I-T - Mistrust - Charitable Trusts - irregular exemption- CAG Lambasts
THE CAG, in its recent report tabled in Parliament observed:-
Twenty two Trusts accumulated surpluses of Rs. 819 crore ranging from 35.7 to 84.8 percent of their total income. These surpluses were used for creating fixed assets for earning more profit or transferred to other Trusts rather than charitable purpose to avoid tax.
ITD allowed irregular exemptions to Jamshedji Tata Trust and Navajbai Ratan Tata Trust who invested Rs. 3,139 crore in prohibited modes arising from accumulations of capital gains which involved tax effect of Rs. 1066.95 crore.
In 25 cases, Trusts transferred accumulations to other Trusts treating as application of income which resulted in short levy of tax of Rs. 32.52 crore. (3.14 Explanation to sub section (2) of section 11 prohibits donation to other Trusts out of accumulated funds.)
Four Trusts disbursed interest free loan of Rs. 14.85 crore to escape taxation involving short levy of tax of Rs. 6.23 crore.
ITD allowed irregular exemptions to three Trusts who earned substantial income by accepting capitation fee in addition to other prescribed fee resulted in short levy of tax of 8.88 crore.
ITD allowed irregular exemptions of TV subsidy received from BCCI to four Cricket Associations engaged in commercial activity which resulted in non levy tax effect of 37.23 crore.
ITD allowed irregular exemptions to 30 Trusts involving tax effect of 59.61 crore where voluntary contributions, received without specific directions, were taken to corpus fund instead of treating as income.
ITD allowed irregular exemptions to 48 Trusts involving tax effect of 28.01 crore where trusts were carrying out commercial activities and did not maintain separate books of accounts.
ITD allowed exemption on accumulated amounts to 11 Trusts involving tax effect of 99.63 crore though Trusts lost charitable character.