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

ITA 6634/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8310 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2014
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 02-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 01-11-2012
• Court: TRIBUNAL
• Department Lawyers: IN CIRCUMSTANCES OF CA SE
• Keywords: Non-deduction of tax
• Section: 201(1); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO.6634/MUM/2012 ASSESSMENT YEAR: - 2008-09 ITA NO.6635/MUM/2012 ASSESSMENT YEAR: - 2009-10 INCOME-TAX OFFICER- 1(1)-(2) ROOM NO. 534/579, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. VS.` M/S DEDICATED HEALTHCARE SERVICES (TPA) INDIA PVT. LTD. KAMBATA BLDG., 3 RD FLOOR, EAST WING, 42, MAHARISHI KARVE MARG, MUMBAI- 400 020. PAN:- AACCD0672J APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAIN ST THE TWO SEPARATE ORDERS OF CIT(A) FOR THE A.Y. 2008-09. THE REVENUE HAS RAISED COMMON GROUNDS IN BOTH APPEALS WHICH 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 ADDITION OF RS. 11,89,18,600/- ON THE GROUND THAT THE AMOUNT ADDED BY THE ASSESSING OFFICER UJS.40(A) {IA) WAS NOT CLAIMED AS DEDUCTION IN THE PROFIT & LOSS ACCOUNT WHEN AS A MA TTER OF FACT THE ASSESSING REVENUE BY SHRI S.D. SRIVASTAVA ASSESSEE BY SHRI. F.V. IRANI SHRI BIREN GABHAWALA AND SHRI HITESH SHAH DATE OF HEARING 02.12.2014 DATE OF PRONOUNCEMENT 10.12.2014 M/S DEDICATED HEALTHCARE SERVICES (TPA) INDIA PVT. LTD. 2 | P A G E OFFICER HAD CATEGORICALLY INVOKED SECTION 145 OF TH E ACT AND 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 ASSESSING OFFICER WAS NOT CHAL LENGED BY THE ASSESSEE . 3. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF 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 OFFI CER INVOKING SECTION 194J WITH REFERENCE TO CBDT CIRCULAR NO.8 OF 2009 DTD.24.11.2 009?' 2. THE ONLY ISSUE ARISES FROM THE GROUND RAISED BY THE REVENUE IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 40(A )(IA) R.W.S 194J OF THE INCOME TAX ACT IN RESPECT OF AMOUNT RECEIVED FROM THE INSURANCE COMPANIES AND DEPOSITED IN FLOAT A/C BY THE ASSESSEE BEING THIRD PARTY ADMINISTRATOR (TPA). THE ASSESSEE IS A COMPANY CARRYING ON THE BUSINESS AS A TPA DULY HOLDING LICENSE FROM INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRDA). THE ASSESSEE COMPANY EARNS ITS REVENUE BY WAY OF FEES FROM INSUR ANCE COMPANIES BY PROVIDING THE INSURANCE COMPANIES, HEALTH SERVICES, CALL CENTRE SERVICES, CASHLESS ACCESS SERVICES, CLAIM PROCESSING, CLAIM PAYMENTS, CUSTOMER RELATIONS AND MANAGEMENT SERVICES. DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE ASSESSING OFFICER MADE THE DISALLOWANCE OF RS. 11,8 9,18,600/- U/S 40(A)(IA) OF THE ACT., HOLDING THAT THE ASSESSEE HAS FAILED TO D EDUCT TAX AT SOURCE U/S 194J FROM THE PAYMENT MADE BY THE ASSESSEE TO HOSPITALS TOWAR DS PAYMENT 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 THE GROUND THAT THE PAYMENT IN QUESTION IS NOT FOR PROFESSIONAL SERVICES RENDERED BY THE ASSESSEE BUT IT IS ACTING AS PASS THROUGH BETWEEN INSURER AND THE INSURED. M/S DEDICATED HEALTHCARE SERVICES (TPA) INDIA PVT. LTD. 3 | P A G E 4. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND C ONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. AUTHORIZED REPRESENTATI VE OF THE ASSESSEE HAS SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISIONS OF THIS TRIBUNAL IN THE CASE OF ACIT VS. HEALTH INDIA TPA SERVICES P. LTD. DATED 21.2.2014 IN ITA NO. 6475/MUM/2012 AS WELL AS THE DECISION DATED 25.7.2014 OF THIS TRIBUNAL IN THE CASE OF PARAMOUNT HEALTH SERVICES (TPA) PVT. LTD. VS. ITO IN ITA NO. 2188/MUM/2013 . WE FIND THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL IN THOSE CASES BY HOLDI NG THAT THE PAYMENT MADE BY THE ASSESSEE IS ONLY TO REPLENISH THE AMOUNT IN FLO ATING 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. THE TR IBUNAL 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 WELL AS RELEVANT MATERIAL ON RECORD. AS FAR AS THE APPLICABILITY OF SECTION 194J IS CONC ERNED THE SAID ISSUE IS NOW SETTLED BY THE DECISION 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), WHEREIN 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 ACCOUNT ONCE THE AMOUNT DEPO SITED THEREIN IS ADJUSTED. THE HON'BLE HIGH COURT HAS HELD THAT THE TPA IS OBLIGED TO DEDUCT TAX AT SOURCE UNDER SECTION 194J OF THE ACT IN AS MUCH AS MONEY ARE PAI D BY IT TO THE HOSPITALS IN RESPECT OF CASH LESS TREATMENTS. THEREFORE IN VIEW OF THE D ECISION OF HON'BLE KARNATAKA HIGH COURT THERE IS NO ESCAPEMENT OF DEDUCTION OF TAX AT SOURCE UNDER SECTION 194J ON THE PART OF TPA AND CONSEQUENTLY SECTION 201(1) AND SECTION 201(1A) OF THE ACT ARE ATTRACTED. THE ISSUE IN THE CASE BEFORE US IS NOT R EGARDING THE LIABILITY UNDER SECTION 201(1) AND 201(1A) BUT THE DISPUTE IS REGARDING ADI TION UNDER SECTION 40(A)(IA) FOR NON-DEDUCTION OF TAX AT SOURCE. THE ASSESSEE HAS RE LIED UPON A SERIES 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 SERVICE PRO VIDED BEING A CONDUIT BETWEEN THE INSURER AND HOSPITAL/ THE 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 TRIBUNAL VIDE ITS DECISION DATED 22/2/2013 HAS HELD IN PARA- 5 AS UNDER :- 5. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE F ACTS PLACED ON RECORD, THE ASSESSEE IS ONLY FACILITATING THE PAYMENTS BY I NSURER TO THE INSURED FOR AVAILING THE MEDICAL FACILITIES. ASSESSEE HAS NOT R ENDERED ANY PROFESSIONAL M/S DEDICATED HEALTHCARE SERVICES (TPA) INDIA PVT. LTD. 4 | P A G E SERVICES TO THE INSURER OR INSURED AND ONLY COLLECT ING THE AMOUNT FROM THE INSURER AND PASSING IT ON TO VARIOUS HOSPITALS WHO WERE PROVIDING MEDICAL SERVICES TO THE INSURED. SINCE, THERE IS NO CLAIM O F EXPENDITURE BY THE ASSESSEE, DISALLOWANCE UNDER SECTION 40A(I)(A) AS W AS DONE BY THE ASSESSING OFFICER DOES NOT ARISE. IT MAY BE DIFFERENT ISSUE T HAT THE AMOUNTS PAID MAY BE COVERED BY PROVISIONS OF SECTION 194J AS WAS HEL D BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF THE MEDIASSES ST INDIA TPA PVT. LTD. VS. DCIT-18(1J, BANGALORE (WP.NO.11376/2009 (T-IT ) RELIED UPON 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 & L OSS ACCOUNT. MOREOVER REVENUE ACCEPTED THE ORDER OF CIT(A) IN THE EARLIER YEAR. FOR THESE REASONS, 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 SERVICES P. LT D. FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO. 6475/MUM/2012 ORDER DATED 21/02/ 2014 . IN THE CASE OF ITO VS. M/S. HARIOM ORGANIZERS PVT. LTD. IN ITA NO. 1946/AHD./2009 FOR ASSESSMENT YEAR 2005-06 ORDER DATED 06/05/2011 AS W ELL AS IN THE CASE OF SUMILON INDUSTRIES LTD. VS. INCOME TAX OFFICER, SUR AT IN ITA NOS.3296 & 3297/AHD./2008 DATED 12/10/2010 (SUPRA), THE TRIBUN AL 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 CLAIMED 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. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF DECEMBER 2014. SD/- SD/- ( N.K.BILLAIYA ) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 10-12-2014 SKS SR. P.S,