 2008-09 and 2009-10, respectively and “invested the same in prohibited mode of investment which is in contravention to the provisions of section 13 (1) (d) of the Income Tax Act (dealing with investment).”

The assessing officer should have brought the investment aggregating Rs 3,139 crore to tax at maximum marginal rate under the Income Tax Act, CAG said adding, “it resulted in short levy of tax of Rs 1,066.95 crore”.

The report said the finance ministry had accepted the audit observation and initiated remedial action.

The CAG, it said feels the ministry should ensure such mistakes do not recur. It also suggested the ministry to “evolve an effective monitoring system to make assessing officers responsible to check investments in authorised modes in all cases”.