The Income Tax (I-T) department has summoned top officials of the Tata Trusts to explain the misuse of tax exemption granted to the trusts for charitable purposes. The Tata Trust officials, who were summoned on Friday, sought more time and are expected to meet tax officials next week.
Confirming the development, a senior I-T official said the Tata Trusts had been asked to submit certain documents. “We are in the process of verifying and collating data required for further probe in the matter,” he said.
The action by the I-T department was a follow up to the Comptroller and Auditor General’s (CAG) report of 2013 that said the Trusts were earning a huge profit, instead of using it for charitable purposes. The Tata Trusts own 66% stake in Tata Sons, the holding company of Tata group.
A Tata Trusts official said Tata Trusts do not pay income tax, as permissible under the Income Tax Act. According to the CAG, the trusts, chaired by Ratan Tata, were making huge profit by spending less on charitable purposes and accumulating it as surplus. The surplus funds were then used for creating fixed assets for earning more profit, or were transferred to other trusts rather than being used for charitable purposes. This, the report claims, was done to avoid paying any tax. The CAG audit pointed out the 22 trusts under scrutiny, including others, have accumulated surpluses of Rs
819 crore. The trusts get income tax exemption only if they spend money on charitable purposes and not for making profits.
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