ACIT RG 8(3), MUMBAI vs. UNITED HEALTHCARE INIDA P.LTD, MUMBAI

The above captioned two appeals by the Revenue relating to A.Y. 2009- 10 & 2010-11 have been preferred against the separate orders of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] dated 23.12.2012 & 10.02.2014 respectively. Since the appeals are relating to the same assessee, hence the same were heard together and are being disposed of with this common order. First we take up for A.Y. 2009-10.

The assessee is a third party administrator whose function is that when the insured persons directly avail services of Hospital which is generally known as "cashless services", the TPA takes guarantee of making payment to such Hospitals. The assessee herein collects the amount of medical expenses billed by the hospitals on insured persons, from the Insurance companies and remit the same to the hospitals. Thus, the case of the assessee is that it only provides services of paper work and guarantee and finally makes payments to hospitals in which the insured persons has availed the medical facilities/services. The assessee is doing all these works on behalf of Insurance companies. The assessee neither credits the receipts nor debits the payments to the P&L Account. The AO held that payment made to the Hospitals by the assessee is covered u/s 1943 and accordingly took the view that the assessee should have TDS from the payments to made to the hospitals. Since the assessee did not deduct tax at source, the AO disallowed such payments by invoking the provisions of sec. 40(a)(ia) of the Act.

In appeal, the Ld. CIT(A) deleted the disallowance so made by the AO observing that since the assessee did not claim the amount paid to hospitals as an expenditure at all, therefore no disallowance of expenditure under section 40(a)(ia) is directed.

At the outset, the Ld. A.R. of the assessee has stated that the issue is squarely covered in favour of the assessee by the decision of the co-ordinate bench of the Tribunal. He has relied upon the decision of the Tribunal in the case of “ACIT vs. Health India TPA Services Pvt. Ltd.” in ITA

We find that the issue came for consideration before the co-ordinate bench of the Tribunal in the case of “Paramount Health Services” (supra) wherein the Tribunal, after considering the relevant submissions and relying upon other decisions of the co-ordinate bench of the Tribunal, has finally concluded as under: “7. Though the assessee is under the obligation to deduct tax at source under section 194Jhowever, the consequential liability is only under section 201 and 201(1A) and the disallowance under section 40(a)(ia) cannot be automatic when the assessee has not claimed this payment as expenditure against the income. The assessee has shown the income, only the service charges receivable from insurance companies for rendering services as 3rd party administrator and not having any margin or profit element in the payment received from the insurers for the purpose of remitting to the hospitals to settle medical claim of the insured. Therefore, when the said payment has not been claimed as expenditure incurred for earning the income by the assessee then the provisions of section 40(a)(ia) is not attracted for non deduction of tax at source in respect of the said payment. Following the decisions of the Tribunal as relied upon by the assessee and discussion above we hold that no disallowance can be made under section 40(a)(ia)in respect of the payment in question. Accordingly the ground raised

Similar view has been taken by the Tribunal in the case of “Health India TPA Services Pvt. Ltd.” (supra). Respectfully following the above decision of the co-ordinate bench of the Tribunal, this issue is decided in favour of the assessee and it is therefore held that no disallowance under section 40(a)(ia) is warranted in this case, when the assessee has not claimed any expenditure at all.

Now coming to the appeal of the Revenue for A.Y. 2010-11 i.e. ITA No.2940/M/2014.

The monetary limits specified in para 3 above shall not apply to writ matters and direct tax matters other than Income tax. Filing of appeals in other Direct tax matters shall continue to be governed by relevant provisions of statute & rules. Further, filing of appeal in cases of Income Tax, where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under section 12A of the IT Act, 1961, shall not be governed by the limits specified in para 3 above and decision to file appeal in such cases may be taken on merits of a particular case.

This instruction will apply retrospectively to pending appeals and appeals to be filed henceforth in High Courts/ Tribunals. Pending appeals below the specified tax limits in para 3 above may be withdrawal not pressed. Appeals before the Supreme Court will be governed by the instructions on this subject, operative at the time when such appeal was filed.” (underlined for emphasis by us)

The tax effect in dispute in the captioned appeal is stated to be below the monetary limit of Rs.10.00 lacs as specified in the CBDT Circular dated 10/12/2015 (supra). The Ld. DR has not brought out any material to suggest that the captioned appeal is protected by any of the circumstances prescribed in Para-8 of the Circular dated 10/12/2015 (supra). He therefore has stated that in view of the above circular of the CBDT, the captioned appeal be treated as withdrawn/not pressed. Hence, without going into the merit of the issues raised in the present appeal, this appeal is treated as dismissed as withdrawn/not pressed as its filing being in contravention of the CBDT Circular dated 10/12/2015(supra) read with section 268A of the Income Tax Act.

In the result, both the appeals of the Revenue are hereby dismissed. Order pronounced in the open court on 08.01.2016.