The crisis at the 57-year-old elite Capri Club in Colombo took a new turn this week when the Inland Revenue Department announced it would launch an investigation into the payment of VAT following a report submitted by a select committee of the membership that went into alleged irregularities by its senior office-bearers.
The alleged irregularities had taken place late last year when the Excise Department routinely asked for the VAT certification prior to the issue of a bar licence for the ensuing year (2010).
The select committee found that The Capri Club President Morgan Fernando and Vice President Ananda Chittampalam had violated club rules by engaging a ‘tax consultant’ to settle a claim by the Inland Revenue Department to pay VAT (Value Added Tax) to the tune of Rs. 528,000. The claim had been settled with the Department for Rs. 75,000 within days.
Inland Revenue Commissioner Kalyani Dahanayake confirmed that the Department was re-opening the file and examining what happened. “Disciplinary action would be taken against any officer if any malpractices had occurred in recovering taxes from Capri Club. I have received several complaints against this club,” she told the Sunday Times on Friday.
The select committee pointed out that a ‘tax consultant’ had been engaged without the prior approval of the management committee and paid Rs. 575,000 in three cheques. According to the club rules no single payment of over Rs. 250,000 can be made by any office-bearer without the approval of the management committee. The three cheques, each below Rs. 250,000 however totalled Rs. 575,000, thus circumventing the club rules, the select committee held.
It stated that the amount due to Inland Revenue was “overstated” to justify the retaining of a ‘tax consultant’.
The select committee said that it did not want to go into how the Rs. 528,000 tax liability and the inflated amount supposed to be the claim by the Inland Revenue Department was reduced to Rs. 75,000, but that eventually the club paid Rs. 650,000 for a claim of Rs. 528,000, and that it would have been better for the club to have paid the State than to compromise the dignity and honour of the club.
Its findings show that even the payment of Withholding Tax by the Club has been inconsistent with the Inland Revenue Act.
In a letter to members earlier this year explaining the circumstances behind the need to have retained a ‘tax consultant’ to settle the VAT claim, Mr. Morgan Fernando described the ‘tax consultant’ as a chartered accountant.The select committee reports points out that the receipts for the payment of Rs. 575,000 to a ‘tax consultant’ do not relate to either a Tax Consultant Company or a practising firm of Chartered Accountants.
Club members this week vehemently protested that Mr. Fernando has misrepresented facts and deliberately misled the entire membership because the ‘tax consultant’ who handled the VAT claim on behalf of the club is not a chartered accountant, but was a former clerk in an accounting firm who deals with the Inland Revenue Department and Tax Assessors.
MORE RESIGNATIONS
Four more Management Committee members of the Capri Club, including the Bar Secretary resigned on Monday and a fifth yesterday following revelations that the club’s President Morgan Fernando and Vice President Ananda Chittampalam had been found guilty of violating club rules in an alleged VAT scam involving the club.
The select committee report handed over to Mr. Fernando has not been circulated among members despite it being handed over to him a fortnight back.
The five members who resigned this week add to a long list of Trustees, the Secretary, Treasurer and several other Management Committee members who have resigned over the same matter from The Capri Club, once a prestigious social club of the Colombo elite, now riddled with dissension among its members and questionable financial dealings.
Vice President Ananda Chittampalam has now assumed the post of Secretary of the club after the interim Secretary also resigned earlier this month after functioning in the post for only three months.
Long-standing members have been suspended from the club or served charge sheets and at least one former president of the club has gone to courts to seek redress.
Club members said the Management Committee is now crippled without a quorum to meet. |
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