08 January 2014

CAG Report on Trusts

Trusts evading taxes - Income Tax Department casual - CAG Fumes 

IN its Report No. 20 of 2013 submitted top Parliament, the CAG has come down heavily on the Income Tax Department for its laxity in dealing with Trusts - not all that charitable. It is a mandatory requirement for charitable trusts/Institutions (Trusts) to get registration under Act for claiming exemption. The CAG scrutinized 90,000 cases in which the Income Tax Department (ITD) granted registration and observed several mistakes, some of which are:
ITD granted registrations/approvals/notifications to the 799 Trusts without verifying necessary documents such as copy of the Trust Deed, proper clauses in the Trust Deed, audited accounts etc.
ITD granted approvals/registrations/notifications in 457 cases in which there was no dissolution clause in the Trust Deed.
ITD granted registrations/approvals/notifications to 73 Trusts having no PAN which is in contravention of the provisions of Act.
ITD granted approvals /registrations In 60 cases Involving tax effect of 87.33 crore irregularly to Trusts whose objects were not charitable in nature.
There was no correlation in granting or rejecting approvals/registrations among different authorities. ITD did not take action to cancel registration in three cases Involving tax effect of Rs. 4.94 crore.
ITD granted registration/exemption in 161cases irregularly involving revenue impact oft 24.23 crore with retrospective effect contravening provisions contained in Act.
There was a delay of more than 6 months to 24 months beyond stipulated period in granting approvals/registrations/notifications in 594 cases. The delay on the part of ITD resulted in deemed approval, to Trusts which were otherwise not eligible.
ITD allowed irregular exemptions involving tax effect of 8.88 crore to 53 Trusts without granting registrations /approvals/notifications.
ITD allowed exemptions In 72 cases Irregularly Involving tax effect of Rs. 8.88 crore despite rejection of registrations/approvals by the competent authority.
ITD allowed exemptions in 9 cases irregularly u/s 10(23C) (iiia)/(iiiad) involving tax effect of 2.39 crore though the gross receipt exceeded one crore.
ITD granted exemptions in 117 cases irregularly without submission of audit reports with the returns.

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