TMI Blog2013 (9) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... of Arogya Sri Health Care Trust v. ITO [2012 (4) TMI 400 - ITAT HYDERABAD ], wherein it has been held that it is only the element of fee for professional services comprise in each of the payment made by assessee trust to the hospitals which falls which falls within the scope of s. 194J of the Act. Elements of payment towards bed charges, medicines, follow up services, out-patient services, transportation charges, implants, expenditure incurred for conducting camps at village levels, do not strictly fall within the scope of fee for professional services which alone can be considered as falling within the scope of the provisions of s. 194J of the Act. Direct the assessing officer to bifurcate the payments made by the assessee trust to the hospitals into various elements as noted above and confine the demand raised in terms of s. 201(1) of the Act, only to the payments which assume the nature of fee for professional services In the present case, the matter restored to the file of A.O. so that he can file the list of payments made by it to the hospitals duly bifurcated into various elements. Period upto which interest is chargeable u/s 201(1A) of the Income tax act in the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sustained efforts the Hospitals have not provided the relevant particulars to the assessee and, therefore, ought to have directed the Assessing Officer to summon the Hospitals to collect the relevant information and compute the interest along with under section 201(1A) correctly. 4. Briefly stated, the facts of the issues are as under: The assessee, a Private Limited Company, is engaged in the business of providing third party administration services (TPA) on health insurance issued by the Insurance Companies and is governed by the Insurance Regulatory and Development Authority (IRDA). There was an action u/s 133A of the Act in the office premises of the assessee on 19.8.2009 to verify the compliance of the TDS provisions. It was noticed by the AO (TDS) that the assessee was not deducting TDS on the payments made to the hospitals. Being queried, the assessee explained that it was not obliged to make TDS in respect of the payments made to the hospitals as such payments do not fall within the ambit of s. 194J of the Act. After rejecting the assessee s submission, the AO had treated the assessee, as an assessee-in-default u/s 201(1) of the Act and also levied interest u/s 201(1A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xempt from deducting taxes u/s. 194J. Hence TPAs being agents of the insured are also exempt under the second proviso; (iv) that under an insurance policy, the insurer undertakes to pay to the insured person the amount of such expenses as are reasonably and necessarily incurred thereof by or on behalf of such insured person and that TPAs were introduced to administer/ facilitate the claim management process by acting as an intermediary between the insurance company and the insured, such that instead of the insured having to incur the hospitalization expenses initially and claiming the reimbursement from the insurance company, the insurance company pays to the hospital on behalf of the insured, albeit, through the TPA. If the said payment was made by the insurance company or the TPA to the policyholder and not to the hospital/nursing home, then it is absolutely clear that no question of deduction of tax under section 194J of the said Act would at all arise; (v) that the cashless arrangement is on a par with, and is conceptually the same, as a credit card payment made by the policyholder to the hospital/nursing home under which the credit card company becomes liable to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 194J of the Act from the payments made to the hospitals? A similar issue was considered by the Hon ble Jurisdictional High Court in assessee s own case of Medi Assist India TPA (P) Ltd v. DCIT (TDS) reported in (2009) 184 Taxman 359 (Kar) and ruled that TPA was obliged to effect TDS u/s 194J of the Act from the payments made to Hospitals. However, the above ruling of the Single Judge was struck down by the Divisional Bench of the Hon ble Court in the same case vide its order dated 14.3.2012 without going into the merits of the case. 7.3.2. At this point of time, we would like to recall the ruling of the Hon ble Bombay High Court in the case of Dedicated Health Care Services TPA (India) Pvt. Ltd Others v. ACIT Others in Writ Petition No.404 of 2010 dated 3.5.2010 on a similar issue. After hearing the contentions of the rival parties and also analyzing the provisions of s. 194J of the Act in depth, the Hon ble Divisional Bench had ruled that: 12. Now undoubtedly a hospital by itself, being an artificial entity, or a corporate enterprise which conducts the hospital is not as medical professional. In Dr. Devendra M Surti v. State of Gujarat [AIR 1969 SC 63], the Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... takes place within the institutional framework of a hospital, services are rendered as part of an umbrella of services provided by the hospital which engages qualified medical professionals who practice the medical profession. These are services rendered in the course of the carrying on of the medical profession. Hence, it is not possible to accept the submission that TPAs, when they make payments to hospitals are not liable to deduct tax at source under the provisions of section 194-J. Section 197(1) of the Act provides that where in the case of any income of any person or sum payable to any person income-tax is required to be deducted at the tie of credit or, as the case may be, at the time of payment at the rates in force under the provisions inter alia of section 194J and the assessing officer is satisfied that the total income of the recipient justifies a deduction of income-tax at lower rates or no deduction of income-tax, the assessing officer shall on application made by the assessee in this behalf give to him such certificate as may be appropriate. Where a certificate to that effect is given, then under sub-section (2) the person responsible for paying the income-tax at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he considered view that the assessee was required to deduct tax at source under the provisions of s. 194J of the Act for the payments made to the hospitals. 7.3.5. In essence, the CIT (A) was justified in confirming the AO s stand to this extent in respect of the AYs under consideration. It is ordered accordingly. 8.1. In its alternative ground, it was contended on behalf of the assessee that where taxes were not deducted, such taxes become the liability of the deductee-hospitals and, as such, it cannot be recovered from the deductor by virtue of s. 191 of the Act. It was, further, submitted that the assessee had taken all possible steps which were at its disposal for discharging its obligation of establishing that the payments which it made to hospitals had already been suffered to tax. Even with its unrelenting and sustained efforts, it was submitted, have not brought any fruitful results as some of the hospitals have not obliged to part with the details as to whether the payments received from the assessee were suffered to tax in their hands. It was, therefore, pleaded that the AO be directed to obtain such information from the hospitals concerned and to verify the veracity of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the quantum of the demand raised by the assessing officer under s. 201 of the Act, we find some force in the contention of the assessee that it is only the element of fee for professional services comprise in each of the payment made by assessee trust to the hospitals which falls which falls within the scope of s. 194J of the Act. As canvassed by the learned counsel for the assessee, elements of payment towards bed charges, medicines, follow up services, out-patient services, transportation charges, implants, expenditure incurred for conducting camps at village levels, do not strictly fall within the scope of fee for professional services which alone can be considered as falling within the scope of the provisions of s. 194J of the Act. In this view of the matter, we set aside the order of the CIT (A) on this aspect, and direct the assessing officer to bifurcate the payments made by the assessee trust to the hospitals into various elements as noted above and confine the demand raised in terms of s. 201(1) of the Act, only to the payments which assume the nature of fee for professional services, as noted above 9.2.2. In conformity with above findings, the assessee is directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the authorities holding that the assessee is liable to pay interest from the date of default till the date of the order is erroneous. However, the authorities have to find out whether the creditor has filed the returns and paid the tax. If he has filed the returns and paid the tax, the liability of the assessee ceases from the day they have paid the tax. That exercise is possible only after verifying the records of both the assessee and the creditor of the assessee. To that extent the impugned order passed is set aside. Accordingly, the appeal is partly allowed and the matters are remitted back to the assessing authority to undertake the exercise and find out the liability of interest payable by the assessee. Ordered accordingly. No costs. Even otherwise the law is well settled that the payment of interest under the Act is compensatory in nature. The authorities shall re-do the exercise of calculating the interest and thereafter issue a fresh demand if they choose to recover the same. That would meet the ends of justice . 10.2.1. On a decisive perusal of the observations of the Hon ble Court (supra), it is observed that the AO has to find out whether the credito ..... X X X X Extracts X X X X X X X X Extracts X X X X
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