MD India Healthcare Services (TPA) Pvt. Ltd., Pune V. Joint Commissioner of Income-tax,

ITA 829/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1579 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 07-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 24-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Additional evidence; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 829/PN/2014 %' ( ')( / ASSESSMENT YEAR : 2010-11 MD INDIA HEALTHCARE SERVICES (TPA) PVT. LTD., S. NO. 46/1, E-SPACE BUILDING, A-2 WING, WADGAON SHERI, PUNE NAGAR ROAD, PUNE-411014 PAN : AADCM4828N ....... / APPELLANT ' / V/S. JT. COMMISSIONER OF INCOME TAX, RANGE 11, PUNE / RESPONDENT ASSESSEE BY : SHRI KISHOR PHADKE REVENUE BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 07-06-2016 / DATE OF PRONOUNCEMENT : 27-07-2016 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, PUNE DATED 31-10- 2013 FOR THE ASSESSMENT YEAR 2010-11. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IS OFFERING SERVICE S TO VARIOUS 2 ITA NO. 829/PN/2014, A.Y. 2010-11 INSURANCE COMPANIES AS THIRD PARTY ADMINISTRATOR (TPA). T HE ASSESSEE SETTLES AND DISCHARGES HEALTH INSURANCE CLAIMS RAISED BY V ARIOUS INDIVIDUALS UNDER THE INSURANCE POLICIES. THE ASSESSEE ACTS ON BEHALF OF THE INSURANCE COMPANIES IN CLAIM SETTLEMENT OF MEDICLAIM PO LICIES. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE IMPUGNED A SSESSMENT YEAR ON 15-10-2010 DECLARING TOTAL INCOME OF ` 4,96,35,608/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER CASS AN D ACCORDINGLY NOTICE U/S. 143(2) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS ISSUED TO THE ASSESSEE ON 30-08-201 1. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MADE DISALLOWANCES OF ` 4,40,54,578/- ON ACCOUNT OF DISALLOWANCE OF ENROLLMENT EXPENSES UNDER RASHTRIYA SWASTHYA BIMA YOJN A (RSBY) SCHEME AND FURTHER DISALLOWED PROFESSIONAL CHARGES ` 12,83,690/-. AGGRIEVED BY THE ASSESSMENT ORDER DATED 13-02-2013, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE FINDINGS OF ASSESSING OFFICER WITH REGARD TO ADDITION OF ` 4,40,54,578/-. HOWEVER, IN RESPECT OF DISALLOWANCE OF PROFESSIONAL CHARGES, THE COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE DISALLOW ANCE TO ` 6,91,190/- ON ACCOUNT OF PROVISION FOR CONSULTANCY CHARGES . NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL AGAINST T HE ADDITIONS/DISALLOWANCES CONFIRMED BY THE COMMISSIONER OF INCO ME TAX (APPEALS). 3. SHRI KISHOR PHADKE APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE FIRST APPELLATE AUTHORITY HAS CONFIRMED THE ADDITIONS OF ` 4,40,54,578/- I.E. EXPENDITURE TOWARDS ENROLMENT UNDER RSBY SCHEME. THE ASSESSEE IS A THIRD PARTY ADMINISTRATO R. THE 3 ITA NO. 829/PN/2014, A.Y. 2010-11 ASSESSEE HAS NOT DERIVED ANY ENDURING BENEFIT FROM SMART CARDS ISSUED TO BELOW POVERTY LINE PERSONS UNDER THE STATE SPONS ORED PROJECT RASHTRIYA SWASTHYA BIMA YOJNA (RSBY). THE MEDICAL POLICIE S UNDER THE SCHEME ARE VALID FOR ONE YEAR UNLESS RENEWED. THE D ISCRETION IS ENTIRELY OF THE INDIVIDUAL WHETHER TO RENEW OR NOT THE M EDICLAIM POLICY. THE AUTHORITIES BELOW HAVE ERRED IN COMING TO THE CONCLUS ION THAT THE EXPENDITURE INCURRED BY THE ASSESSEE FOR ENROLLMENT UNDE R RSBY SCHEME IS DEFERRED REVENUE EXPENDITURE AND IT SHOULD BE AMORTIZED OVER THE PERIOD OF 3 YEARS. THE ASSESSEE HAD INCURRED TOTAL EXPENDITURE OF ` 6,60,81,867/- DURING THE FINANCIAL YEAR 2009-10. THE ASSES SING OFFICER ALLOWED ` 2,20,27,289/- AND THE BALANCE AMOUNT OF ` 4,40,54,578/- WAS DISALLOWED. THE ASSESSING OFFICER HAD MADE DISALLOWANCES ON IDENTICAL GROUND IN IMMEDIATELY PRECEDING YE AR I.E. ASSESSMENT YEAR 2009-10. THE COMMISSIONER OF INCOME TA X (APPEALS) HAD ACCEPTED THE CONTENTIONS OF THE ASSESSEE AND DELET ED THE DISALLOWANCES. HOWEVER, IN THE ASSESSMENT YEAR UNDER APP EAL THE COMMISSIONER OF INCOME TAX (APPEALS) HAS TAKEN A CONTRARY VIEW ON SAME SET OF FACTS. IN ASSESSMENT YEAR 2009-10 THE DEP ARTMENT CARRIED THE ISSUE IN APPEAL BEFORE THE TRIBUNAL IN ITA NO. 2585/PN/ 2012, THE CO-ORDINATE BENCH OF THE TRIBUNAL DISMISSED THE APPEAL OF THE REVENUE AND UPHELD THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPE ALS). THE LD. AR PLACED ON RECORD A COPY OF THE ORDER OF TRIBUNAL IN ITA NO. 2585/PN/2012 DECIDED ON 10-07-2014. 