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1.5 billion-rupee tax bill on Asiri Surgical Hospital
View(s):By Namini Wijedasa
The Inland Revenue Department (IRD) has slapped Asiri Surgical Hospital with a backdated tax bill of Rs. 1.5 billion for allegedly not complying with key conditions in a Board of Investment (BOI) agreement under which the hospital was started. At the time of setting up, the hospital had consented to maintain one ward with a minimum of ten beds and an outpatient department for non-paying patients. These two conditions had not been fulfilled, authoritative sources said. “They were unable to provide us with records to prove it had been done,” one source said.
The agreement was signed with the BOI more than a decade ago. It entitled Asiri Surgical to a 10-year income tax exemption provided certain conditions were met. However, a recent IRD assessment showed that these clauses had not been honoured. This led the Department to serve Asiri Surgical with a bill of around Rs. 1.5 billion or ten years’ worth of tax arrears.
Asiri Surgical challenged the assessment and the IRD has now taken the company to court, the sources told the Sunday Times. An Asiri Surgical lawyer confirmed the report and said the company objected to the IRD assessment going back ten years.
“Under the terms of the agreement, the company was entitled to an income tax exemption of 10 years,” he said. “It ran out in 2014. Now, twelve years later, the IRD is challenging the exemption saying the hospital had not complied with certain conditions in the BOI agreement.”
“If the IRD had a problem, it should have come back at that time,” he added. “Not now.” The BOI agreement was signed in 2000. The investor received more than 90 hectares on a 99-year lease to set up the hospital on the understanding that it would put in Rs. 75 million within 24 months. This was, however, extended till 2003.
In September 2015, the IRD started inquiring whether Asiri Surgical had fulfilled the terms of the agreement that entitled it to a tax exemption. But the BOI had no record; neither could the hospital provide evidentiary documentation. “This went up and down many times,” a source said. “Now it is in courts.” The company’s management had attempted to negotiate its way out of the penalty, the sources said. One of the proposals it had made was that the hospital would carry out free heart surgeries for children from the State-owned Lady Ridgeway Hospital. It has also offered to maintain a 10-bed ward and OPD for non-paying patients in future. However, this had been turned down.