Parliament’s Public Accounts Committee (PAC) severely criticised the Finance Ministry for providing “undesirable” Income Tax exemption, that too pre-dated, to Tata Trusts for donating Rs.100 crores ($16 million) to foreign universities like Cornell University and Harvard Business School. Tata Trusts donated the funds during 2008 to 2015. The Central Board of Direct Taxes (CBDT), Revenue Department under Finance Ministry declined to give Income Tax exemptions applied by Tata Trusts, citing that no tax exemption available for foreign donations. But mysteriously the Finance Ministry under Arun Jaitley’s tenure in 2015 granted tax exemptions to Tata Trust with pre-dated donations from 2008.
Earlier in June 2014, rejecting Tata’s applications, CBDT had said that only donations inside India can claim tax exemptions. CBDT and Comptroller and Auditor General (CAG) found that actually, Tata Group companies which donated this money to Tata Trusts claimed “sponsoring such grants to Harvard for Tata Hall as a business promotion expense.” The CAG, as well as the CBDT, said: “Claim of the assessee for exemption was rejected by the Board in June 2014 on the ground that there was no international welfare where India was interested was served the said granting of funds. Construction of Tata Hall at Harvard did not amount to international welfare in which India was interested.” However, the Finance Ministry under Arun Jaitley (he used to give legal advice to Tata Group firms), overruled the objections of CBDT and granted Income Tax exemption on November 10, 2015, for donations made to the foreign universities from 2008!
In 2017, the Finance Ministry in its replies to PAC even lied that by these donations Indian community students studying in the USA are benefited, justifying the controversial exemption order to Tata Trusts. In its recent report tabled in Parliament on July 19, 2018, PAC rejected all these frivolous justifications and recommended that Income Tax form an Expert Committee to “look into the violations committed by the 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 country are used by these trusts in supplementing the work of the welfare of the people within India by catering their educational, medical, socio-economic and religious needs.”
The PAC also asked the Finance Ministry to provide the list of Indian students who benefited by the Tata Trusts foreign donations for the past five years. The PAC also asked the Finance Ministry to inform these controversial and illegal foreign donations given by the Tata Trusts to the Charity Commissioner.
“The Committee (PAC) is also concerned that in addition to the violation of the Income Tax Act, the Committee has also not seen any document to prove that the Trusts (Tata Trusts) have secured permission from the Charity Commissioner to hold these prohibited modes of investment. The Committee recommends that this matter should be brought to the attention of the Charity Commissioner for appropriate action,” said the PAC report.
1. The conversion rate used in this article is 1 USD = 68.81 Rupees.