The Bombay High Court’s stay on showcause notices issued by the income tax department to six Tata Trusts will continue, while the matter will be heard next month. The high court in April 2018 had stayed the notices to show cause why the registration of the trusts, under Section 12A of the Income Tax Act, should not be cancelled.
Issuing the interim stay, a bench comprising Justice MS Sanklecha and Justice SK Shinde had asked the I-T authorities to file a reply on their jurisdiction, in the first place, to issue such a showcause notice. Senior counsel for Tata Trusts, Darius J Khambata, had submitted that the six trusts had surrendered their tax registrations back in 2015.
The matter pertains only to registrations of the trusts under the Income Tax Act. The trusts continue to be registered with the charity commissioner for carrying out charitable activities, Tata Trusts said in a statement. According to media reports, the notices issued on March 8 had sought to cancel the Tata Trusts licence under Section 12(A) of the I-T Act for tax exemption.
The notices had alleged “non-compliance” of rules governing the use of the funds of the trust for the purpose of tax exemptions. Under Section 12A, the trusts and non-profit organisations can claim tax benefits; however, such exemptions can be withdrawn if the trusts invest in ‘prohibited modes’. A withdrawal of tax exemption status could mean a one-time tax payment of 30% of the fair market value of Tata Trusts’ assets, reports had suggested.
The next hearing on the matter will be on August 10.