Another plaint against DMCH, misuse of IT exemption alleged

Tribune News Service

Nitin Jain

Ludhiana, March 25

A day after the Commissioner of Police Mandeep Singh Sidhu ordered an investigation through a special investigation team into the allegations of “misappropriation of funds, forging documents, account books, records, fudging accounts and cheating poor patients,” another complaint has been filed against the Dayanand Medical College and Hospital (DMCH), a 1,326-bed (inclusive of 800 teaching beds) tertiary care teaching hospital here.

Zero tolerance to corruption: hospital

We have zero tolerance for corruption and wrongdoings. Since we have a three-tier accounting system with three layers of audit in place, not even a small discrepancy in our accounts is possible at all. There are some bad elements who are behind making such false and frivolous complaints. — Prem Gupta, DMCH Secretary

Filed by advocates and social activists PC Sharma and Rohit Sabharwal, the complaint addressed to the Prime Minister’s Office and the Income Tax Department has alleged “misuse of income tax exemption” being availed by the leading medical college and hospital.

However, the managing society of the DMCH has vehemently denied the allegations as “totally false and baseless” while terming them as a bid to “deflect the attention from the good work for noble cause being done by the institution since ages”.

The complainants, who were running an NGO, “Fighting Against Social Evils and Corruption”, have submitted that the hospital had been availing exemptions under the provisions of Sections 11 and 12 of the Income Tax Act since one of the objectives of the hospital was to provide charitable medical facilities to the poor and needy.

“It is a bogus charity and crores of rupees have been amassed showing it as charitable. Section 11 of the Income Tax Act, 1961, provides exemptions for income earned from property held under charitable trusts/ societies for activities carried out for charitable or religious purposes subject to certain terms and conditions,” they alleged while referring to conditions laid down in relevant law provisions.

Alleging that the audited account of hospital show “vast irregularities”, they said the DMCH had an in-house pharmacy also with an objective of providing patients with easy access to medicines at reasonable and subsidised rates but “though the pharmacy was buying medicines at highly concessional rates, merely 20 per cent of the maximum retail price was offered to patients while a substantial portion of such discount was not passed on to the patients by charging a much higher price than the actual purchase price”.

Raising questions on the claim of the DMCH being a charitable institution, the complainants said one of the fundamental criteria of granting tax exemption was that none of the activities must not be undertaken on commercial lines. But if the operations of the pharmacy were carried out on “commercial lines”, it should be treated as business with the intent of making profits.

Seeking withdrawal of registration granted to the DMCH under Sections 12-A and 12-AA of the Income Tax Act, the social activists further alleged that the accounting shows “bogus entries” in the shape of “concession and subsidy to patients”. “The practice of pharmacy receipts being notionally accounted for at MRP of medicines and thereafter, the difference between MRP and the actual price charged to the patient was treated as “concession and subsidy to patients”, which was against law,” they alleged.

Referring to the accounting standard-9 on “revenue recognition” issued by the Institute of Chartered Accountants of India, they submitted that as per Section 11(1) of the Income Tax Act, the receipts of a charitable organisation were not subject to tax provided at least 85 per cent of such receipts were applied towards charitable purpose in the relevant year.

“There have been various instances where patients had complained that they were forced to buy medicines from the DMCH’s in-house pharmacy, which were sold at higher prices,” they alleged.

Sharing audited financial statements for financial year 2018-19, the complainants wrote that the gross receipts of the DMCH were Rs 820,62,33,539, which included revenue from sale of medicines of Rs 177,44,60,564 (recorded at MRP) while Rs 144,18,82,953 was shown as discount offered to the patients on the sale of medicines, and thereby marked as expenditure towards “concession and subsidy to patients”.

Alleging “false accounting” and claiming that “no such discount had ever been given”, the social activists further submitted that as per the audited financial statements for financial year 2019-20, the gross receipts of the DMCH were Rs 928,72,15,046, which included revenue from sale of medicines of Rs 222,41,72,733 (recorded at MRP).

“Again, Rs 184,48,67,488 being a discount offered to patients on sale of medicines, had been separately recorded as expenditure towards “concession and subsidy to patients”,” they averred, while reproducing the copies of the audited financial statements.

Similarly, as per the draft audited financial statements for financial year 2020-21, they submitted that the gross receipts of the DMCH were Rs 785,68,93,184, which included revenue from sale of medicines of Rs 181,25,51,307 (recorded at MRP). “Correspondingly, a sum of Rs 180,20,65,118 being a discount offered to the patients on sale of medicines, had been separately recorded as expenditure towards “concession and subsidy to patients”, they stated.

Alleging “accounting jugglery in the course of income tax assessments”, the complainants accused the DMCH of “non-compliance of fundamental conditions of application and accumulations”.

“The so-called discounts extended to the patients were notionally recorded as expenditure and simultaneously claimed as application for charitable purposes. However, in reality, it was not the actual application of income for charitable purposes since the money that had been charged from consumers was less than what had been claimed in the accounts,” they argued, while alleging that the DMCH had been making “wrong/ misleading representation of facts/ figures to claim illegitimate benefit not available in law”.

Stating that the definition of charitable and religious purpose in the Income Tax Act includes relief to the poor, the social activists also accused the DMCH of “making false claims of giving concession to everyone irrespective of whether the person was rich or poor, which was against the spirit of the Income Tax Act”.

They further submitted that the RT-PCR test charge was shown as Rs 4,000 and Rs 3,550 was shown as concession, thereby charging Rs 450 from the patients. “This was again wrongly shown as concession and claimed as application of income for charitable purposes, since Rs 450 was the rate fixed by the government for such Covid test,” the complaint read while attributing it to “wrong misrepresentation of the facts, which had also been highlighted by a governing body member”.

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