The Public Accounts Committee (PAC) of the Lok Sabha has called for the setting up of an expert group to look into alleged violations by the Tata Educational and Developmental Trust in its donations to the Harvard Business School and the Cornell University.
The PAC, in its report submitted to the Lok Sabha on Wednesday, noted that the Tata Trust was allowed an exemption by the Central Board of Direct Taxes for its cumulative donation of $100 million during 2008-09 and 2015-16 to Harvard Business School and Cornell University. This exemption, it said, violated the Income Tax Act.
“Section 11 (1) (c) of the Income Tax Act 1961 provides that in the case of trusts created after April 1, 1952, the application of income outside India should be with reference to international welfare in which India is interested… The order of the CBDT is not in accordance with the provisions of the Act. Construction of Tata Hall at Harvard did not amount to international welfare in which India was interested,” the report said.
“The Committee, therefore, desires that an expert group under the Income Tax Department may be constituted to look into the violations committed by Tata Trust afresh with a view to devising a procedure for proper and systematic evaluation of such trusts so that these trusts do not escape the tax liability, and the funds transferred out of the country are used by these trusts in supplementing the… welfare of the people within India,” it added.
The PAC was scathing in its criticism of both the Tata Trust as well as the Income Tax Department.
“The Committee are aghast to note that the trusts are investing money in prohibited modes of investment despite the law strictly prohibiting (sic) public charitable trusts from holding such assets post 1973,” the report said. “The value of these prohibited investments run into thousands of crores. The Committee are appalled to note that no action has been taken by the trustees or the Income Tax Department to remedy the situation.”
“At a time when under-privileged students of universities such as Tata Institute of Social Sciences are protesting lack of basic funds and scholarships, it is difficult to comprehend the justification of spending millions of dollars of public charity money on foreign universities,” the PAC added.
The Ministry of Finance, in its defence of these actions, said that the exemption was within the purview of the Income Tax Act since the grants were made for the creation of endowment funds at Cornell for the scholarship of Indian students and joint collaboration between Indian and Cornell scientists. It did not, however, explain how the creation of the Tata Hall at the Harvard was in India’s interest.
