December 29, 2020 4:20:24 am
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) on Monday quashed the March 2019 revision order of the Income Tax Department that sought to cancel tax exemptions to three Tata group Trusts — Ratan Tata Trust, JRD Tata Trust and Dorabji Tata Trust. The I-T Department order had alleged that these trusts invested in shares of companies in violation of tax norms, 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 pension payments to Ratan N Tata and NA Soonawala, for example, have been held to be wholly and exclusively for the purposes of the business of Tata Sons Ltd, and, therefore, the stand that these payments amounted to benefit to the trustees is ex facie incorrect,” it added.
The ITAT 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, adding “the objectivity of the averments” made by Mistry, in such a situation is “extremely doubtful”.
“(Mistry) was chairman of Tata Sons Ltd since 2013 and its director since 2006, but apparently, knowing everything very well, he keeps quiet all along. Just as he is expelled from the office of the Chairman of Tata Sons, he gathers copies of the documents accessed by him in a fiduciary capacity and hands these documents over to the Income Tax Department. This kind of conduct is unheard of in the civilized corporate world. The inputs from those engaged in a rivalry with an assessee should be taken with a reasonable degree of circumspection and should not be placed on such a high pedestal so as to relegate all other material facts and accepted past assessment history of the case into insignificance,” said the order.
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