ITO 1(1)(2), MUMBAI V. DEDICATED HEALTHCARE SERVICE (TPA) INDIA P. LTD, MUMBAI

ITA 5523/MUM/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0075 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 04-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJITKUMAR SRIVASTAVA
• Keywords: Rectification of order
• Section: 143(3); 115JB; 145; 154; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, A M AND SHRI RAM LAL NEGI, JM ./ I.T.A. NO S . 5523 & 5524/MUM/2015 ( / ASSESSMENT YEAR: 2008 - 09 ) ITO - 1(1 )(2), 534, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 / VS. M/S. DEDICATED HEALTHCARE SERVICES (TPA) INDIA PVT. LTD. 201, NAMAN CHAMBERS, C - 32, G - BLOCK, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400 051 ./ ./ PAN/GIR NO. AACCD 0672 J ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI AJIT KUMAR SRIVASTAVA / RESPONDENT BY : NONE / DATE OF HEARING : 09.01.2018 / DATE OF PRONOUNCE MENT : 01.03 .2018 / O R D E R PER S HAMIM YAHYA , A. M.: THESE ARE TWO APPEALS FILED BY THE R EVENUE AGAINST RESPECTIVE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2008 - 09. ITA NO.5523/MUM/2015 2. T HIS APPEAL B Y THE R EVENUE IS AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) D ATED 31 . 08 . 2015 PERTAINING TO ASSESSMENT YEAR 2008 - 09 ARISING OUT OF ASSESSMENT ORDER PASSED U /S. 143(3) OF THE IT ACT. 2 ITA NO S . 5523 & 5524/MUM/2015 3. THE GROUNDS OF APPEAL READ AS UNDER : 1. 'WHETHE R ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW , THE LD.CIT(A) IS JUSTIFIED IN RELYING ON THE DECISION OF THE THEN LD.CIT( A) &HON'BLE ITAT, IN DELETING THE ADDITION OF RS. 1 6,01,30,25 0 / - ON THE GROUND THAT THE AMOUNT ADDED BY THE A.O. U/S. 4 0 (A)( IA) WAS NOT CLAIMED AS DEDUCTION IN THE PROFIT & LOSS ACCOUNT WHEN AS A MATTER OF FACT THE A.O. HAD CATEGORICALLY INVOKED SECTION 145 OF THE ACT AND HAD HELD THAT THE AMOUNTS RECEIVED BY THE ASSESSEE FROM INSURANCE COMPANIES AND DEPOSITED IN FLOAT ACCOUNT HAS TO BE RECOGNIZED AS REVENUE RECEIPT AND THE OUTFLOW AS EXPENSES AND THIS ACTION OF THE A.O. WAS NOT CHALLENGED BY THE ASSESSEE. ' 2. 'WHETHER ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT ( A) IS JUSTIFIED IN DELETING THE ADDITI ON MADE ON ACCOUNT OF PROVISIONS FOR EXPECTED CLAIMS OF RS.16,01,30,2 50 / - I NCLUDED IN THE COMPUTATION U/S.11 5JBFOR CALCULATION OF TAX UNDER MAT. ' 4 . THE BRIEF FACTS ARE AS UNDER: THE ASSESSEE HAS E - FILED ITS RETURN OF INCOME ON 28.09.2008 DECLARING A TOT AL INCOME OF RS.68,85,850/ - . THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE INCOME - TAX ACT, 1961 ON 29.12.2011 AND THE TOTAL INCOME WAS DETERMINED AT RS.13,77,33,980/ - . IN THE ASSESSMENT ORDER, THE FOLLOWING ADDITIONS/DISALLOWANCES WERE MADE: (1) DISALLOW ANCE U/S. 40(A)(IA) : RS.11,89,18,600/ - 5. UP ON ASSESSEE'S APPEAL THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER : 4. ORIGINALLY THE ASSESSEE COMPANY HAS FILED AN APPEAL BEFORE CIT(A) - 1, MUMBAI AS AGAINST THE ASSESSMENT ORDER DATED 29.12.2011 AND THE SAME HAS BEEN ADJUDICATED BY THE THEN CIT(A) - 1 , MUMBAI VIDE HIS ORDER NO. CIT(A) - 1/IT - 107/2011 - 12 DATED 08.08.2012 WHEREIN THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 1 HAS ALLOWED THE GROUND NO. 1 OF ADDITION U/S. 4 (A ) (IA). HOWEVER, THE OTHER I SSUE REGARDING THE ADDITION U/S. 194J OF THE I.T. ACT. 3 ITA NO S . 