Controversy over cancellation of Tata Trusts' registration

The contentious issue that Tata Trusts is challenging is the date of the order, which makes it liable to pay a much higher amount of tax under the new tax provision introduced in June 2016 concerning charitable trusts.

The Central Board of Direct Taxes (CBDT) has summoned senior officials who were till recently handling the case linked to the cancellation of Tata Trusts registration.

The tax department is seeking explanation from these officials over the cancellation date to find out if there were lapses.

Tata Trusts - the largest shareholder in the group’s holding company Tata Sons with a 66 per cent stake - had last month moved the Income Tax Appellate Tribunal (ITAT) to challenge the tax department order on cancelling the registration.

On October 31, the department had cancelled the registration of six trusts operating under Tata Trusts, citing violation of norms applicable to charitable institutions.

The contentious issue that Tata Trusts is challenging is the date of the order, which makes it liable to pay a much higher amount of tax under the new tax provision introduced in June 2016 concerning charitable trusts.

The Trusts is of the view that the cancellation should apply retrospectively as it had offered to surrender the registration in 2015, about one year before the new tax provision became effective.

According to sources in the know, CBDT wants officials, who were in charge of the matter during that period and also post that, to explain the rationale of not resolving the case in the stipulated time period.

The officials have been asked to give a rationale for not acting on the Trusts’ registration in 2015 after a show-cause notice issued the same year, said two persons privy to the development.

The CBDT is also trying to ascertain whether the Tata Trusts case triggered the special provision in the regulation, one of the sources quoted above said.