Consultancy services of IIT, IIMs evading tax

Consultancy services by the Indian Institutes of Management and Indian Institutes of Technology and cash payments made to surgeons of large multi-speciality hospitals have come under the scanner of Income Tax department after a country-wide probe established that these transactions were largely escaping the I-T net.

An elaborate ‘analysis probe’ conducted by the I-T department’s investigative apparatus found that a number of services, including large and small Public Sector Undertakings (PSUs) and state government enterprises, are a large catchment area for realising taxes under the Tax Deducted at Source category and should be essentially tapped now.

In a recent conference of chiefs of various departments and the CBDT held in the national capital, the participants were told about the need to keep track of these potential tax generating areas .

According to the I-T data, while the IIMs and IITs render consultancy services to a host of government and non-government sectors, the beneficiaries (clients) of these services do not deduct the TDS on the payments made to these elite institutions.

The report termed the consultancy offered by the pan-India institutes “commercial”.
The I-T found that on an average, an IIM undertakes about 40 fresh consultancy projects in an year on a host of subjects. While some projects consist of giving advice to clients on specific issues and problems, others include training modules for the staff of the client company, while some are related to orient maximum output from a desired project of the client firm.

The IITs, too, undertake similar projects but their consultancy services are higher on the technical and statistical fronts, the I-T found.

The probe found big hospitals making “huge cash payments” to doctors, particulary surgeons, without deducting the requisite TDS and this is an area to be tapped by the I-T. The department will now scan the annual reports of state governments and PSUs brought out by the CAG to check if TDS and other taxes are being deducted and are dropped in the governments’ revenue kitty.