5523 & 5524/MUM/2015 INADVERTENTLY, THE ASSESSEE COMPANY OMITTED TO FILE APPEAL ON THE ISSUE OF 115JB AND THAT IS WHY THE APPEAL HAS LED BEFORE THE UNDERSIGNED. I HAVE GONE THROUGH THE ASSESSMENT ORDER DATED 29.12.2011 AND THE APPELLATE ORDER DATED 08.08.2012 OF CIT(A) - 1, MUMBAI. IT IS SEEN THAT GROUND OF APPEAL HAS NOT BEEN RAISED BY THE APPELLANT IN THE ORIGINAL APPEAL FILED BY THEM. IN THE APPELLATE ORDER DATED 08.08.2012 PASSED BY CIT(A) - 1, MUMBAI, HE HAS HELD THE ISSUE IS IN FAVOUR OF THE APPELLANT AND DIRECTED THE AO TO DEL E TE THE ADDITION MADE U/S. 40 ( A)(IA) OF THE I.T. ACT. THE RELEVANT PORTION IS REPRODUCED AS UNDER: '3.4. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, SUBMISSIONS OF THE APPELLANT AND THE ASSESS MENT ORDER. IT IS OBSERVED THAT THE EXPENDITURE INCURRED BY THE APPELLANT IS NOT ITS EXPENDITURE AND IN FACT THE APPELLANT HAS NOT DEBITED ANY EXPENDITURE IN ITS BOOKS OF ACCOUNT. THE QUESTION OF DISALLOWANCE OF EXPENDITURE IS RELEVANT ONLY WHEN THERE WILL BE CLAIM IN P&L A/C. THE INSURANCE CO. HAS MADE THE PAYMENTS TO THE HOSPITALS AND THE EXPENDITURE IS IN THEIR BOOKS. THE APPELLANT IS NOT MAKING ANY PAYMENT FOR PROFESSIONAL SERVICES RENDERED TO THE ASSESSEE BUT IT IS ACTING AS PASS THROUGH BETWEEN INSURE R AND THE INSURED. THE PROFESSIONAL SERVICES RENDERED ARE TO THE INSURANCE CO. AND IT IS INFORMED THAT THE INSURANCE CO. IS DEDUCTING TDS ON COMMISSION PAYMENTS TO THE APPELLANT. IN VIEW OF THE FACTS, THE DISALLOWANCE BY AO U/S. 40(A)(IA) R.W. 194J IS NOT WARRANTED. GROUND NO. 1 IS ALLOWED.' AGAINST THE CIT(A)'S ORDER, THE DEP ARTMENT FILED APPEAL BEFORE HON BLE ITAT. WHILE ADJUDICATING THE DEPARTMENTAL APPEAL, THE HON B LE ITAT PASSED AN ORDER ON 10.12.204 WHEREIN IT HAS UPHELD THE CIT(A)'S DECISION ON THIS ISSUE. THE RELEVANT PORTION IS AS UNDER: '4. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE B Y THE DECISIONS OF THIS TRIBUNAL IN THE CASE OF ACJT VS. HEALTH INDIA TPA SERVICES P. LTD. DATED 21.2.2014 IN JTA NO. 6475/MUM/2012 AS WELL AS THE DECISION DATED 25.07.2014 OF THIS TRIBUNAL IN THE CASE OF PARAMOUNT HEALTH SERVICES (TPA) PVT. LTD. VS. TTO I N TTA NO. 21888/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 I S ONLY TO REPLENISH THE AMOUNT IN FLOATING ACCOUNT AND, THEREFORE THE DISALLOWANCE U/S. 40(A)(IA ) CANNOT BE MADE WHEN THE ASSESSEE HAS NOT CLAIMED ANY SUCH EXPENDITURE IN P & L ACCOUNT. 4 ITA NO S . 