ACIT RG 8(3), MUMBAI V. UNITED HEALTHCARE INIDA P.LTD, MUMBAI

ITA 4403/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4392 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 04-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 29-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHISH SODHANI
• Keywords: Audit objection; Tax effect
• Section: 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.4403/M/2012 ASSESSMENT YEAR: 2009-10 THE ASSTT. COMMISSIONER OF INCOME TAX-8(3), ROOM NO.217, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020 VS. M/S. UNITED HEALTHCARE INDIA PVT. LTD., 3A, GUNDECHA ENCLAVE, KHERANI ROAD, SAKI NAKA, ANDHERI (E), MUMBAI - 72 PAN: AAACS 9480R (APPELLANT) (RESPONDENT) ITA NO.2940/M/2014 ASSESSMENT YEAR: 2010-11 THE ASSTT. COMMISSIONER OF INCOME TAX (TDS)-3(1), R.NO.1012, 10 TH FLOOR, SMT. K.G. MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD, MUMBAI 400 002 VS. M/S. UNITED HEALTHCARE INDIA PVT. LTD., 3B, GUNDECHA ENCLAVE, KHERANI ROAD, SAKI NAKA, ANDHERI (E), MUMBAI - 72 PAN: AAACS 9480R (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI ASHISH SODHANI, A.R. REVENUE BY : SHRI G.M. DOSS, D.R. DATE OF HEARING : 07.01.2016 DATE OF PRONOUNCEMENT : 08.01.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE ABOVE CAPTIONED TWO APPEALS BY THE REVENUE RELA TING TO A.Y. 2009- 10 & 2010-11 HAVE BEEN PREFERRED AGAINST THE SEPARA TE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE CIT(A)] DATED 23.12.2012 & 10.02.2014 RESPECTIVELY. SINCE THE APPEALS ARE RELATING TO THE SAME ASSESSEE, HENCE THE SAME WERE HEARD TOGETH ER AND ARE BEING DISPOSED OF WITH THIS COMMON ORDER. FIRST WE TAKE UP ITA NO .4403/M/2012 FOR A.Y. 2009-10. ITA NO.4403/M/2012 & ITA NO.2940/M/2014 M/S. UNITED HEALTHCARE INDIA PVT. LTD. 2 ITA NO.4403/M/2012 FOR A.Y. 2009-10 2. THE SOLE ISSUE RAISED IN THIS APPEAL IS IN RELAT ION TO DISALLOWANCE OF EXPENDITURE MADE BY THE ASSESSING OFFICER (HEREINAF TER REFERRED TO AS THE AO) UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT WITH REGARD TO PAYMENT MADE TO HOSPITALS BY THE ASSESSEE ON BEHALF OF INSURANCE CO MPANIES WITHOUT DEDUCTING THE TDS. 3. THE ASSESSEE IS A THIRD PARTY ADMINISTRATOR WHOS E FUNCTION IS THAT WHEN THE INSURED PERSONS DIRECTLY AVAIL SERVICES OF HOSP ITAL WHICH IS GENERALLY KNOWN AS 'CASHLESS SERVICES', THE TPA TAKES GUARANT EE OF MAKING PAYMENT TO SUCH HOSPITALS. THE ASSESSEE HEREIN COLLECTS THE AM OUNT OF MEDICAL EXPENSES BILLED BY THE HOSPITALS ON INSURED PERSONS, FROM TH E INSURANCE COMPANIES AND REMIT THE SAME TO THE HOSPITALS. THUS, THE CASE OF THE ASSESSEE IS THAT IT ONLY PROVIDES SERVICES OF PAPER WORK AND GUARANTEE AND F INALLY MAKES PAYMENTS TO HOSPITALS IN WHICH THE INSURED PERSONS HAS AVAILED THE