ITAT Mumbai bench modifies observations, takes back its comment on Cyrus Mistry

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January 01, 2021 8:00 AM

The tribunal via the order had restored the tax-exempt status for Tata Group Trusts, quashing a revised assessment order issued by the tax commissioner concerned.

The CAG report had highlighted that the corpus funds of Trusts were being utilised to control the business of the group companies instead of applying funds for charitable purposes, the statement said.The CAG report had highlighted that the corpus funds of Trusts were being utilised to control the business of the group companies instead of applying funds for charitable purposes, the statement said.

In an embarrassing turn for the Mumbai bench of the Income Tax Appellate Tribunal (ITAT), it has come to modify the observations made by it in a recent order that amounted to casting aspersions on the conduct of Cyrus Mistry, the former chairman of Tata Sons.

The tribunal via the order had restored the tax-exempt status for Tata Group Trusts, quashing a revised assessment order issued by the tax commissioner concerned.

In a corrigendum issued on Thursday, the tribunal admitted that it “inadvertently missed out” on the fact that the information provided by Mistry to the tax department in this connection was in response to a notice from the latter, and not on his own volition.

On the presumption that Mistry gave the inputs, questioning the conduct of the Tata Trusts and the trustees, to the department without being asked by the latter, the tribunal had said earlier that such kind of conduct was unheard of in the civilised corporate world.

The modified order, however, maintained that: “The inputs from those engaged in a rivalry with an assessee ought to have been considered by the department 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 tribunal also iterated that, “…corrections will have no impact on the outcome of the appeal.”

The tribunal had earlier questioned the veracity of evidences received from Mistry on the grounds that “his action of supplying documents to the income tax department, without any authorisation of the company even though which were apparently obtained by him in the fiduciary capacity, almost immediately after being removed as Chairman of the Tata Sons Ltd, cannot be said to be influenced by call of a pure conscience and high ground of morality”.

The tribunal had quashed the I-T department’s revised assessment order on the Tata Trusts which had sought to tax its income from investment in Tata Sons companies while investigating charges that the trustees had significant control over Tata Sons and were also takings services and benefits from the business in contravention to income tax laws governing Trusts. The revised assessment order was based on the information supplied by Mistry.

A statement issued by Cyrus Mistry’s office said the corrigendum was “one step towards the vindication of truth and justice”. “The Tata Trusts are Public Charitable Trusts and not a family investment firm. The current trustees, who are fiduciaries, have been tasked with the noble goal of improving the lives of millions of Indians through philanthropy. Instead of seeking to blame Mr Mistry at every turn, the Trustees of the Tata Trusts must introspect why they have deviated from this path, leading to a greater scrutiny on their operations by the various government bodies,” the statement said.

Mistry’s office also referred to recent reports by Public Accounts Committee and Comptroller and Auditor General (CAG) that had expressed concerns that public charitable trusts were being used to run businesses for profit and repeatedly violating provisions of the Income-Tax Act. The CAG report had highlighted that the corpus funds of Trusts were being utilised to control the business of the group companies instead of applying funds for charitable purposes, the statement said.

“The trustees should also introspect why they continue to seek to donate hundreds of millions of dollars to rich foreign universities with deep pockets and worse, where one of the Trustees has an association, instead of applying the tax-exempt money for the development of educational institutes in India as mandated by the settlors of the Trusts. As fiduciaries in charge of public money, the Trustees have a moral duty to avoid conflicts of interest and discharge their duties in accordance with law and the Trust deeds,” Mistry’s office added.

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