ITAT quashes earlier order to cancel tax exemptions to three Tata trusts

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has quashed the March 2019 revision order of the Income Tax Department that sought to cancel tax exemptions of three Tata group Trusts viz Ratan Tata Trust, JRD Tata Trust and Dorabji Tata Trust.

The I-T Department order had alleged that since these trusts had invested in shares of companies in violation of tax norms, they were not eligible for tax exemption as its trustees had substantial interest in Tata Sons Ltd where the three trusts have 66 per cent stake and the trustees received payments from Tata Sons in contravention of the trust deeds.

The ITAT Bench, comprising its President Justice PP Bhatt and Vice-President Pramod Kumar passed three orders noting that the I-T revision orders in the case of the three trusts are devoid of any legally sustainable merits.

It said none of the trustees of the trusts had any substantial interest in Tata Sons and the investment in Tata Sons by the trust is not for the purpose of investment in shares but undisputedly for the purpose of sharing the fruits of the success of the Tata Group for the benefit of the general public at large. Since the investments by the trusts are in the nature of corpus, it will not make them ineligible for I-T exemption, it said.

The ITAT said the payments made by Tata Sons to trustees of these trusts was for their roles as its former directors and employees and has nothing to do with the benefits given to them.

The Tribunal also said that the I-T revision order is based on documents provided by Cyrus Mistry to the Department eight weeks after his removal from Tata Sons’ board on October 24, 2016.