The Income Tax Appellate Tribunal (ITAT) on Monday, December 28 reversed the March 2019 revisionary orders of the Commissioner of Income Tax (I-T)- Exemptions (CIT) that sought to annul tax exemptions given to three Tata group trusts - JRD Tata Trust, Dorabji Tata Trust, and Ratan Tata Trust. The edicts would have led to three Tata Trusts having to pay up taxes running into several lakhs.
The CIT had in its order alleged that the said trusts may have been in violation of the provisions of Section 13(1)(d) of the Income Tax Act during the assessment year 2014-15. The IT department also said that the Assessing Officer (AO) in the matter did not investigate the violation properly.
Meanwhile, the original assessment orders of the I-T officer/AO, which had upheld the tax-exempt status of the three trusts, will now apply.
The ITAT bench is the final authority, however, a plea can be filed with the court, but only when a question of law is involved. Hence, the trusts can finally breathe easy.
The high-profile Mumbai bench, including its president Justice PP Bhatt and Vice-President Pramod Kumar, passed three orders observing that the I-T department's revision orders in the three trusts are "devoid of any legally sustainable merits."
It noted that none of the trustees of the three trusts had any significant interest in Tata Sons and the investment in the holding company of Tata Group by the trusts is not "for the purpose of investment in shares", but undoubtedly with the intention to share the "fruits of the success of the Tata Group for the benefit of the general public at large."
The bench further stated that considering the investments by the three trusts are in the nature of corpus, they are not ineligible for I-T exemption.
The ITAT further noted that the payments made by Tata Sons to trustees of the said trusts were for the positions they held as its former directors and employees and had no connection to the benefits given to them.
The bench also took a dim view of Cyrus Mistry's action, who soon after his removal as Tata Sons' chairperson, passed on several documents to the I-T department that he had received in a "fiduciary capacity". It pointed out that the "objectivity of the averments" made by Mistry, in this situation is "extremely doubtful."
"This kind of conduct is unheard of in the civilised 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," the bench said in its order.