PAC concerned with Tata Trust funding foreign varsities

A Parliamentary panel has taken exception to Tata Educational and Development Trust diverting $100 million (around Rs 650 crore) tax-exempted public charity money outside the country to fund its rich foreign universities, and has asked the Centre to set up an expert group to look into violations committed by the Tata trust and other such trusts, so that they do not escape tax liability.

The Tata Educational and Development Trust, set up in 2008, was allowed exemptions in November 2015 towards foreign contributions of $100 million made during 2008-09 to 2015-16 to two foreign universities - Cornell University and Harvard Business School - for creation of endowment fund and construction of a new executive building named Tata Hall, the Public Accounts Committee (PAC) noted in its latest report.

According to the Income Tax Act 1961, in case of trusts created after April 1, 1952, the application of income outside India should be with reference to international welfare in which India is interested.

However, the panel said that construction of Tata Hall at Harvard did not amount to international welfare in which India was interested. Instead, it was for the promotion of personal interest of one/some of the trustees of various Tata trusts.

“The committee is concerned to note that Public Charitable Trusts are used to run commercially for profit businesses and have repeatedly violated provisions of the Income Tax Act. The committee is aghast to note that the trusts are investing money in prohibited modes of investments, despite the law which strictly prohibits Public Charitable Trusts from holding such assets post 1973. The value of these prohibited investments run into thousands of crores,” the panel said.

“The committee is appalled to note that no action has been taken by the Trustees or the Income Tax Department to remedy the situation. The Committee are again perturbed to find that Tata Trusts have been claiming dividend income which forms the majority of their income, is exempt from the requirement of applying 85% of Trust income towards charitable purposes,” it said.

The committee said that surprisingly, no efforts were made by the Income Tax Department to monitor whether the trust had been fulfilling the objectives under which it has been established.

It, therefore sought setting up an expert group under the Income Tax Department to look into violations committed by Tata Trust afresh, with a view to devising a procedure for proper and systematic evaluation of such trusts so that they do not escape tax liability.