The Income Tax Department is reportedly examining the foreign contributions sought by the Navajbai Ratan Tata Trust (NRTT) as a non-profitable entity in December 2015, even after the Trust had offered to give up its charitable trust status earlier that year. This further aggravates the crisis that the Tata Trusts have fallen into. The Income Tax Department had cancelled the registration of six Tata Trusts recently. NRTT was one of those Tata Trusts whose registration was cancelled. The Tata Trusts are the largest shareholder (66 per cent) in Tata Sons, the holding company of Tata Group, the conglomerate which posted 110 billion dollars revenue in last year.
NRTT had made an application in December 2015 under Section 11 (1) of the Foreign Contribution Regulation Act (FCRA), for the purpose of accepting foreign contributions by an association having a definite cultural, economic, educational, religious or social programme. However, the Trust had already given up its Trust status in February 2015.
In the FCRA application, the Trust had mentioned the detailed activities of the NRTT and had also stated that it was established in the year 1974 by Ratan Naval Tata, in the memory of his grandmother, Lady Navajbai Ratan Tata.
Section 12A of the Income Tax Act exempts a few types of organisations from income tax. A trust or NGO registered under Section 12A is eligible to get an exemption from Income Tax. The issue herein is the fact that NRTT had given up its Trust status in February 2015, and did not even disclose it in its December 2015 application. Tata Trusts, however, claims that the non-disclosure was an ‘inadvertent omission’. In an email response to Business Standard, the Tata Trusts spokesperson said, “Since the Trust was registered under 12A of the I-T Act, for those financial years, by way of information it was so mentioned. It was an inadvertent omission not to have mentioned that the Trust had surrendered its 12A registration in February 2015.”
Tata Trusts have been in a quagmire surrounding Income Tax exemptions for quite some time. Six Tata Trusts-Jamsetji Tata Trust, RD Tata Trust, Tata Education Trust, Tata Social Welfare Trust, Sarvajanik Seva Trust and Navajbai Ratan Tata Trust, were registered in the mid-1970s when Indira Gandhi’s tax terrorism was going on in full swing.
As stated earlier, 66 per cent of Tata Sona is owned by trusts, which ‘promote education, health, culture, and livelihood initiatives in India’. But a 2013 CAG report had stated that the Tata Trusts were given irregular tax exemptions and had found that the company had invested 3,139 crore rupees in ‘prohibited modes of investment’. This resulted in a loss of 1,066 crore rupees to the exchequer. Investment with the aim of making profits is prohibited in case of trusts and societies, disabling them from claiming tax exemptions under the relevant provisions.
Following the CAG report, the Tata Trusts had moved an application in 2015 to surrender their charitable trust status and admitted that they were not entitled to seek exemptions. However, the never-ending trouble for Tata Trusts mounted further when the matter was transferred to a sub-panel of Public Accounts Committee (PAC) of Parliament in 2018, which noted that, the Trusts were investing in prohibited modes of investment since 1973.
The Tata group has gradually built a reputation for itself. It is largely seen as the ‘human face of industry’ on account of the dominant share that Tata Trusts hold in the group. However, the ongoing tax crisis further aggravated by examination of foreign contributions sought by one of the six Tata Trusts comes as a huge blow to its brand image. Tata is one of the most trusted groups in the country, however, the ongoing crisis with serious allegations of corruption and tax evasion will definitely erode the faith that the nation repose in the Tata group.