5523 & 5524/MUM/2015 THE AR OF THE APPELLANT C OMPANY ARGUES THAT A SUM OF RS. 16,01,30,250/ - IS NOT A PROVISION DEBITED TO THE P&L A/C. ACTUALLY, IN THE ACCOUNTS, IT IS SHOWN AS CLAIMS R ECEIVABLE FROM INSURANCE COMPANIES AND CLAIMS RECEIVED FROM PARTIES AS ASSET AND LIABILITY RESPECTIVELY IN THE SCHEDULE 5 AND 6 TO THE BALANCE SHEET. I HAVE GONE THROUGH THE P&L A/C. WHEREIN THE AR OF THE APPELLANT COMPANY HAS MADE THE FOLLOWING ENTRIES W ITH REGARD WITH THE ABOVE CLAIM : BRANCH ACCOUNT RS. 16,000/ - CLAIMS RECEIVABLE FROM INSURANCE COMPANIES RS. 16,01,30,251/ - TPA SERVICE CHARGES RECEIVABLE RS. 2,19,33,851/ - BY APPLYING THE RATIO FOLLOWED IN THE CIT(A)'S ORDER DATED 08.08.2012 AN D HON BLE ITAT ORDER DATED 10,12.2014, SINCE THE EXPENDITURE NOT DEBITED IN P&L A/C. AND MOREOVER SEC. 115JB IS NOT DIRECTLY CONNECTED TO THE PROVISION FOR EXPECTED CLAIM RECEIVABLE FROM INSURANCE COMPANY AND ACCORDINGLY I DIRECT THE ABOVE ADDITION OF RS. 16,01,30,250/ - FROM THE ADJUSTMENT MADE U/S. 115JB COMPUTATION. 6. A GAINST THE ABOVE ORDER , THE R EVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE LEAR NED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORDS. N ONE APPEARED ON BEHALF OF THE ASSESSEE . 8 . U PON CAREFUL CONSIDERATION, WE FIND THAT THIS TRIBUNAL IN THE ASSESSEES OWN CASE HAS DECIDED THE ISSUE IN NORMAL ASSESSMENT IN FAVOUR OF THE ASSESSEE BY FOLLOWING A FEW TRIBUNAL DECISIONS ON THE ISSUE. NO CONTRARY DECISION HAS BEEN SHOWN TO US. HENCE, WHEN IT HAS ALREADY BEEN HELD THAT DISALLOWANCE CANNOT BE MADE INASMUCH AS THE ASSESSEE HAS NOT CLAIMED ANY SUCH EXPENDITURE IN PROFIT AND LOSS ACCOUNT , WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND UPHOLD HIS ORDER. 9. IN T HE RESULT, TH IS APPEAL BY THE REVENUE STANDS DISMISSED. 5 ITA NO S . 5523 & 5524/MUM/2015 ITA N O .5 524 /MUM/2015 10 . T HIS APPEAL BY THE R EVENUE IS FILED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 31.08.2015 PERTAINING TO ASSESSMENT YEAR 2008 - 09 ARISING OUT OF ASSESSMENT ORDER PASSED U /S. 154 OF THE IT A CT . 11 . T HE GROUNDS OF APPEAL READ AS UNDER : 1. 'WHETHER ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) IS JUSTIFIED IN RELYING ON THE DECISION OF THE THEN LD. C I T(A) & HON'BLE ITAT, I N DELETING THE ADDITION OF RS.16, 01 ,3 0 ,250/ - ON THE GROUND THAT THE AMOUNT ADDED BY THE A.O. U/S. 40(A)(IA) WAS NOT CLAIMED AS DEDUCTION IN THE PROFIT & LOSS ACCOUNT WHEN AS A MATTER OF FACT THE A.O. HAD CATEGORICALLY INVOKED SECTION 145 OF THE ACT AND HAD HELD THAT THE AMOUNTS RECEIVED BY THE ASSESSEE FROM INSURANCE COMPANIES AND DEPOSITED IN FLOAT ACCOUNT HAS TO BE RECOGNIZED AS REVENUE RECEIPT AND THE OUTFLOW AS EXPENSES AND THIS ACTION OF THE A.O. WAS NOT CHALLENGED BY THE ASSESSEE. ' 2. 'WHETHER ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF PROVISIONS FOR EXPECTED CLAIMS OF RS. 16 ,01,30,25 0 / - INCLUDED IN THE COMPUTATION U/S. 115JB FOR CALCULATION OF TAX UNDER MAT. ' 12 . T HE BRIEF FACTS ARE THAT THE ASSESSEE HAS E - FILED ITS RETURN OF INCOME ON 28.09.2008 DECLARING A TOTAL INCOME OF RS.68,85,850/ - . THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE INCOME - TAX ACT, 1961 ON 29.12.2011 AND THE TOTAL INCOME WAS DETERMINED AT RS. 13,77,33,980/ - . THE ASSESSING OFFICER HAD MADE A DISALLOWANCE OF RS. 11,89,18,600/ - U/S. 40(A)(IA) OF THE I.T. ACT. THE ASSESSEE FILED AN APPEAL AGA INST THE DISALLOWANCE MADE U/S. 40(A)(IA) OF THE I.T. ACT, BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 1, MUMBAI. