Tax relief for Dorabji Tata Trust withdrawn

The move is linked to managing trustee’ s‘ significant’ compensation

The income-tax department has withdrawn the exemption granted to Sir Dorabji Tata Trust, one of the oldest and biggest philanthropic organisations in the country, in a move that could adversely hit the $103-billion salt-to-software Tata group. The withdrawal order was issued on December 31, 2018, after the authorities found violation of certain conditions required for claiming tax exemptions.

Confirming the development, an I-T official said, “The exemption claimed under Section 11 has been denied for violation of condition under Section 13 of the I-T Act.” The alleged violation relates to “significant compensation paid to the Trust’s managing trustee R Venkataramanan’’, he pointed out. The compensation of Venkataramanan (referred to as Venkat) is beyond the permissible limit under the I-T Act, according to sources in the tax department.

An e-mail sent to Tata Trusts, chaired by Ratan Tata, did not elicit any comment. Sources in the know said the I-T order was being contested. The last date to file an appeal was January 31.

The Sir Dorabji Tata Trust, along with the Sir Ratan Tata Trust, is the biggest under the umbrella of Tata Trusts, a cluster of charitable organisations controlling 66 per cent of Tata Sons, the holding company of the group.

Section 11 of the I-T Act deals with the exemption of income derived from property held in a trust or other organisations linked to religious or charitable purposes.

Explaining the process, a source in the I-T department said an assessing officer would verify the ‘exempt’ on the basis of what one has filed for. In this case, a compensation amount of ~2.5 crore has been reflected in the Trust’s audited books for assessment year 2015-16. The tax department had issued notices last year, seeking explanation on the amount paid. However, submissions made by the Trust were not satisfactory, he said. “So, accordingly, the order has been issued.’’