Tata Trusts’ tax liability may surge


I-T Dept., which cancelled trusts’ registration, says reports of demand notice untrue

Tata Trusts, the dominant shareholders of Tata Sons, will see their tax liability shooting up significantly after the Income Tax (I-T) Department cancelled their registration.

The department has invoked Section 115 (TD) of the I-T Act, a special provision introduced in 2016 with respect to certain category of trusts.

Additional income tax

Under Section 115 (TD), a trust whose registration is cancelled is required to pay tax on its “accreted” or past exempted income.

The section deals with additional income tax if the trust converts or merges into a non-charitable trust, or if it gets dissolved and fails to transfer its assets/liabilities.

Surrendered registration

Tata Trusts’ contention is that they had in 2015 surrendered, on their own volition, their registration under the I-T Act and decided not to claim the associated tax exemptions.

A Tata Trusts’ spokesperson in an e-mail response said, “The trusts have not received any demand notice from the Income Tax Department pursuant to the cancellation.

“We have already stated that the trusts are examining the order and will take necessary next steps in accordance with the law. The trusts have effective legal options to vindicate their grievances against the order both factually and legally.”

Anil Singhvi, chairman, I-Can Investment Advisors, felt that the big question was why the Tata Trusts, being a public charitable trust, would give up exemptions when it was doing public good. “I don’t understand why a public charitable trust will give up its exemptions when people seek exemptions for doing charity.

“The Charity Commissioner should be asking why the Trust is giving up exemptions that it enjoyed for over 30-40 years as they are not discretionary or private trusts. “What is the point of paying the highest rate of taxation of over 42% to the government by giving up the exemptions, when they are doing a good job,” Mr. Singhvi told The Hindu.

According to I-T officials, reports of sending a demand notice, amounting to several thousand crores, to the Tata Trusts are not true. The provision of a demand for tax on accumulated income is done only in the case of an assessment and not in the case of a cancellation of registration.

“There is no question of sending a demand notice and reports to this effect are untrue.

“We are awaiting their response to the order, which could be in the nature of an appeal against what the trust thinks is contentious, whether it is do to with the freezing of assets or date from which the cancellation may take effect,” said a person in the I-T Department.

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Printable version | Jan 22, 2020 7:05:07 PM |

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