IMA Stand on endorsements

Can a doctor endorse a product?

No. A doctor can not endorse a product

MCI Ethics Regulations

h) Endorsement: A medical practitioner shall not endorse any drug or product of the industry publically. Any study conducted on the efficacy or otherwise of such products shall be presented to and / or through appropriate scientific bodies or published in appropriate scientific journals in a proper way”.

IMA is an appropriate scientific body.

Can IMA endorse a health statement?

Yes. IMA can endorse public health messages and lend its name to it. The same can be propagated by governmental and non governmental bodies.

MCI 7.11

            Is there any bar/ restriction, by any law, over IMA to give opinion on products?

A.         IMA is registered society of doctors with the following objectives:

1.        To promote and advance medical; and allied sciences in all their different branches and to promote the improvement of public health and medical education in India.

2.        To maintain the honor and dignity and to uphold the interest of the medical profession and to promote co-operation amongst the members thereof;

3.         To work for the abolition of compartmentalism in medical education, medical services and registration in the country and thus to achieve equality among all members of the profession.”

                In accordance with the objects as stated above, IMA is empowered to do all such acts to promote and advance medical and allied sciences and to promote the improvement of public health. 

Does IMA comes under MCI act?

As per latest Judgment dated 17.11.14 of Hon’ble High Court Delhi by Justice Mr. Vibhu Bakhru, in WP (C) No. 8188/2010 titled as “IMA vs MCI”, it is held that IMA does not come under MCI and the Rule in relation to Endorsement is not applicable to IMA.

IMA did endorse products in the past. Was the money generated by IMA allowed by the income tax?

The Income Tax case for A/Y2009-2010 was selected for scrutiny and the order was passed against IMA by the then AO on the basis that some of the receipts are arising out of commercial transactions with outsider who are non- member of the IMA.

For the next   A/Ys i.e. 2010-11,2011-12 all orders were passed on the same ground and huge demands were created against IMA. ( over five crores)

 The main controversy/ground was related to section 2(15) regarding nature of receipts from various endorsements and rent received.

The IO case was that IMA case does not fall in the 2(15) "charitable purpose" but falls in the proviso under advancement of any other object of general public utility

            2(15) "charitable purpose" includes relief of the poor, education, medical relief,      preservation of environment  (including watersheds, forests and wildlife) and reservation     of monuments or places or objects of artistic or  historic interest,] and the advancement     of any other object of general public   utility:

            Provided that the advancement of any other object of general public utility shall not be a     charitable purpose, if it involves the carrying on of any activity in the nature of trade,      commerce or   business, or any activity of rendering any  service in relation to any         trade, commerce or business, for a cess or fee or any other consideration, irrespective of the  nature of use or application, or  retention, of the income from    such activity:]

         [Provided further that the first proviso shall not apply if the aggregate value of the             receipts from the activities referred to therein is  [TWENTY-FIVE LAKH RUPEES]   or less in the previous year;]

            IMA appealed against the AO Order in The court of CIT (Appeals) and won. This order     was challenged by IT Department in ITAT. The final order passed by ITAT is passed now         in IMA's favour.   

            Excerpts from the Judgment

• "  In the facts of the present case since the Ld. Sr. DR inviting attention to only the agreement of Pepsico has canvassed that it cannot be related to any charitable activity as the other companies may be health related and pharmaceuticals companies we find on considering the copy of the specific agreement which is placed at pages 152 to 169 that the “endorsement ” refers to “Quaker Oats” and “Tropicana 100% fruit Juice and fortified drinks” as set out in page 152.  Per se we find no conflict if the assessee in the advancement of its aims and objects to promoting by improving public health if on research and analysis it propounds that there are significant health benefits to the uses of Oats or drinking fruit based, fortified health drinks as opposed to aerted drinks having no health benefits."

•  " It is not the case of the Revenue that the endorsement of healthy nutrition is medically/scientifically incorrect". 

