The income tax department keeps harping about mandatorily quoting Permanent Account Number in every transaction but a scrutiny by the Comptroller and Auditor General of tax exemptions granted to 1.37 lakh trusts and NGOs has revealed that the I-T department granted exemption to at least 72 trusts which had no PAN. 

 

In a report tabled in Parliament on Friday, CAG said tax exemption was granted to 1,200 trusts and NGOs worth more than Rs 3,000 crore when they did not deserve it. These trusts include the Tata trusts, Breach Candy Hospital and cricket associations among others who have evaded tax, the audit findings revealed. 

Two Tata trusts -- Jamshetji Tata Trust and Navajbai Ratan Tata Trust - were allowed exemptions of over Rs 1,000 crore which it should have otherwise paid as tax. This was on account of Rs 3,100 crore the two trusts had earned as capital gains and which they further deployed as investment against the norms. "The investments in contravention to the I-T Act... resulted in short levy of tax of Rs 1,066.95 crore," the report said. 

The auditor identified 1.37 lakh assessments of trusts and checked 81,000 cases. In 1,283 cases, objections of irregular exemption involving tax effect of Rs 3,019.21 crore was raised. 

The I-T department granted approvals to 72 trusts having no PAN which is in contravention of the provisions of the I-T Act. At least 800 trusts were given registration without verifying whether necessary documents such as copy of the trust deed and audited accounts etc were in place. 

Despite these facts coming to its notice, the I-T department failed to take action to cancel registration and these trusts continued to evade taxes. 

In its recommendation, the federal auditor sought action against officials responsible for such omissions and asked the finance ministry to "evolve effective monitoring system". 

In case of Breach Candy Hospital in Mumbai, its exemption was rejected on April 25, 2010 for assessment year 2003-11 on the ground of "profit motive and no philanthropy". However, the department failed to cancel the registration and disallow the exemption. "This resulted in underassessment of income of Rs 14.56 crore involving tax effect of Rs 4.94 crore," the CAG report said. 

The report pointed out irregular exemption of TV subsidy received from BCCI in cases of Saurashtra Cricket Association, Baroda Cricket Association, Kerala Cricket Association and Maharashtra Cricket Association resulting in short levy of tax of Rs 37.23 crore. (Times of India)