MEDICAL FACILITIES/SERVICES. THE ASSESSEE IS DOING ALL THES E WORKS ON BEHALF OF INSURANCE COMPANIES. THE ASSESSEE NEITHER CREDITS THE RECEIPT S NOR DEBITS THE PAYMENTS TO THE P&L ACCOUNT. THE AO HELD THAT PAYMENT MADE TO T HE HOSPITALS BY THE ASSESSEE IS COVERED U/S 1943 AND ACCORDINGLY TOOK T HE VIEW THAT THE ASSESSEE SHOULD HAVE TDS FROM THE PAYMENTS TO MADE TO THE HO SPITALS. SINCE THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE, THE AO DISAL LOWED SUCH PAYMENTS BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE AC T. 4. IN APPEAL, THE LD. CIT(A) DELETED THE DISALLOWAN CE SO MADE BY THE AO OBSERVING THAT SINCE THE ASSESSEE DID NOT CLAIM THE AMOUNT PAID TO HOSPITALS AS AN EXPENDITURE AT ALL, THEREFORE NO DISALLOWANCE OF EXPENDITURE UNDER SECTION 40(A)(IA) IS DIRECTED. 5. AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE HAS STATED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL. HE HAS RELIED UPON THE DECI SION OF THE TRIBUNAL IN THE CASE OF ACIT VS. HEALTH INDIA TPA SERVICES PVT. LT D. IN ITA ITA NO.4403/M/2012 & ITA NO.2940/M/2014 M/S. UNITED HEALTHCARE INDIA PVT. LTD. 3 NO.6475/M/2012 ORDER DATED 18.02.2014 AND IN THE CA SE OF PARAMOUNT HEALTH SERVICES VS. ITO IN ITA NO.2188/M/2013 VIDE ORDER DATED 25.07.2014. 6. WE FIND THAT THE ISSUE CAME FOR CONSIDERATION BE FORE THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF PARAMOUNT HEA LTH SERVICES (SUPRA) WHEREIN THE TRIBUNAL, AFTER CONSIDERING THE RELEVAN T SUBMISSIONS AND RELYING UPON OTHER DECISIONS OF THE CO-ORDINATE BENCH OF TH E TRIBUNAL, HAS FINALLY CONCLUDED AS UNDER: 7. THOUGH THE ASSESSEE IS UNDER THE OBLIGATION TO DEDUCT TAX AT SOURCE UNDER SECTION 194JHOWEVER, THE CONSEQUENTIAL LIABIL ITY IS ONLY UNDER SECTION 201 AND 201(1A) AND THE DISALLOWANCE UNDER SECTION 40(A)(IA) CANNOT BE AUTOMATIC WHEN THE ASSESSEE HAS NOT CLAIMED THIS PAYMENT AS E XPENDITURE AGAINST THE INCOME. THE ASSESSEE HAS SHOWN THE INCOME, ONLY THE SERVICE CHARGES RECEIVABLE FROM INSURANCE COMPANIES FOR RENDERING SERVICES AS 3RD PARTY ADMINISTRATOR AND NOT HAVING ANY MARGIN OR PROFIT ELEMENT IN THE PAYMENT RECEIVED FROM THE INSURERS FOR THE PURPOSE OF REMITTING TO THE HOSPITALS TO SETTLE MEDICAL CLAIM OF THE INSURED. THEREFORE, WHEN THE SAID PAYMENT HAS NOT BEEN CLAIM ED AS EXPENDITURE INCURRED FOR EARNING THE INCOME BY THE ASSESSEE THEN THE PRO VISIONS OF SECTION 40(A)(IA) IS NOT ATTRACTED FOR NON DEDUCTION OF TAX AT SOURCE IN RESPECT OF THE SAID PAYMENT. FOLLOWING THE DECISIONS OF THE TRIBUNAL AS RELIED U PON BY THE ASSESSEE AND DISCUSSION ABOVE WE HOLD THAT NO DISALLOWANCE CAN B E MADE UNDER SECTION 40(A)(IA)IN RESPECT OF THE PAYMENT IN QUESTION. ACC ORDINGLY THE GROUND RAISED IN ASSESSEE'S APPEAL IS ALLOWED AND GROUND RAISED IN T HE REVENUE'S APPEAL IS DISMISSED. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED. 7. SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN T HE CASE OF HEALTH INDIA TPA SERVICES PVT. LTD. (SUPRA). RESPECTFULLY FOLL OWING THE ABOVE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL, THIS ISSUE I S DECIDED IN FAVOUR OF THE ASSESSEE AND IT IS THEREFORE HELD THAT NO DISALLOWA NCE UNDER SECTION 40(A)(IA) IS WARRANTED IN THIS CASE, WHEN THE ASSESSEE HAS NOT C LAIMED ANY EXPENDITURE AT ALL. 8. NOW COMING TO THE APPEAL OF THE REVENUE FOR A.Y. 2010-11 I.E. ITA NO.2940/M/2014. ITA NO.2940/M/2014 FOR A.Y 2010-11 ITA NO.4403/M/2012 & ITA NO.2940/M/2014 M/S. UNITED HEALTHCARE INDIA PVT. LTD. 4 9. THE REVENUE HAS AGITATED THE ACTION OF THE LD. C IT(A) IN DELETING THE PENALTY LEVIED BY THE AO UNDER SECTION 271(1)(C) OF THE ACT. AT THE OUTSET, THE LD. D.R. HAS SUBMITTED THAT THE TAX EFFECT/PENALTY CLAIMED IS LESS THAN RS.10 LAKHS AND THE CBDT CIRCULAR NO. 21/2015 IS APPLICAB LE TO THIS APPEAL, HENCE, THIS APPEAL BE DISMISSED AS NOT PRESSED IN TERMS OF CBDT CIRCULAR NO 21/2015 DATED 10/12/2015. 10. THE CBDT VIDE CIRCULAR DATED 10/12/2015 (SUPRA) HAS REVISED THE MONETARY LIMITS FOR FILING OF APPEALS BY THE DEPART MENT BEFORE THE TRIBUNAL AND FURTHER VIDE PARA 10 OF THE SAID CIRCULAR IT HA S BEEN CLARIFIED THAT SAID CIRCULAR IS APPLICABLE RETROSPECTIVELY TO THE PENDI NG APPEALS ALSO. THE RELEVANT PORTION OF THE CIRCULAR DATED 10/12/2015 (SUPRA) IS REPRODUCED BELOW:- 3.HENCEFORTH APPEALS/SLPS SHALL NOT BE FILED IN CAS ES WHERE THE TAX EFFECT DOES NOT EXCEED THE MONETARY LIMITS GIVEN HEREUNDER:- SL. NO. APPEALS IN INCOME-TAX MATTERS MONETARY LIMI TS (IN RS.) 1. BEFORE APPELLATE TRIBUNAL 10,00,000 2. BEFORE HIGH COURT 20,00,000 3. BEFORE SUPREME COURT 25,00,000 ................................................... ................................................... .................... 4. FOR THIS PURPOSE, 'TAX EFFECT' MEANS THE DIFFERE NCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX THAT WOULD HAVE B EEN CHARGEABLE HAD SUCH TOTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME I N RESPECT OF THE ISSUES AGAINST WHICH APPEAL IS INTENDED TO BE FILED (HEREI NAFTER REFERRED TO AS 'DISPUTED ISSUES'). HOWEVER THE TAX WILL NOT INCLUD E ANY INTEREST THEREON, EXCEPT WHERE CHARGEABILITY OF INTEREST ITSELF IS IN DISP UTE. IN CASE THE CHARGEABILITY OF INTEREST IS THE ISSUE UNDER DISPUTE, THE AMOUNT OF INTEREST SHALL BE THE TAX EFFECT. IN CASES WHERE RETURNED LOSS IS REDUCED OR ASSESSED AS INCOME, THE TAX EFFECT WOULD INCLUDE NOTIONAL TAX ON DISPUTED ADDITIONS. I N CASE OF PENALTY ORDERS, THE TAX EFFECT WILL MEAN QUANTUM OF PENALTY DELETED OR REDUCED IN THE ORDER TO BE APPEALED AGAINST. 