•  " The assessee as per the mandate of its objects and the methods set out in Clause IV(2); (3)(5) (6); (7) and (16) has endorsed products on the claims of health and nutritional benefit the grievance of the Revenue appears to be misplaced. The above is notwithstanding the material fact considering the judicial precedent as laid down by the Jurisdictional High Court in ITPO case (cited supra) namely that the dominant purpose of the activity was to mobilize funds for charitable purposes and not for endorsing the products. In the absence of any adverse finding in regard to the activities of the trust we find that the department’s case has no merits. "

•  " On considering the judicial precedent cited we find that the Hon’ble High Court took into consideration in the facts of the ITPO that prime land was made available to the assessee to facilitate its objects of providing space on rent etc. for promotion of trade wherein the assessee apart from selling tickets etc was also providing food & beverage outlets and providing for water, electricity etc in the facts of the present case admittedly financial support is also provided to the assessee trust whose activities have not been assailed to be contrary to the aims and objects and we find that mobilizing resources towards its aims and objects that too within the methods enshrined by the trust deed which are ploughed back by the society towards its aims & objects to our minds does not cause any grievance to the Revenue."

•  "It goes without saying that financial support from the Ministry of Health and Family Welfare to the assessee necessarily would be based on the functions performed by the said trust and would necessarily be monitored at each and every step and stage with adequate checks and balances and would not be allowed to be frittered away carelessly".

• "Accordingly considering the judicial precedent cited and the arguments of the parties before the Bench and the peculiar facts and circumstances of the case which we have brought out in great detail in the earlier part of this order, we hold that the departmental grounds have no merit and deserve to be dismissed."

• ".................."trade", "commerce" or "business" in Section 2(15), mean activity undertaken with a view to make or earn profit. Profit motive is determinative and a critical factor to discern whether an activity is business, trade or commerce."

• " If the dominant and prime objective of the institution, which claims to have been established for charitable purposes, is profit making whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a ‘charitable purpose’. On the flip side, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purposes.

• " .....the expression "charitable purpose", as defined in Section 2(15)' cannot be construed literally and in absolute terms. It has to take colour and be considered in the context of Section 10(23C)(iv) of the said Act."

•  ". It is also clear that if the literal interpretation is given to the proviso to Section 2(15) of the said Act, then the proviso would be at risk of running fowl of the principle of equality enshrined in Article 14 of the Constitution India. In order to save the Constitutional validity of the proviso, the same would have to be read down and  interpreted in the context of Section 10(23C)(iv) because, in our view, the context    requires  such an interpretation."

• "The correct interpretation of the proviso to Section 2(15) of the said Act would be that it carves out an exception from the charitable purpose of advancement of any other object of general public utility and that exception is limited to activities in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration. In both the activities, in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and prime objective of the institution, which claims to have been established for charitable purposes, is profit making whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a ‘charitable purpose’.

• Section 10(23C)(iv) of the Income-tax Act, 1961 – Exemptions charitable funds/institutions – Notified fund or charitable institution: Notification No. S.O.  692,  dated 23-9-2009

             In exercise of the powers conferred by sub-section (iv) of clause (23C) of section 10 of    the Income-tax Act, 1961 (43 of 1961) read with rule 2C of the Income-tax Rules, 1962,   I, Chief Commissioner of Income-tax, Udaipur hereby notify the Help Society, New           Purnima Guest House, Holy Chowk, Charbhuja, Rajsamand (Rajasthan) for the purpose     of the said sub-clause for the assessment years 2008-09 onwards subject to the  following conditions, namely

       (i)   The assessee will apply its income, or accumulate for application, wholly and        exclusively to the  objects for which it is established;

      (ii)  The assessee will not invest or deposit its fund (other than voluntary contributions  received and maintained in the form of jewellery, furniture, etc.) for any period during   the previous year relevant to the assessment years mentioned above otherwise than in any      one or more of the forms or modes specified in sub-section (5) of section 11;

      (iii)   This notification will not apply in relation to any income being profits and gains of  business, unless the business is incidental to the attainment of the objectives of the assessee and separate books of  account are maintained in respect of such business;

     (iv)  The assessee will regularly file its return of income before the income–tax authority in accordance with the provisions of the Income-tax Act, 1961;

     (v)  That in the event of dissolution its surplus and the assets will be given to a charitable organization with similar objectives;

      This notification is applicable only to the recipients of income on behalf of the assessee and    not to any other receipt or income of such recipients. Taxability or, otherwise of the income of the assessee would be separately considered as per the provisions of the Income-tax Act, 1961.

        Take Home Points

• As long as the dominant purpose of any activity of society is to mobilize funds and resources for the charitable purposes as mentioned in its aims and objects and these raised funds are ploughed back and used by the society only towards its aims and objects, the same is within the law and within the proviso of section 2(15). And are allowed.

• Raising funds by sponsorships, endorsements, registration fee, entry to events ate are allowed to IMA and its branches as long as the proceeds and the excess of income over the expenditure is used only for the objects for which IMA was formed.

•  Sub: ITAT Order for the A/Y 2009-2010 ADIT (E) vs IMA

            What were the details of Delhi High Court Judgment regarding endorsement issue     against IMA?

            A: No: IN THE HIGH COURT OF DELHI AT NEW DELHI:   W.P.(C) 7987/2010 and             CM 18254/2014     DHARAM PRAKASH ..... Petitioner vs UNION OF INDIA and ANR ..... Respondent,  W.P.(C) 8188/2010 and CM 18242/2014: IMA Vs MCI,        HON'BLE MR. JUSTICE VIBHU BAKHRU: O R D E R: 17.11.2014:  CM 18254/2014             in W.P.(C) 7987/2010/ :  CM 18242/2014 in W.P.(C) 8188/2010
    
These are applications filed by the petitioners inter alia praying as under:-
  
a) Quash/set aside order dated 23.11.2010 passed by the respondent approving the recommendations of the Ethics Committee of Medical Council of India dated 09.11.2010.
  
 b) Allow/dispose of the captioned writ petition in terms of letter dated  24.05.2010 of     Government of India, judgment dated 10.01.2014 in Writ Petition No. 1334/2013 titled     Max Hospital Vs. Medical Council of India and resolutions of 2nd Session (continued  138th Session) General Body meeting of MCI held on 28.03.14.
  
The petitioner submits that the subject matter of the petition is covered by a judgment of this court titled Max Hospital Vs. Medical   Council of India? in W.P.(C) 1334/2013  decided on 10.01.2014.
 

It is asserted by the applicant that the Government of India had by a letter dated   24.05.2010 deleted the words "and professional association of doctors" from the     regulation 6.8 of the Indian Medical Council (Professional Conduct, Etiquette and Ethics)Regulations, 2002. The approval for deletion of the aforesaid words was granted by the       Central Government under Section 33 of the Indian Medical Council Act, 1956. In addition, it is submitted that the MCI at its General Body  meeting held on 28.03.2014     had accepted the recommendation of the Executive Committee and resolved as under:- "      In view of the above, the Council unanimously decided that the amendment to title of             section 6.8 of the Indian Medical Council (Professional Conduct Etiquette and Ethics)  Regulations, 2002vide notification dated 10/12/2009 and further amended by deletion of the words "and professional association of doctors" duly approved, and authenticated by

The aforesaid contentions are not disputed by the MCI. In view of the stand of the MCI as recorded in the General Body Resolution dated  28.03.2014 the present petitions are liable to be allowed. Accordingly, the order of MCI dated 23.11.2010 accepting the recommendation of the  Ethical Committee of 09.11.2010 is set aside.
  
The petitions are allowed and the applications are also disposed  of. VIBHU BAKHRU, J/ NOVEMBER 17, 2014.