Income Tax dept examines foreign contribution sought by Tata trust

The income-tax (I-T) department is examining the foreign contributions sought by the Navajbai Ratan Tata Trust (NRTT) as a non-profitable entity in December 2015, even after the Trust offered to surrender its charitable trust status earlier that year. The NRTT is among the six Tata Trusts that had their registrations cancelled by the I-T department in October.

The Trust had made an application on December 10, 2015, under Section 11 (1) of the Foreign Contribution Regulation Act (FCRA), for acceptancing foreign contributions by an association having a definite cultural, economic, educational, religious or social programme. This requisition was made after it had given up Trust status in February 2015.

In the FCRA application, the Trust had mentioned the detailed activities of the NRTT and said that it was established in 1974 by Ratan Naval Tata, in the memory of his grandmother Lady Navajbai Ratan Tata. It further said that the Trust was registered with the office of the charity commissioner, Mumbai, and is registered under Section 12A of the Income-tax Act, 1961.

Section 12A of the I-T Act enables a few types of organisations to get exemption from income tax. When a trust or non-profit organisation gets registered under Section 12A, it is further eligible to get exemption from income tax. Trusts and non-government organisations which don’t make profits from their financial transactions are eligible to register for 12A. If any non-profitable trust or NGO has not registered for 12A, its financial receipts or transactions would be considered taxable.

Apart from the activities, the Trust had also submitted the trust deed along with an audited statement of accounts for the past three financial years (FY13, FY14 and FY15).

In an emailed response to this newspaper, the Tata Trusts spokesperson said, “Since the Trust was registered under 12A of the I-T Act, for those financial years, by way of information it was so mentioned. It was an inadvertent omission not to have mentioned that the Trust had surrendered its 12A registration in February 2015.”

The spokesperson said, “NRTT made an application for FCRA registration in December 2015. As part of the application process, the Trust was supposed to detail the activities of the previous three financial years, 2012-13, 2013-14 and 2014-15.”

Tata Trusts further said that, in any event, the 12A registration is a non-issue in so far as the FCRA application is concerned. The rules governing such an application do not mandate a requirement that a Trust should be registered under section 12A of the I-T Act. In fact, the eligibility criteria for grant of registration under FCRA requires that an association should be registered under any one of The Societies Registration Act,1860, or The Maharashtra Public Trust Act,1950 (the Navajbai Ratan Tata Trust is registered here), or the Indian Trust Act, 1882, or under Section 8 of the Companies Act, 2013.

Therefore, any implicit suggestion that the Trust was making a false declaration to get FCRA status is grossly incorrect. In any case NRTT does not have an FCRA registration, the statement added. On the issue of exit tax introduced in 2016, which the Trusts claimed is not applicable on the ground that they surrendered the registration a year ago, it said, the Trust from the financial year 2014-15 onwards has been filing its income tax returns on the basis that it has surrendered its 12A registration. But the charitable character of the Trust has not changed. Therefore, the question of applying 2016 tax provisions, whether on merits or from the standpoint of date of applicability, does not arise.

The NRTT in the FCRA application had also given a short synopsis of the various activities involving advancement of the education in economy, sanitary science and arts or for the relief of human suffering or for other works of public utility. It said that Trust is to help various institutions and individuals without any distinction of caste or creed anywhere in India.