4. WITH REGARD TO DISALLOWANCES OF ` 6,91,190/- ON ACCOUNT OF PROVISION OF CONSULTANCY CHARGES, THE LD. AR OF THE ASSESSE E SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS UPHELD T HE FINDINGS OF ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE HAS FAILED TO 4 ITA NO. 829/PN/2014, A.Y. 2010-11 SUBSTANTIATE ITS CLAIM. THE LD. AR DRAWS OUR ATTENTION TO THE LIST OF PAYMENTS MADE TO CONSULTANTS DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR 2010-11 AT PAGES 32 AND 33 OF THE PA PER BOOK. THE LD. AR FURTHER REFERRED TO THE LETTER OF APPOINTMENT ISSUED TO ONE OF THE CONSULTANTS/ADVISOR AT PAGE 34 OF THE PAPER BOOK. DURING THE COU RSE OF SCRUTINY ASSESSMENT PROCEEDINGS AND FIRST APPELLATE STAGE , THE ASSESSEE COULD NOT PRODUCE THE EVIDENCE RELATING TO APPOINTMENT O F CONSULTANTS. THE LD. AR PRAYED FOR ADMITTING THE SAMPLE COPY OF APPOIN TMENT LETTER ISSUED TO CONSULTANTS AS ADDITIONAL EVIDENCE. THE LD. AR CO NTENDED THAT IF AN OPPORTUNITY IS GIVEN THE ASSESSEE CAN SUBSTANTIATE ITS CLA IM. 5. ON THE OTHER HAND SHRI HITENDRA NINAWE REPRESENTING THE DEPARTMENT FAIRLY ADMITTED THAT AS REGARDS ADDITIONS ON ACCOUNT OF ENROLLMENT EXPENSES UNDER RSBY SCHEME IS CONCERNED THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS ADJUDICATED THE ISSUE IN THE CA SE OF ASSESSEE IN IMMEDIATELY PRECEDING ASSESSMENT YEAR. IN RESPECT OF DISALLOWANCE OF PROVISIONS FOR CONSULTANCY CHARGES, THE LD. DR CONTENDED THAT THE ASSESSEE HAS NOT PLACED ON RECORD ANY DOCUMENTARY EV IDENCE FOR ENGAGING THE SERVICES OF CONSULTANTS/ADVISORS. IN THE AB SENCE OF ANY DOCUMENTARY EVIDENCE THE COMMISSIONER OF INCOME TAX (APP EALS) HAS RIGHTLY CONFIRMED THE DISALLOWANCE OF ` 6,91,190/-. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE FIRST ISSUE IN APPEAL IS WITH REGARD TO DISALLOWANCE OF ENROLLME NT EXPENDITURE ` 4,40,54,578/- UNDER RSBY SCHEME. WE FIND THAT SIMILAR DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER IN THE ASSES SMENT YEAR 2009-10. THE COMMISSIONER OF INCOME TAX (APPEALS) HAD DELE TED THE 5 ITA NO. 829/PN/2014, A.Y. 2010-11 SAID ADDITION. THE DEPARTMENT CARRIED THE MATTER IN APPE AL TO THE TRIBUNAL. THE TRIBUNAL UPHELD THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) AND DISMISSED THE APPEAL OF THE REVENUE. TH E RELEVANT GROUNDS RAISED BY THE REVENUE AGAINST THE ORDER OF COM MISSIONER OF INCOME TAX (APPEALS) IN ASSESSMENT YEAR 2009-10 BEFORE THE TRIBUNAL WERE : 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) GROSSLY ERRED IN DELETING THE DISALLOWANCE OF RS.1,71,20,559/-, B EING THE ASSESSEE'S CLAIM ON ACCOUNT OF ENROLLMENT EXPENSES, INSTEAD OF CONFIRMING THE SAME. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) GROSSLY ERRED IN FAILING TO APPRECIATE THAT THE ASSESSEE HAD CLAI MED A HUGE ONE-TIME EXPENDITURE TOWARDS PRINTING OF SMART CARDS AND THA T AS THE SMART CARDS COULD BE REVALIDATED YEAR AFTER YEAR, THE ASSESSEE COMPANY WOULD GET ENDURING BENEFIT FROM THE SAID EXPENDITURE. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) GROSSLY ERRED IN IGNORING THE PROVISION IN THE SCHEME FOR RENEWAL OF POLICIES AND ALSO THE RESPONSIBILITY OF THE ASSESSEE FOR SUPPLY AND M AINTENANCE OF THE SMART CARDS AS PER THE TERMS AND CONDITIONS OF THE SCHEME, FROM WHICH IT IS EVIDENT THAT THE EXPENDITURE INCURRED 85 CLAIMED ON THE MAKING OF THE SMART CARDS IS REQUIRED TO BE SPREAD BEYOND THE YEA R UNDER CONSIDERATION AND CANNOT BE TREATED AS RELATING TO THE YEAR UNDER CONSIDERATION ALONE. THE RELEVANT EXTRACT OF THE FINDINGS OF TRIBUNAL ON THE GR OUNDS RAISED ARE AS UNDER : 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. FROM THE FINDING GIVEN BY THE CIT(A) WE NOTICE THAT AS AGAINST INCURRING OF APPROXIMATELY RS.77/- TOWARDS COST OF EACH SMART CARD THE ASSESSEE RECEIVED SERVICE CHARGE OF RS.97/- PER SMART CARD F ROM THE INSURER. FURTHER, THE FINDING GIVEN BY THE LD.CIT(A) THAT TH E ISSUE OF SMART CARD PER SE IS COMPLETELY INDEPENDENT LINE OF BUSINESS F OR THE ASSESSEE COMPANY FROM THE MAIN BUSINESS OF SETTLING THE BENE FICIARIES CLAIMED ON BEHALF OF THE INSURANCE COMPANIES UNDER THE RSBY SC HEME COULD NOT BE 6 ITA NO. 829/PN/2014, A.Y. 2010-11 CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE . FURTHER, THE LD. DEPARTMENTAL REPRESENTATIVE ALSO COULD NOT CONTROVE RT THE FINDING GIVEN BY THE CIT(A) THAT THE AMOUNT RECEIVED DURING THE Y EAR HAS BEEN SHOWN AS INCOME AND THE ASSESSEE HAS CLAIMED THE CORRESPO NDING EXPENDITURE INCURRED ON THE PRINTING AND ISSUE OF SMART CARDS. UNDER THESE CIRCUMSTANCES AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE CIT(A) WE FIND NO INFIRMITY IN HER ORDER. THE LD. DEPARTM ENTAL REPRESENTATIVE ALSO COULD NOT POINT OUT ANY OTHER MISTAKE IN THE O RDER OF THE CIT(A). MERELY BECAUSE THE AMOUNT APPEARS TO BE HUGE CANNOT BE A GROUND TO DISALLOW THE SAME ON THE GROUND OF ENDURING BENEFIT TO THE ASSESSEE WHEN THE CORRESPONDING REVENUE EARNED HAS BEEN CONS IDERED AS INCOME OF THE IMPUGNED YEAR. IN THIS VIEW OF THE MATTER A ND IN VIEW OF THE DETAILED REASONING GIVEN BY THE CIT(A) WE FIND NO I NFIRMITY IN THE SAME. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUNDS RAI SED BY THE REVENUE ARE DISMISSED. 7. IN THE ASSESSMENT YEAR UNDER APPEAL, UNDISPUTEDLY, THE FACTS ARE IDENTICAL. THE LD. DR HAS NOT BEEN ABLE TO CONTROVERT THE FINDINGS OF CO- ORDINATE BENCH OF THE TRIBUNAL ON THE ISSUE. WE FIND NO R EASON TO TAKE A DIFFERENT VIEW. ACCORDINGLY, THE ADDITION OF ` 4,40,54,578/- IS DELETED. 8. THE SECOND ISSUE IN APPEAL IS WITH REGARD TO THE PRO VISION FOR CONSULTANCY CHARGES ` 6,91,190/-. THE ADDITION HAS BEEN CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS) ON THE GROUND TH AT THE ASSESSEE HAS NOT BEEN ABLE TO FURNISH ANY COGENT EVIDEN CE IN SUPPORT OF THE PROVISION CLAIMED. THE ASSESSEE HAS FILED THE DETAILED LIS T OF CONSULTANTS AND THE PAYMENTS MADE TO THEM DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2010-11. THE ASSESSEE HAS ALS O FILED SAMPLE COPY OF APPOINTMENT LETTER TO THE CONSULTANT AS ADDITIONA L EVIDENCE. THE LD. AR OF THE ASSESSEE HAS PRAYED THAT THE ASSESSE E CAN DEMONSTRATE FROM THE DOCUMENTS AVAILABLE WITH HIM THE GEN UINENESS OF PROVISION FOR CONSULTANCY CHARGES. WE ARE OF THE CONSIDE RED VIEW THAT THIS ISSUE NEEDS A REVISIT TO THE FILE OF ASSESSING OFFICER. AC CORDINGLY, 7 ITA NO. 829/PN/2014, A.Y. 2010-11 WE REMIT THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR RECONSIDERATION IN THE LIGHT OF DOCUMENTS FURNISHED BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM. THE ASSESSING OFFICER SHALL DECIDE THIS ISSUE AFRESH, IN ACCORDANCE WITH LAW. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY A LLOWED IN THE AFORESAID TERMS. ORDER PRONOUNCED ON WEDNESDAY, THE 27 TH DAY OF JULY, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 27 TH JULY, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-I, PUNE 4. ' / THE CIT-I, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE