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Tata Trust refused to share Venkatramanan’s employment contract: Income Tax Dept

The income tax (I-T) department has accused Sir Dorabji Tata Trust of not sharing former managing trustee R Venkataramanan’s employment contract, despite repeated requests to justify its order. In the absence of a contract, the department concluded that the contract deems to be in breach of the trust deed, they said.

Last Updated: Feb 26, 2020, 07.42 AM IST
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Mumbai: The income tax (I-T) department has accused Sir Dorabji Tata Trust of not sharing former managing trustee R Venkataramanan’s employment contract, despite repeated requests to justify its order that his salary was “not in accordance with the trust’s deed.”

The department made this claim before the Commissioner of I-T, Appeals that is hearing an appeal by the trust — part of the Tata Trusts that collectively own about two-thirds of Tata group holding company Tata Sons — challenging the I-T order, people familiar with the development told ET.

In the absence of a contract, the department concluded that the contract deems to be in breach of the trust deed, they said.

“There were repeated communications sent to the trust to share the contract so that it could be verified and matched with the objects of the trust deeds. However, the same was never shared,” said one tax official. “So, their contention that everything was as per the trust object deeds cannot be corroborated… The only inference one can draw from this is that the contract would be in breach of the trusts objectives and therefore it wasn’t shared.”

In an order for assessment year 2016-17 dated December 30, 2018, the I-T department had ruled that the annual salary of Rs 2.66 crore drawn by Venkataramanan was not in accordance with the trust’s deed and was violative of rules under Section 13 of the Act.

The department withdrew tax exemption to the trust and arrived at a sum of Rs 317.27 crore as its taxable income and initiated penalty proceedings for “furnishing inaccurate particulars” of total income.

The department had also refused to accept the explanation of an “external benchmarking” to arrive at the compensation for the executive trustee, and contested that an internal benchmark was the right method because executive trustees don’t “need to bother about revenue,” one of the persons cited above said.

Tata Trusts did not comment on the tax department’s claims.

A senior official said the trust has not flouted deed rules. “The 1932 deed of the Sir Dorabji Tata Trust allows for compensation of the managing trustee and there are no limits mentioned,” he said. “Venkataramanan is responsible for the performance of all Tata trusts although the salary is reflected in the Sir Dorabji Tata Trust.”

The person claimed that Venkataramanan's role as managing trustee is executive in nature and, therefore, his salary cannot be compared with other regular trustees. “The trustee may from time to time appoint employees and servants as the trustee may deem expedient and fix and pay their remuneration out of the trust fund or the income thereof,” the trust deed states.

“Disbursement of all Tata Trusts in 2017-18 was Rs 1,150 crore against ?955 crore in the previous year,” the official said.

Venkataramanan is being probed by the Central Bureau of Investigation and the Enforcement Directorate in a separate case.

The I-T department questioned the trust’s contention of using external benchmark for the managing trustee’s remuneration, and argued that executive trustees shouldn’t act like CEOs of multinationals and be bothered about the revenue. “This is a trust whose sole aim is charity, it cannot be run as a corporate. Therefore they should have followed an internal benchmark,” an official said.

According to the department, the trust was established with an endowment of Rs 1 crore. Percentage of remuneration to the executive trustee is 1.18% of income. Therefore, Venkataramanan's remuneration cannot be treated as reasonable, the tax department said.

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