IMA not a Charitable Organization, but Corporate Entity: GST sleuths tell high court
Kerala High Court
Thiruvananthapuram: Submitting additional evidence before the Kerala High Court the Directorate General of GST Intelligence (DGGI) has claimed that the Indian Medical Association (IMA), which is an organisation comprising of doctors practicing modern medicine, is not a charitable organisation but actually a corporate entity involved in product endorsement, land deals, and profit generation.
The DGGI's submission comes in respect of the plea filed by IMA before the Kerala HC seeking an order restraining the GST Intelligence officials, their men, and agents from provisionally attaching the properties of the association.
Medical Dialogues had earlier reported that the association moved to the High Court bench last year after the DGGI sent an email to the IMA Secretary and requested a comprehensive list of immovable properties registered under the IMA Kerala branch. Previously, the GST Intel officials had issued a notice to IMA on June 19 requiring compliance with the GST laws.
However, IMA had contended before the Court that they do not need to pay the GST as it was registered as a "charitable association". On the other hand, the GST intel claimed that 90% of the activities carried out by the IMA are categorized as non-charitable.
Last year, DGGI informed the HC bench that the Kerala Chapter of the IMA had Rs 50 crore GST due. Submitting an affidavit, the regional director of DGGI Kozhikode, S Syam Nath had informed the Court that an investigation revealed that IMA Kerala has acquired Rs 280 crores in the last six years through various schemes.
It was further stated that responding to the letter by the GST Department, the association had acknowledged its tax debt. However, no payment was made by the IMA Kerala Chapter.
In its plea before the HC bench, the association had invoked the 'principle of mutuality', essentially meaning that no person can transact with oneself. The association claimed that it was formed exclusively for its members, and therefore exempt from tax. It contended that those who pay and those who benefit are doctors.
Also Read: IMA Kerala owes Rs 50 Crore, GST department informs High Court
"There is identity between the contributors and the participants (all are doctors) – consequently, per the established doctrine of mutuality there can be no service by one person to another," IMA stated in its plea.
As per the latest media report by Onmanorama, intending to dismantle IMA's 'mutuality' agreement, the DGGI deputy director filed an affidavit on February 27 and stated that "Many of its activities deviate from the principle of mutuality." DGGI further mentioned in its affidavit that the various activities of IMA were in form of commercial transactions involving non-members.
One such example was a liquor bar that the IMA Cochin Charitable Society owned at Palarivattom. The bar sells liquor to outsiders and non-members. Referring to this, a top DGGI source informed Onmanorama, "The IMA's primary objective is to promote public health. Yet, the IMA is running a bar and claims to be a charitable society. What's this, India's first charitable bar?" In this regard, the DGGI produced a receipt for the sale of three beer bottles and a carry bag issued to a non-member.
Further, the GST sleuths referred to another instance of renting out of rooms in IMA House to non-members. DGGI submitted a tax-invoice in this regard showing that a room in the IMA House Kochi was billed at Rs 2,300 a day for a non-member, the Deputy Director of DGGI himself.
Apart from this, DGGI also submitted documents to show that funds were transferred from profit-making entities of IMA - IMA PEPS (Professional Equipment and Employment Protection Scheme) and IMAGE (IMA Gone Eco-Friendly) to the IMA. Funds were transferred for the purpose of various activities such as purchase of land, conduct of conferences etc.
However, IMA did not disclose any immovable assets in its Income Tax returns. In its affidavit, the DGGI highlighted this big hole in the IT returns of the association.
IMAGE, the association's biomedical waste treatment and disposal project, processes biomedical waste on a commercial basis. IT has around 16,000 clients like hospitals and laboratories. On the other hand, IMA PEPS offers expert advice to private hospitals on the purchase of medical equipment.
While both of these entities carry out commercial operations and have profits, the association has not paid any tax for amounts received from the corporate entities.
Commenting on this, the DGGI source informed the Daily, "It is like two profit-making Adani Group subsidiaries diverting money to Gautam Adani and the tycoon claiming tax exemption for the money received." The source further added, "This is money laundering."
The DGGI affidavit also referred to the IMA's activities for generating revenues through product branding and product sponsorship. "It engages in partnerships with various companies spanning diverse industries such as LED bulbs, water purifiers, oats, soaps... resulting in a significant financial turnover," stated the affidavit.
In this regard, DGGI relied on two examples where IMA profitably endorsed private brands. One was IMA's association with Kent RO Systems. Referring to this, the affidavit claimed that IMA took money for its logo to be featured in Kent commercials.
Meanwhile, IMA claims it to be a project under IMA Swachh Bharat Swasth Bharat Initiative. In this regard, a document titled 'IMA Kent Initiative: IMA White Paper' explained why IMA chose to associate with Kent. "Based on the available literature and evaluation, IMA found that their purified water not only removes bacteria, and viruses but also dissolved impurities," it mentioned. However, in the same document, the association also states that it did not conduct an independent study.
While the association denying receiving an endorsement fee, it mentioned that "IMA did receive voluntary donations from Kent RO group also."
Another example was that IMA headquarters in New Delhi had issued an endorsement for Royale Health Shield, an interior pain brand of Asian Paints, on its own letterhead. The letter signed by the IMA honorary secretary general mentioned, "Royale Health Shield which contains Silver Ion Technology, has shown anti-bacterial activity through the tests recommended by the IMA."
Referring to this, the DGGI mentioned in its affidavit that "IMA is neither a testing nor a certifying authority." The affidavit also highlighted the probability of quid pro quo in such arrangements. It added, "Moreover, such external financial involvement also raises concerns regarding the independence and autonomy of the association."
