Probe Tata Trusts over tax ‘violations’, says House panel

A parliamentary panel has recommended a probe into alleged tax violations by Tata Trusts and has accused them of favouring foreign institutions like Harvard Business School (HBS) over the Indian universities.

In the report, the sub-panel of the Public Accounts Committee on Direct and Indirect Taxes headed by BJP MP Nishikant Dubey, flagged several alleged violations by Tata Trusts.

Asked for their comments, Tata Trusts, which are among the main promoters of over $100-billion Tata Group, countered all the charges and said they did not violate any Income Tax Act compliance.

The parliamentary panel said: "At a time when underprivileged 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 million dollars of public charity money on foreign universities." It also accused the Tata Educational and Development Trust of "funnelling" tax-exempt public charity money outside the country to fund rich foreign universities as opposed to being used for the benefit of the people of India.

The contribution to HBS "was for the personal interest of one/some of the trustees of various Tata trusts", the panel said while flagging a "gift agreement" of $50 million executed between the HBS dean and industrialist Ratan Tata. As per the agreement, in recognition of the generous support, a new building to be constructed on the HBS campus would be named in the donor's name, the Tata Hall, it said. "Thus, the funding to the HBS is neither charity nor in international welfare in which India was interested," it said.

It also claimed that the trusts were investing money in prohibited modes of investment despite a law strictly prohibiting public charitable trusts from holding such assets post 1973. The value of such investments ran into tens of billions of rupees, it said.

"The committee is appalled to note that no action has been taken by the trustee or the Income-Tax Department to remedy the situation," the panel said.

In the report, the panel also noted that Tata Trusts had been claiming dividend income, which formed a majority of its income.