8. ADVERSE JUDGMENTS RELATING TO THE FOLLOWING ISS UES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX EFFECT ENTAILED IS LESS THAN THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE OR THERE IS NO TAX EFFECT: (A) WHERE THE CONSTITUTIONAL VALIDITY OF THE PROVISIONS OF AN ACT OR RULE ARE UNDER CHALLENGE, OR (B) WHERE BOARD'S ORDER, NOTIFICATION, INSTRUCTION OR C IRCULAR HAS BEEN HELD TO BE ILLEGAL OR ULTRA VIRES, OR ITA NO.4403/M/2012 & ITA NO.2940/M/2014 M/S. UNITED HEALTHCARE INDIA PVT. LTD. 5 (C) WHERE REVENUE AUDIT OBJECTION IN THE CASE HAS BEEN ACCEPTED BY THE DEPARTMENT, OR (D) WHERE THE ADDITION RELATES TO UNDISCLOSED FOREIGN A SSETS/ BANK ACCOUNTS. 9. THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE S HALL NOT APPLY TO WRIT MATTERS AND DIRECT TAX MATTERS OTHER THAN INCOME TA X. FILING OF APPEALS IN OTHER DIRECT TAX MATTERS SHALL CONTINUE TO BE GOVER NED BY RELEVANT PROVISIONS OF STATUTE & RULES. FURTHER, FILING OF APPEAL IN CA SES OF INCOME TAX, WHERE THE TAX EFFECT IS NOT QUANTIFIABLE OR NOT INVOLVED, SUC H AS THE CASE OF REGISTRATION OF TRUSTS OR INSTITUTIONS UNDER SECTION 12A OF THE IT ACT, 1961, SHALL NOT BE GOVERNED BY THE LIMITS SPECIFIED IN PARA 3 ABOVE AN D DECISION TO FILE APPEAL IN SUCH CASES MAY BE TAKEN ON MERITS OF A PARTICULAR C ASE. 10. THIS INSTRUCTION WILL APPLY RETROSPECTIVELY TO PENDING APPEALS AND APPEALS TO BE FILED HENCEFORTH IN HIGH COURTS/ TRIB UNALS. PENDING APPEALS BELOW THE SPECIFIED TAX LIMITS IN PARA 3 ABOVE MAY BE WITHDRAWAL NOT PRESSED. APPEALS BEFORE THE SUPREME COURT WILL BE GOVERNED BY THE INSTRUCTIONS ON THIS SUBJECT, OPERATIVE AT THE TIME WHEN SUCH APPEAL WAS FILED. (UNDERLINED FOR EMPHASIS BY US) 11. THE TAX EFFECT IN DISPUTE IN THE CAPTIONED APPE AL IS STATED TO BE BELOW THE MONETARY LIMIT OF RS.10.00 LACS AS SPECIFIED IN THE CBDT CIRCULAR DATED 10/12/2015 (SUPRA). THE LD. DR HAS NOT BROUGHT OUT ANY MATERIAL TO SUGGEST THAT THE CAPTIONED APPEAL IS PROTECTED BY ANY OF TH E CIRCUMSTANCES PRESCRIBED IN PARA-8 OF THE CIRCULAR DATED 10/12/2015 (SUPRA). HE THEREFORE HAS STATED THAT IN VIEW OF THE ABOVE CIRCULAR OF THE CBDT, THE CAPTION ED APPEAL BE TREATED AS WITHDRAWN/NOT PRESSED. HENCE, WITHOUT GOING INTO T HE MERIT OF THE ISSUES RAISED IN THE PRESENT APPEAL, THIS APPEAL IS TREATE D AS DISMISSED AS WITHDRAWN/NOT PRESSED AS ITS FILING BEING IN CONTRA VENTION OF THE CBDT CIRCULAR DATED 10/12/2015(SUPRA) READ WITH SECTION 268A OF THE INCOME TAX ACT. 12. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08.01.2016. SD/- SD/- (ASHWANI TANEJA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 08.01.2016. * KISHORE, SR. P.S. ITA NO.4403/M/2012 & ITA NO.2940/M/2014 M/S. UNITED HEALTHCARE INDIA PVT. LTD. 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.