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 1 VIDE HIS ORDER NO. CIT(A) - 1/IT - 107/2011 - 12 DATED 08.08.2012 HELD THAT THE DISALLOWANCE U/S. 40(A)(IA) R.W. SECTION 194J WAS NOT WARRANTED. ACCORDINGLY, THE LD. 6 ITA NO S . 5523 & 5524/MUM/2015 COMMISSIONER OF INCOME TAX (APPEALS) D ELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER . PURSUANT TO THE ORDER GIVING EFFECT TO THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 'S ORDER, A DEMAND OF RS.2,78,68,872/ - WAS DETERMINED AS PAYABLE. SUBSEQUENTLY, THE ASSESSEE FILED AN APPLICATION DATE D 20.11.2012 REQUESTING FOR RECTIFICATION U/S. 154 OF THE ACT STATING THAT THE SUM OF RS.16,01,30,250/ - IS NOT A PROVISION DEBITED TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER PASSED ORDER U/S. 154 OF THE ACT DATED 29.11.2012 REJECT ING THE CLAIM F OR RECTIFICATION. 13 . UPON THE AS SESSEE'S APPEAL THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER : 4. THE APPEAL IS FILED BY THE APPELLANT AGAINST THE ORDER U/S. 154 OF THE I.T. ACT REJECTING THE REQUEST OF THE APPELLANT FOR MODIFYING THE 115J B COMPUT ATION. THE ADDITION MADE OF RS. 16,01,30,251/ - UNDER THE HEAD 'PROVISION FOR EXPECTED CLAIM' ADDED ALONG WITH P&L A/C. OF RS. 1,87,96,690/ - AND ARRIVED AT TOTAL INCOME OF RS. 17,89,26,940/ - . THE APPELLANT PLEADED BE FORE THE AO THAT THE SUM OF RS. 6,01, 30,251/ - IS NOT PROVISION DEBITED TO THE P&L A/C. THE CLAIMS RECEIVABLE FROM IN SURANCE COMPANY IS SHOWN AT RS. 16,01,30,251/ - (SCH - 5) AND CLAIMS RECEIVED FROM PARTIES IS ALSO SHOWN AT RS. 16,01,30,251/ - (SCH - 6). HENCE THESE ARE RECORDING OF CLAIMS RECEIVED AND CLAIMS RECEIVABLE AND THERE IS NO AMOUNT DEBITED TO PROFIT AND LOSS A/C. FURTHER IT IS NOT A CONTINGENT LIABILITY OF OUR CLIENT. THE SUM HAS ALREADY BEEN ADJUDICATED BY ME IN THE QUANTUM ORDER NO.CIT(A) - 2/IT/159/2015 - 16 DATED 31.08.2015 AN D ACCORDINGLY THE RECTIFICATION HAS ALREADY BEEN ADDRESSED BY ALLOWING THE QUANTUM APPEAL. SO THIS APPEAL OF RECTIFICATION ORDER IS FOUND TO BE INFRUCTUOUS. HOWEVER, FOR STATISTICAL PURPOSES, IT IS TREATED AS ALLOWED. 5. IN THE RESULT THE APPEAL IS ALLOWED. 14 . A GAINST THE ABOVE ORDER , THE R EVENUE IS IN APPEAL BEFORE US. 15. WE HAVE HEARD THE LEAR NED DEPARTMENTAL REPRESENTATIVE A ND PERUSED THE RECORDS . N ONE APPEARED ON BEHALF OF THE ASSESSEE . WE FIND THAT IN THE MAIN/ QUANTUM APPEAL HEREINABOVE WE HAVE ALREADY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. HENCE , THIS 7 ITA NO S . 5523 & 5524/MUM/2015 APPEAL HAS BECOME INFRUCTUOUS . ACCORDINGLY, THIS APPEAL BY THE REVENUE STANDS DISMISSED. 16. IN THE RESULT, BOTH THE APPEALS BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.03.2018 SD/ - SD/ - ( RAM LAL NEGI ) (S HAMIM YAHYA ) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 01.03.2018 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI