DCIT 1(1)(1), MUMBAI V. DEDICATED HELATHCARE SERVICE (TPA) INDIA P. LTD, MUMBAI

ITA 3248/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8697 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 28-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLADR
• Keywords: Non-deduction of tax
• Section: 201(1); 145

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, G MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.3248/MUM/2015 ASSESSMENT YEAR: 2010-11 DCIT-1(1)(1), 579, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 / VS. M/S DEDICATED HEALTHCARE SERVICE (TPA) INDIA PVT. LTD. CAMBATTA BUILDING, 3 RD FLOOR, 42, M.K. ROAD, CHURCHGATE MUMBAI-400020 ( / REVENUE) ( !'# $ /ASSESSEE) PAN. NO . AACCD0672J % & $ ' / DATE OF HEARING : 30/01/2017 & $ ' / DATE OF ORDER: 30/01/2017 ! / REVENUE BY MISS. ANUPAMA SINGLA-DR !'# $ ! / ASSESSEE BY SHRI HITEN VASANT ITA NO.3248/MUM/2015 M/S DEDICATED HEALTHCARE SERVICE (TPA) INDIA PVT. LTD. 2 / O R D E R PER JOGINDER SINGH(JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 28/01/2015 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, IN DELETING THE ADDITION OF RS.2,64,65,123/- MADE U/S 194J R.W.S 40(A)(IA) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER THE ACT) IN RESPECT OF PAYMENTS TO HOSPITALS AND CLINIC S ON THE GROUND THAT THESE AMOUNTS WERE NOT DEBITED TO THE P ROFIT AND LOSS ACCOUNT OF THE ASSESSEE. 2. DURING HEARING, AT THE OUTSET, SHRI HITEN VASAN T, LD. COUNSEL FOR THE ASSESSEE, CONTENDED THAT THE IM PUGNED ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE TRIBUNAL FOR ASSESSMENT YEAR 2008-09 AND 2009-1 0 (ITA NO.6634 & 6635/MUM/2012) ORDER DATED 10/12/2014. MISS. ANUPAMA SINGLA, LD. DR, THOUGH DEFENDED THE ADDITION MADE BY THE ASSESSING OFFICER BUT DID NOT CONTROVERT THE ASSERTION MADE BY THE LD. COUNSEL FO R THE ASSESSEE. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE ORDER OF THE TRIBUNAL DATED 10/12/2014 FOR READY REFERENCE AND ANALYSIS:- ITA NO.3248/MUM/2015 M/S DEDICATED HEALTHCARE SERVICE (TPA) INDIA PVT. LTD. 3 THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAI NST THE TWO SEPARATE ORDERS OF CIT(A) FOR THE A.Y. 2008 -09. THE REVENUE HAS RAISED COMMON GROUNDS IN BOTH APPEALS W HICH READS AS UNDER:- 1. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION UJS.40(A)(IA) OF THE ACT AMOUNTING TO RS.11,89,18,600/-?' 2. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD, CIT(A) IS JUSTIFIED IN DELETING THE AD DITION OF RS.11,89,18,600/- ON THE GROUND THAT THE AMOUNT ADD ED BY THE ASSESSING OFFICER UJS.40(A){IA) WAS NOT CLAIMED AS DEDUCTION IN THE PROFIT & LOSS ACCOUNT WHEN AS A MATTER OF FACT THE ASSESSING OFFICER HAD CATEGORICALLY INVOKED SECTION 145 OF THE ACT AN D HAD HELD THAT THE AMOUNTS RECEIVED BY THE ASSESSEE FROM INSURANCE COM PANIES AND DEPOSITED IN FLOAT ACCOUNT HAS TO BE RECOGNIZED AS REVENUE RECEIPT AND THE OUTFLOW AS EXPENSES AND, THIS DECISION OF THE A SSESSING OFFICER WAS NOT CHALLENGED BY THE ASSESSEE . 3. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.11,89,18,600/- MADE UJS.40(A)(IA) OF THE ACT DESPITE THE ASSESSING OFFICER INVOKING SECTION 194J WITH R E F E R E N C E T O C B D T C I R C U L A R N O . 8 O F 2 0 0 9 D T D . 2 4 . 1 1 . 2 0 0 9 ? ' 2. THE ONLY ISSUE ARISES FROM THE GROUND RAISED BY THE REVENUE IS WHETHER IN THE FACTS AND CIRCUMSTANCES O F THE CASE, THE CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANC E MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) R.W.S 194J OF T HE INCOME TAX ACT IN RESPECT OF AMOUNT RECEIVED FROM THE INSU RANCE COMPANIES AND DEPOSITED IN FLOAT A/C BY THE ASSESSE E BEING THIRD PARTY ADMINISTRATOR (TPA). THE ASSESSEE IS A COMPANY CARRYING ON THE BUSINESS AS A TPA DULY HOLDING LICE NSE FROM INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRD A). THE ASSESSEE COMPANY EARNS ITS REVENUE BY WAY OF FE ES FROM ITA NO.3248/MUM/2015 M/S DEDICATED HEALTHCARE SERVICE (TPA) INDIA PVT. LTD. 4 INSURANCE COMPANIES BY PROVIDING THE INSURANCE COMP ANIES, HEALTH SERVICES, CALL CENTRE SERVICES, CASHLESS ACC ESS SERVICES, CLAIM PROCESSING, CLAIM PAYMENTS, CUSTOMER RELATION S AND MANAGEMENT SERVICES. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, THE ASSESSING OFFICER MADE THE DISALLO WANCE OF RS. 11,89,18,600/- U/S 40(A)(IA) OF THE ACT., HOLDI NG THAT THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE U/S 194 J FROM THE PAYMENT MADE BY THE ASSESSEE TO HOSPITALS TOWARDS P AYMENT OF CLAIMS TO INSURANCE POLICY HOLDERS OF INSURANCE COMPANIES AS THEY ARE FACILITATED UNDER THE TPA AGREEMENT. 3. THE ASSESSEE CHALLENGED THE ACTION OF ASSESSING OFFICER BEFORE CIT(A). THE CIT(A) DELETED THE ADDITION ON T HE GROUND THAT THE PAYMENT IN QUESTION IS NOT FOR PROFESSIONA L SERVICES RENDERED BY THE ASSESSEE BUT IT IS ACTING AS PASS T HROUGH BETWEEN INSURER AND THE INSURED. 4. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS SUBMI TTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIONS OF THIS TRIBUNAL IN THE CASE OF ACIT VS. HEALTH IND IA TPA SERVICES P. LTD. DATED 21.2.2014 IN ITA NO. 6475/MU M/2012 AS WELL AS THE DECISION DATED 25.7.2014 OF THIS TRI BUNAL IN THE CASE OF PARAMOUNT HEALTH SERVICES (TPA) PVT. LTD. V S. ITO IN ITA NO. 2188/MUM/2013. WE FIND THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL IN THOSE CASES BY HOLDING THAT THE PAYMENT MADE BY THE ASSESSEE IS ON LY TO ITA NO.3248/MUM/2015 M/S DEDICATED HEALTHCARE SERVICE (TPA) INDIA PVT. LTD. 5 REPLENISH THE AMOUNT IN FLOATING ACCOUNT AND, THERE FORE, THE DISALLOWANCE U/S 40(A)(IA) CANNOT BE MADE WHEN THE ASSESSEE HAS NOT CLAIMED ANY SUCH EXPENDITURE IN P&L ACCOUNT . THE TRIBUNAL IN THE CASE OF PARAMAOUNT HEALTH SERVICES (TPA) PVT. LTD. VS. ITO (SUPRA) HAS DEAL WITH THIS ISSUE IN PARA 5 AND 6 AS UNDER:- 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. AS FAR AS THE APPLICABILITY OF SECTION 194J IS CONCERNED THE SAID ISSUE IS NOW SETTLED BY THE DECI SION OF HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF MEDI ASSIST INDIA TPA P. LTD. VS. DCIT (TDS) AND OTHERS (324 ITR 356) (SUPRA), WHEREI N THE HON'BLE HIGH COURT HELD THAT IT IS THE DUTY AND OBLIGATION OF THE TPA TO PAY THE HOSPITALS AND INSURER WILL NOT HAVE ANY TO ROLE TO PLAY IN AS MUCH AS IT IS ONLY TO REPLENISH THE AMOUNT IN THE FLOATING ACC OUNT ONCE THE AMOUNT DEPOSITED THEREIN IS ADJUSTED. THE HON'BLE HIGH COU RT HAS HELD THAT THE TPA IS OBLIGED TO DEDUCT TAX AT SOURCE UNDER SECTIO N 194J OF THE ACT IN AS MUCH AS MONEY ARE PAID BY IT TO THE HOSPITALS IN RESPECT OF CASH LESS TREATMENTS. THEREFORE IN VIEW OF THE DECISION OF HO N'BLE KARNATAKA HIGH COURT THERE IS NO ESCAPEMENT OF DEDUCTION OF T AX AT SOURCE UNDER SECTION 194J ON THE PART OF TPA AND CONSEQUENTLY SE CTION 201(1) AND SECTION 201(1A) OF THE ACT ARE ATTRACTED. THE ISSUE IN THE CASE BEFORE US IS NOT REGARDING THE LIABILITY UNDER SECTION 201(1) AND 201(1A) BUT THE DISPUTE IS REGARDING ADITION UNDER SECTION 40(A)(IA ) FOR NON-DEDUCTION OF TAX AT SOURCE. THE ASSESSEE HAS RELIED UPON A SE RIES OF DECISIONS IN SUPPORT OF ITS CLAIM AND SUBMITTED THAT PROVISIONS OF SECTION 40(A)(IA) CANNOT BE INVOKED FOR NON DEDUCTION OF TAX BY TPA S ERVICE PROVIDED BEING A CONDUIT BETWEEN THE INSURER AND HOSPITAL/ T HE INSURED. IN THE CASE OF ACIT VS. M/S. HEALTH INDIA TPA SERVICES P. LTD. IN ITA NO.5856/M/11 FOR ASSESSMENT YEAR 2008-09 THIS TRIBU NAL VIDE ITS DECISION DATED 22/2/2013 HAS HELD IN PARA-5 AS UNDE R :- 5. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE FACTS PLACED ON RECORD, THE ASSESSEE IS ONLY FACILITATING THE PA YMENTS BY INSURER TO THE INSURED FOR AVAILING THE MEDICAL FAC ILITIES. ASSESSEE HAS NOT RENDERED ANY PROFESSION SERVICES T O THE INSURER OR INSURED AND ONLY COLLECTING THE AMOUNT FROM THE INSURER AND PASSING IT ON TO VARIOUS HOSPITALS WHO WERE PROVIDI NG MEDICAL SERVICES TO THE INSURED. SINCE, THERE IS NO CLAIM O F EXPENDITURE BY THE ASSESSEE, DISALLOWANCE UNDER SECTION 40A(I)( A) AS WAS DONE BY THE ASSESSING OFFICER DOES NOT ARISE. IT MA Y BE DIFFERENT ISSUE THAT THE AMOUNTS PAID MAY BE COVERED BY PROVI SIONS OF SECTION 194J AS WAS HELD BY THE HON'BLE KARNATAKA H IGH COURT ITA NO.3248/MUM/2015 M/S DEDICATED HEALTHCARE SERVICE (TPA) INDIA PVT. LTD. 6 IN THE CASE OF THE MEDIASSESST INDIA TPA PVT. LTD . VS. DCIT- 18(1J, BANGALORE (WP.NO.11376/2009 (T-IT ) RELIED U PON BY THE ASSESSING OFFICER. IN THAT CASE, PROVISIONS OF SECT ION 201 WAS APPLICABLE BUT CERTAINLY DISALLOWANCE UNDER SECTION 40(A)(IA) DOES NOT ARISE AS ASSESSEE IS NOT CLAIMING ANY SUCH EXPENDITURE IN ITS PROFIT & LOSS ACCOUNT. MOREOVER REVENUE ACCE PTED THE ORDER OF CIT(A) IN THE EARLIER YEAR. FOR THESE REAS ONS, WE UPHOLD THE ORDER OF THE CIT(A). 6. A SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL IN THE SUBSEQUENT ASSESSMENT YEAR IN THE CASE OF HEALTH INDIA TPA SER VICES P. LTD. FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO. 6475/MUM/2012 OR DER DATED 21/02/2014 . IN THE CASE OF ITO VS. M/S. HARIOM ORG ANIZERS PVT. LTD. IN ITA NO.1946/AHD./2009 FOR ASSESSMENT YEAR 2005-06 O RDER DATED 06/05/2011 AS WELL AS IN THE CASE OF SUMILON INDUST RIES LTD. VS. INCOME TAX OFFICER, SURAT IN ITA NOS.3296 & 3297/AHD./2008 DATED 12/10/2010 (SUPRA), THE TRIBUNAL HAS HELD THAT THE DISALLOWANCE UNDER SECTION 40(A)(IA) CANNOT BE MADE IN RESPECT OF THE EXPENSES WHICH ARE PART OF THE COST OF THE PROJECT WHICH WILL BE CLAIM ED AGAINST RECEIPT IN THE SUBSEQUENT YEAR. 5. FOLLOWING THE EARLIER ORDERS OF THIS TRIBUNAL, W E DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF CIT(A) QUA THIS ISSUE. 6. IN THE RESULT APPEALS OF THE REVENUE ARE DISMISS ED. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, WE FIND THAT ON IDENTI CAL ISSUE, WHERE THE LD. ASSESSING OFFICER INVOKED SECTION 145 OF THE ACT, THE FACTUAL MATRIX WAS CONSIDERED. IT IS NOTED THAT THE TRIBUNAL CONSIDERED THE DECISION IN THE CASE OF ACI T VS HEALTH INDIA TPA SERVICES PVT. LTD. (ITA NO.6475/MUM/2012) ORDER DATED 21/02/2014 AND ANOTHE R DECISION IN PARAMOUNT HEALTH SERVICES (TPA) PVT. LT D. VS ITA NO.3248/MUM/2015 M/S DEDICATED HEALTHCARE SERVICE (TPA) INDIA PVT. LTD. 7 INCOME TAX OFFICER (ITA NO.2188/MUM/2013) ORDER DAT ED 25/07/2014 AND THEREAFTER CONSIDERING THE FACTUAL M ATRIX DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. NO CO NTRARY DECISION/FACTS WERE BROUGHT TO OUR NOTICE, THEREFOR E, FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH, WE FIND NO INFIRMITY IN THE CONCLUSION OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL). IT IS AFFIRMED, RESULTING INTO DISMISSAL OF APPEAL OF THE REVENUE. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 30/01/2017. SD/- SD/- ( MANOJ KUMAR AGGARWAL ) (JOGINDER SINGH) '!# / ACCOUNTANT MEMBER $!# /JUDICIAL MEMBER % MUMBAI; ) DATED : 30/01/2017 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,- / THE APPELLANT (RESPECTIVE ASSESSEE) 2. ./,- / THE RESPONDENT. 3. 0 0 1$ ( + ) / THE CIT, MUMBAI. 4. 0 0 1$ / CIT(A)- , MUMBAI, 5. 34 .$! , 0 +' ! 5 , % / DR, ITAT, MUMBAI 6. 6' 7% / GUARD FILE. ! / BY ORDER, /3+$ .$ //TRUE COPY// /! (DY./ASSTT. REGISTRAR) , % / ITAT, MUMBAI