A.C.I.T., Circle - 6(2), Kolkata , Kolkata V. M/s. National Insurance Company Limited , Kolkata

ITA 2240/KOL/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2435 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 30-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Keywords: TDS
• Section: 147; 148; 40(a)(ia)

Judgement Text

1 ITA NO. 2240/KOL/2018 NATIONAL INSURANCE CO. LTD., AY - 2008-09 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( ) . . , . . ! , ' #$ ) [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT & SHRI A. T. VARKEY, JM] I.T.A. NO. 2240/KOL/2018 ASSESSMENT YEAR: 2008-09 ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-6(2), KOLKATA. VS. M/S. NATIONAL INSURANCE COMPANY LIMITED (PAN: AAACN9967E) APPELLANT RESPONDENT DATE OF HEARING 15.07.2019 DATE OF PRONOUNCEMENT 04.09.2019 FOR THE APPELLANT DR. P. K. SRIHARI, CIT, DR FOR THE RESPONDENT SHRI SANJAY BHATTACHARYA, FCA ORDER PER SHRI A. T. VARKEY, JM: THIS APPEAL PREFERRED BY THE REVENUE IS AGAINST THE ORDER OF THE LD. CIT(A)-2, KOLKATA DATED 09.08.2018 FOR AY 2008-09. 2. THE SOLE GRIEVANCE OF THE REVENUE IS AGAINST THE ACTION OF LD. CIT(A) IN DELETING A SUM OF RS.18,35,06,436/- BEING DISALLOWANCE OF PAYM ENTS MADE TO HOSPITALS (CASHLESS) U/S. 40(A)(IA) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 3. BRIEFLY STATED FACTS OF THE CASE AS NOTED BY TH E AO ARE THAT THE ASSESSEE FILED ITS RETURN ON 16.10.2008 DECLARING A TOTAL LOSS OF RS.587,36,9 6,266/- AND AS PER THE ORDER PASSED U/S. 251/154/143(3) OF THE ACT DATED 28.05.2012, THE TOT AL LOSS FINALLY DETERMINED WAS TO THE TUNE OF RS.532,66,29,286/-. SUBSEQUENTLY, REASSESSM ENT PROCEEDING WAS INITIATED BY AO U/S. 147 AND ISSUED NOTICE U/S. 148 OF THE ACT DATED 30. 03.2015. THE REASON RECORDED BY THE AO TO BELIEVE ESCAPEMENT OF INCOME HAD BEEN THE INFORMATION HE RECEIVED IN RESPECT OF AN ASSESSMENT MADE IN RESPECT OF AN ASSESSEE VIZ, M/S. PARAMOUNT HEALTH SERVICES TPA P. LTD. WHICH WAS A THIRD PARTY ADMINISTRATOR (TPA), AND W HICH HAD BEEN ASSESSED IN THE MUMBAI. FROM A PERUSAL OF THE ASSESSMENT ORDER IN THE CASE OF THAT TPA, THE AO WAS OF THE VIEW THAT IN RESPECT OF THE PAYMENTS MADE BY THE TP A TO HOSPITALS (CASHLESS) AMOUNTING TO 2 ITA NO. 2240/KOL/2018 NATIONAL INSURANCE CO. LTD., AY - 2008-09 RS.18,35,06,436/- THERE WAS A BREACH OF NON-DEDUCTI ON OF TAXES AT SOURCE U/S. 194J OF THE ACT. HOWEVER, ACCORDING TO ASSESSEE, IT WAS THE RE SPONSIBILITY OF TPA TO COMPLY WITH THE TDS PROVISION IN RESPECT OF PAYMENT MADE TO THE HOS PITALS. BEFORE THE AO THE ASSESSEE STATED THAT IN ACCORDANCE WITH THE SERVICE LEVEL AG REEMENT ENTERED INTO BETWEEN THE ASSESSEE AND THE TPA, THE ASSESSEE HAD TO PAY SERVI CE FEES TO THE SAID TPA AND ALSO TO REIMBURSE THE PAYMENTS MADE BY THE SAID TPA TOWARDS SETTLEMENT OF CLAIMS TO THE HOSPITALS AND/OR INSURED PERSONS. IT WAS ALSO CLARIFIED BY T HE ASSESSEE THAT IN RESPECT OF THE SERVICE FEES PAID TO THE TPA, THE ASSESSEE HAD DULY DEDUCTE D TAXES AT SOURCE U/S. 194J OF THE ACT. THE ASSESSEE ALSO BROUGHT TO THE ATTENTION OF THE A O, THE CBDT CIRCULAR NO. 8/2009 DATED 24.11.2009 WHEREIN THE CBDT HAD CLARIFIED THAT THE TDS PROVISIONS WOULD BE APPLICABLE ON PAYMENTS MADE BY THE TPA TO HOSPITALS. HOWEVER, TH E AO DID NOT AGREE AND HELD THAT THE ASSESSEE HAD MADE PAYMENTS TO HOSPITALS FOR AN AGGR EGATE SUM OF RS.18,35,06,436/- WITHOUT DEDUCING ANY TDS U/S. 194J OF THE ACT FOR WHICH HE INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND DISALLOWED RS.18,35,06,436 /- BEING THE PAYMENTS MADE TO HOSPITALS BY THE TPA VIZ. M/S. PARAMOUNT HEALTH SERVICES PTA P. LTD. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO, ALLO WED THE ASSESSEES GROUNDS OF APPEAL BY OBSERVING AS UNDER: I HAVE CONSIDERED THE GROUNDS OF APPEAL, STATEMEN T OF FACTS AND SUBMISSION OF THE AUTHORIZED REPRESENTATIVE OF THE APPELLATE COMPANY AS WELL AS THE ASSESSMENT ORDER FRAMED IN THE LIGHT OF THE MATERIALS AVAILABLE ON RECORD BEFORE THE ASSESS ING OFFICER DURING THE ASSESSMENT PROCEEDINGS. THE AR OF THE APPELLANT HAS SUBMITTED THAT THE CENTRAL BOARD OF DIRECT TAXES (CBDT) VIDE ITS CIRCULAR NO, 8/2009 DATED 24/11/200 9 HAD CLARIFIED THAT THE TPA HAD THE LIABILITY TOWARDS TDS IN RELATION TO THE PAYMENTS M ADE BY IT TO THE HOSPITALS AND/OR INSURED PERSONS. THE CIRCULAR FURTHER CLARIFIED THAT ALL SU CH TRANSACTION BETWEEN TPAS AND HOSPITAL FALL WITHIN PROVISION OF SECTION 194J AND TPAS WOUL D BE DEEMED TO BE ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX. THE ASSESSING OFFICER HAS ALSO MENTIONED THE CBDT CIRCULAR IN ITS ORDER, BUT HE DID NOT MAKE ANY OBSERVATION FOR NOT FOLLOWI NG THE SAME, KEEPING IN VIEW OF ABOVE, I AGREE WITH THE SUBMISSION OF THE AR OF THE APPELLAT E AND ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE ADDITION. THESE GROUNDS OF APPEAL ARE AL LOWED. AGGRIEVED BY THE AFORESAID ORDER OF THE LD. CIT(A), THE REVENUE IS BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT IN THIS CASE, ON THE STRENGTH O F SERVICE LEVEL AGREEMENT BETWEEN THE ASSESSEE AND THE TPA, THE TPA M/S. PARAMOUNT HEALT H SERVICES PTA PVT. LTD. HAS MADE 3 ITA NO. 2240/KOL/2018 NATIONAL INSURANCE CO. LTD., AY - 2008-09 PAYMENTS TO HOSPITALS ON BEHALF OF THE INSURANCE CO MPANY (ASSESSEE) FOR SETTLING MEDI- CLAIM/INSURANCE CLAIM FOR WHICH SERVICES, THE TPA WAS ENTITLED TO SERVICE FEES FROM THE ASSESSEE, WHICH WAS IN TURN DISBURSED BY THE ASSESS EE TO TPA AFTER DULY DEDUCTING TAX. SINCE THE PAYMENTS WERE MADE BY THE TPA TO THE HOSP ITAL, THE TDS IF ANY ON SUCH PAYMENTS CANNOT BE SADDLED ON THE ASSESSEE AS PER S ECTION 194J OF THE ACT. AND IN THIS CASE SINCE PAYMENTS WERE MADE BY TPA TO HOSPITAL LIABILI TY TO DEDUCT TAX AT SOURCE U/S. 194J OF THE ACT, IF ANY, IS ON TPA AND NOT THE INSURANCE CO MPANY (ASSESSEE) AS CLARIFIED BY THE CBDT CIRCULAR NO. 8/2009 DATED 24.11.2009 AND IN T HE LIGHT OF THE AFORESAID DECISION THE ASSESSEE COMPANY I.E. M/S. NATIONAL INSURANCE COMPA NY LIMITED CANNOT BE HELD TO BE AN ASSESSEE IN DEFAULT AND, THEREFORE, NO DISALLOWANCE COULD HAVE BEEN MADE BY THE AO APPLYING SECTION 40(A)(IA) OF THE ACT. THUS, WE FI ND THAT LD. CIT(A) HAS GIVEN THE RELIEF BASED ON THE CBDT CIRCULAR (SUPRA) WHICH IS BINDING ON THE INCOME TAX AUTHORITIES, THEREFORE, WE DO NOT FIND ANY MERITS IN THE GROUND S OF APPEAL RAISED BY THE REVENUE, SO WE CONFIRM THE ORDER OF LD. CIT(A). THEREFORE, REVENUE S APPEAL IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. ORDER IS PRONOUNCED IN THE OPEN COURT ON 4TH SEPTE MBER, 2019. SD/- SD/- (P. M. JAGTAP) (ABY. T. VARKEY) VICE PRESIDENT JUDICIAL MEMBER DATED : 4TH SEPTEMBER, 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT ACIT, CIRCLE-6(2), KOLKATA. 2 RESPONDENT M/S. NATIONAL INSURANCE COMPANY LIMI TED, 3, MIDDLETON STREET, KOLKATA-700 071. 3. 4. CIT(A)-2, KOLKATA (SENT THROUGH E-MAIL) CIT-, , KOLKATA. 5. DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR