TMI Blog2015 (3) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... essee 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. Thus we hold that no disallowance can be made under section 40(a)(ia) in respect of the payment in question. - Decided in favour of assessee. - ITA No.2188/Mum/2013, ITA No.2616/Mum/2013 - - - Dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tlement of claims, Call centre etc. on behalf of the Insurance Companies and disbursement of the claim amount under the cashless hospitals. The amounts paid by the Appellant to the hospitals are in discharge of the obligation of the Insurance Company. The Appellants obligation is conditional upon the principal liability of the Insurance Company. Such disbursements made by the Appellant as a service provider to the insurance company cannot be regarded as its expenditure which can be the subject matter of disallowance under section 40(a)(ia) of the Act. 4) The CIT(Appeal) failed to appreciate that the hospitals are being run as business. They cannot be regarded as carrying on a medical profession. Therefore, there was no obligation on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. 2. Ground No.1-7 are regarding disallowance under section 40(a)(ia) for non deduction of tax at source. The assessee is carrying on business of Third Party Administrator (TPA) providing cash less hospitalization and claim processing of medical policy for insurance companies and others. During the assessment proceedings the AO noted that the assessee had paid ₹ 187,82,28,432/- to hospitals for settlement of claim of insurance for rendering medical services which is covered under section 194J of the Act. The AO was of the view that the assessee was bound to deduct tax at source on such payments whereas the assessee had not deducted tax at source on the payments made to the hospital. Accordingly the AO has disallowed an amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Organizers Pvt. Ltd. ITA No.1946/Ahd/2009 (AY :2005-06) dated 06/05/2011. 4. Sumilon Industries Ltd. vs. Income tax officer, Surat (ITAT)-ITA Nos.3296 3297/ahd/2008 dated 12/10/2010 and 5. Ahaar Consumer ITA No.2910/Del/2010 10 Taxmann.com 181. 3.1 The ld. AR has also relied upon the Circular No.9 of 2009 dated 24/11/2009 and submitted that the CBDT has explained that in case of TPA and insurance companies the Board has decided that no proceedings under section 201 may be initiated after the expiry of six years from the end of financial year in which such payments have been made without deducting tax at source by the TPA. It was further decided by the Board that tax demand arising out of section 201(1) may not be enforced if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pitals 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 addition 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 ACI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA No. 6475/Mum/2012 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. 7. Though the assessee is under the obligation to deduct tax at source under section 194J however, the consequential liability is only under section 201 and 201(1A) and the disallowance under section 40(a)(ia) cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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