Suresh Kalmadi- led Indian Olympic Association ( IOA) has been served a “ scrutiny notice” under Section 142( 2) of the Income Tax Act of 1961 to review the tax exemption granted to it under the “ charitable organisation” category, an Income Tax official told the Delhi tabloid Mail Today.
The scrutiny notice will allow I- T officials to examine balance sheets and tax returns of the IOA, thus putting Kalmadi in an embarrassing situation once again, with less than 60 days to go for the Commonwealth Games in October, the report said.
The senior I- T official said the department has also summoned for the IOA's tax returns filed for the assessment year 2008- 09. “ In case there is any violation, the charitable status could be withdrawn,” he said. The IOA enjoys charitable status under section 12 A ( b) of the Income Tax Act since 2002, a tax holiday given to the association for promoting sports activities.
According to the I- T Act, a charitable organisation that operates in the field of sports has to channel its revenue in the direction of sports and sports promotion.
However, retired income tax chief commissioner Vishwa Bandhu Gupta alleged that several grants received by the IOA are left unutilised and a majority of the expenses on the organisation's activities are not related to sports. “ Huge bank deposits, unpaid bills to five- star hotels, luxury cars, funds wasted on renovation of building and IOA's administrative expenses should be probed,” he said.
According to IOA's statement of accounts for the year 2008- 2009, it spent ` 1.55 crore on office and administrative expenses alone. Of this, an astonishing ` 11 lakh was spent on lapel pins and ties. The previous year, the IOA had spent ` 1.8 lakh on purchasing the same items.
An I- T official told Mail Today that while the IOA treats athletes shabbily by putting them up in ordinary hotels while on tour, the association owes a large amount to several five- star hotels such as Le Meridien and Sun & Sand for holding functions there.
The 2008- 09 statement of accounts bears this out: the IOA spent ` 51.34 lakh on holding meetings and conferences at five- star hotels. The previous year, it had spent ` 16.19 lakh on the same.
There's more: taxpayers' money was used to buy luxury vehicles, including Mercedes cars, to be used by the IOA top brass. The “ charitable” organisation also spent ` 36.82 lakh on the inauguration of the Olympic Bhawan in 2008.
As of March 2009, IOA's income stood at ` 9.56 crore, while expenses were pegged at ` 7.9 crore, thus giving it a surplus of approximately ` 1.65 crore. It also made fixed deposit investments of ` 6.6 crore. An I- T official said, “ We could also check the IT returns papers for the years before this.
We could also scrutinise the account for the year after the “ check period” to understand what's going on.” Dinesh Mehta, IOA's auditor, confirmed that a scrutiny of his client's accounts is on. “ The accounts for the assessment year 2006- 2007 were also scrutinised earlier, but they found no violations,” he claimed.
A serving chief commissioner of Income Tax, who spoke on the condition of anonymity, explained that a scrutiny of accounts is ordered in case there is suspicion of irregularity in budgetary expenses or violations of the terms and conditions of charitable status. “ Other routine cases that invite scrutiny are when receivables or income of a charitable organisation is high, say, between ` 4 crore to ` 5 crore. It requires verification. If violations are established, the charitable status can be withdrawn,” he said.
The IOA's sources of income include grants and funds received from the ministry of youth affairs and sports, the International Olympic Committee, the Olympic Council of Asia, interest on fixed deposits, etc.
The IOA's audit report finalised by Dinesh Mehta and Company, however, stated that accounts for the financial year ending March 31, 2009, would give a true and fair view in conformity with the laid down accounting principles. Other than this, the I- T sleuths are also investigating financial dealings and contracts related to the upcoming Commonwealth Games.
Removal of the “ charitable organisation” status is not unusual. It may be recalled that the I- T department had served a scrutiny notice under Section 143( 2) of the Income Tax Act of 1961 to the Board of Control for Cricket in India ( BCCI) last year. In November 2009, the department had raised a tax demand of ` 118 crore.
An exemption was granted to BCCI on the grounds that cricket was a ‘ charitable' activity. BCCI had, however, amended its rules and changed its objectives by introducing commercial activities such as the Indian Premier League or IPL. Following this, the I- T Department decided to cancel BCCI's registration as a ‘ charitable' organisation. This decision is in appeal at present.