DCIT 8(3), MUMBAI vs. UNITED HEALTH CARE PAREKH TPA P. LTD, MUMBAI

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ITA 268/MUM/2014Status: DisposedITAT Mumbai31 March 2016AY 2009-103 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that Section 40(a)(ia) is not applicable when payments are not debited to the assessee's profit and loss account. The assessee merely passed on funds from the insurer to the hospital without claiming any expenditure.

What were the facts?

The assessee, a TPA, facilitated health insurance claim settlements by making payments to hospitals from funds provided by insurance companies. The Assessing Officer disallowed these payments under Section 40(a)(ia) for non-deduction of TDS.

What were the issues?

Whether disallowance under Section 40(a)(ia) is permissible for payments not debited to the assessee's profit and loss account, even if TDS was not deducted.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 194J,Section 201(1),Section 201(1A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “F”, BENCH MUMBAI

Before: SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM

Hearing: 08/02/2016Pronounced: 31/03/2016

O R D E R PER R.C.SHARMA (A.M.) : This is an appeal filed by the revenue against the order of CIT(A), Mumbai, dated 28-10-2013, for the assessment years 2009-2010, in matter of order passed u/s.143(3) of the I.T.Act.

2.

In this appeal, the revenue is aggrieved for deleting the addition made by the AO by disallowing payment u/s.40(a)(ia) of the I.T.Act.

3.

At the outset, ld. AR placed on record order of the Tribunal in assessee’s own case for the assessment year 2007-08, dared 9-11-2015, wherein exactly similar issue was decided in favour of the assessee after having the following observation :-

4.

We have considered the rival submissions and perused the material available on record. Facts in brief are that the assessee declared Nil income after claiming set off of carried forward unabsorbed depreciation allowance, in its return filed on 13.10.2007, which was assessed u/s 143(3) of the Act on 29.12.2009 on a taxable income of Rs. 7,41,87,640/- .It is noted that the Ld. Assessing Officer added the income on the basis of the decision from Hen'ble Karnataka High Court in the case of Medi Assist TPA vs. DCIT and also CBDT Circular No. 8/2009 dated 24.11.2009 holding that TPAs are liable to deduct tax at source u/s 194J of the Act in respect of payment made to hospitals. In the present appeal) the assessee is engaged in the business of facilitating health insurance claim settlement and the assessee acts on behalf of insurance companies and makes payments to hospitals in respect of services availed by individual, holding insurance policies. Before doing so, the assessee entered into agreements with insurance companies and the agreements relate to administration of Group health insurance policies provided by the insurance companies to the employing entity (employer), which in- turn provides the policy to the insured persons. When an insured person approaches the hospital, the bills are forwarded by the hospitals to the assessee under the cashless hospitalization scheme. The assessee in-turn forwards the bills to the insurance company. Insurance companies pays the bills to the hospitals directly through a check of remits money to a float account through which payments are made by the assessee. In no situation, the assessee' makes payments out of its own accounts. The services provided 'by the assessee include facilitation of cashless hospitalization of insured persons, call centre services, claim processing and payment services, customer relations and contract management services. Now undisputed facts emerges from the record is that the assessee discharges the liability of the insurance company out of the float money placed by the insurance company with the assessee and further the assessee is prohibited to use the float money for any purposes other than making payments in discharging the liability of insurance company towards the insured persons. We note that the case relied upon by the Ld. DR from Hon 'ble Karnataka High Court, in that case no discussion has been made with respect to applicability of section 40 (a)(ia) in a case wherein such amount are not routed through profit & loss account of the assessee and merely talks about applicability of section 194J on TPA. There is no discussion with respect to accounting method adopted by the TPAs wherein the amount has not been routed through profit & loss account. Section 40(a}(la) can be invoked if there is a debit of said payment as expenditure in profit & loss account, thus in our view non deduction of TDS on payments made from professional services even if not debited in the profit & loss account would make assessee liable for levy of interest ix] s 201 (1) and 201 (lA) of the Act, however no action u/s 40(a)(ia) can be taken. Our view finds supports from the decision of the Mumbai Bench of the Tribunal in the case of ACIT Vs. Health India TPA Services Pvt. Ltd. ( 2014) 49 taxmann.corn 541 (Mumbai.) order

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