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Income Tax Appellate Tribunal, MUMBAI BENCHES, ‘G’ MUMBAI
Before: Shri Joginder Singh, & Shri Manoj Kumar Aggarwal
आदेश / O R D E R
Per Joginder Singh(Judicial Member) The Revenue is aggrieved by the impugned order dated 28/01/2015 of the Ld. First Appellate Authority, Mumbai, 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 (hereinafter the Act) in respect of payments to hospitals and clinics on the ground that these amounts were not debited to the profit and loss account of the assessee.
During hearing, at the outset, Shri Hiten Vasant, ld. counsel for the assessee, contended that the impugned issue is covered in favour of the assessee by the decision of the Tribunal for Assessment Year 2008-09 and 2009-10 (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 for the assessee.
2.1. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the order of the Tribunal dated 10/12/2014 for ready reference and analysis:-
M/s Dedicated Healthcare Service (TPA) India Pvt. Ltd.
“These two appeals by the revenue are directed against 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:-
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 of 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 matter of fact the Assessing Officer 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 decision of the Assessing Officer was not challenged 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 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 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 M/s Dedicated Healthcare Service (TPA) India Pvt. Ltd.
Insurance 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 assessment proceedings, the Assessing Officer made the disallowance of Rs. 11,89,18,600/- u/s 40(a)(ia) of the Act., holding that the assessee has failed to deduct tax at source u/s 194J from the payment made by the assessee to hospitals towards payment of claims to insurance policy holders of insurance companies as they are facilitated under the TPA agreement.
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.
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 submitted that this issue is covered in favour of the assessee by the decisions of this Tribunal in the case of ACIT Vs. Health India TPA Services P. Ltd. dated 21.2.2014 in 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 holding that the payment made by the assessee is only to M/s Dedicated Healthcare Service (TPA) India Pvt. Ltd.
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. 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 well as relevant material on record. As far as the applicability of section 194J is concerned 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 deposited 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 paid by it to the hospitals in respect of cash less treatments. Therefore in view of the decision 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 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 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 provided 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 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 facts placed on record, the assessee is only facilitating the payments by insurer to the insured for availing the medical facilities. Assessee has not rendered any profession services to the insurer or insured and only collecting 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 of expenditure by the assessee, disallowance under section 40A(i)(a) as was done by the Assessing Officer does not arise. It may be different issue that the amounts paid may be covered by provisions of section 194J as was held by the Hon'ble Karnataka High Court
M/s Dedicated Healthcare Service (TPA) India Pvt. Ltd. in the case of – The MediAssesst 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 section 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 accepted the order of CIT(A) in the earlier year. For these reasons, we uphold the order of the CIT(A).”
A similar view was taken by the Tribunal in the subsequent assessment year in the case of Health India TPA Services P. Ltd. for the assessment year 2009-10 in 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 well as in the case of Sumilon Industries 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 claimed against receipt in the subsequent year.” 5. Following the earlier orders of this Tribunal, we 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 dismissed.” 2.2. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we find that on identical 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 ACIT vs Health India TPA services Pvt. Ltd. (ITA No.6475/Mum/2012) order dated 21/02/2014 and another decision in Paramount Health Services (TPA) Pvt. Ltd. vs
M/s Dedicated Healthcare Service (TPA) India Pvt. Ltd.
Income Tax Officer (ITA No.2188/Mum/2013) order dated 25/07/2014 and thereafter considering the factual matrix decided the issue in favour of the assessee. No contrary decision/facts were brought to our notice, therefore, 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) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य /JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 30/01/2017 f{x~{tÜ? P.S/.�न.स. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant (Respective assessee) 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT, Mumbai. 4. आयकर आयु�त / CIT(A)- , Mumbai, 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file.