TMI Blog2009 (8) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 194J is not attracted cannot be accepted. - 11376 OF 2009 - - - Dated:- 13-8-2009 - AJIT J GUNJAL, J. By Sri Sarangan, Senior counsel for Smt. Vani H. Adv. for the petitioner. By Sri M.V. Seshachala, Adv. for the respondent. ORDER The petitioner is in all these writ petitions is questioning the order passed by the first respondent under section 201(1) and 201 (1A) of the Income Tax Act, 1961 (for short 'the Act for the respective the assessment years. The petitioner is also questioning the show cause notice issued on 19.1.2009, pursuant to which Annexure-H has been passed. 2. The facts in a nut-shell are as follows : The petitioner is a Third Party Administrator licensed by the Insurance Regulatory and Development Authority under the Third Party Administrator Health Services Regulations, 2001 (for short TPA Regulations"). The petitioner is engaged in the business of providing health Insurance claim services under various Health Insurance Policies issued by several Insurers. The services include providing cashless service through Network Hospitals and settlement or reimbursement of claims in accordance with the terms of the Health Insurance Policies. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said claim float account diminishes, it has to be replenished by the insurance company. The TPA in order to provide better services to the policy holders of the insurance company enters into an memorandum of understanding (MoU) with various hospitals and nursing homes. Under the MoU, the TPA gives an undertaking to the hospitals to reimburse/settle the bills of the policy holders. The Memorandum of Understanding inter alia allows the policy holders to be treated in the hospital without the policy holder making any payment i.e, cashless facility. The payment of reimbursement/settlement of insurance claims is done in two ways - (1) when the policy holder gets treatment for a medical condition and pays by himself directly to the hospital and (2) when a policy holder gets himself treated at the Network hospital which has an agreement with the TPA to treat the patients who are their members on cashless basis. The TPA processes the medical documents for reimbursement of the medical expenses incurred by the policy holder and the amount is paid. According to the petitioners an individual will not come within the ambit of section 194J of the Act, In as much as, the payments are made in ful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given set of circumstances, section 194J of the Act is not at all applicable. He submits that the explanation to section 194J of the Act deals with the contents of the agreement. Another primary contention of Mr. Saranmgan learned senior counsel is that sufficient opportunity was not given to the petitioner to put forth their case. It is specifically contended that it is in violation of principle, of natural justice. It is also submitted that no opportunity was given to file objections to the equitable claim with the reduction of income. On these grounds he submits that the impugned order holding that section 194J of the Act is applicable to the petitioner is unsustainable. 6. Mr. Aravind, appearing for the respondent Revenue submits that the petitioner is carrying on the business of profit in respect of Health Insurance claim services. He further submits that under section 133A of the Act a survey was conducted and the information received was not in compliance with the provisions of the Income Tax Act. He submits that prior to amendment to section 201, there was a controversy that any person who has failed to comply with the provisions of the Act in not deducting the TDS at s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Sub-section (1A) was introduced on 1.4.1966 which would indicate that notwithstanding what is stated in sub-section (1), if any person, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under the Act, he shall be liable to pay simple interest at 12% per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. These are the broad provisions which would relate to if the tax is not deducted at source. One will have to consider whether the petitioners would come within the ambit of section 194J as well as section 201(1) and 201(1A) of the Act. 9. The facts relating to TPA are also referred to along with the relevant provisions. Before considering the case on merits, whether the petitioner was obliged to deduct tax at source, it is necessary to see whether the proceedings disclose that the impugned order at Annexure-H is passed in violation of the principle of natural justice and without affording an opportunity, the matter requires remittance. If it is found that sufficient opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the fact that they would require some more time to collect the necessary information. Another letter dated 5.2.2009 at Annexure-F is also to the effect that they were in the process of collecting the balance of data as required by them. The last of the communication dated 12.3.2009 which would once again seeking some more time to do the needful at the earliest and once they are in receipt of the copies they will be in a position to give a comprehensive reply to the show cause notice. That was received by the authority on the same day; Nevertheless, the authority has proceeded to pass an order dated 23.7.2009. It is no doubt true that a request was made on 12.3.2009 in seeking some more time to collect the data and file a comprehensive reply. Indeed it is not a case where it can be said that the petitioners are denied of an opportunity, in as much as, on several occasions time was granted and the petitioners have filed a reply. What was lacking is only the documents which were not available which are the TPA agreement. Indeed the question is not one of Interpretation of the terms of the TPA agreement but as to whether the petitioners who are third party administrator are required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndering the professional service. The agreement which is made available along with the papers would clearly disclose some of the conditions laid down in the agreement which are as under: (1) The hospital is required to provide necessary medical treatment; (2) The hospital will not provide cashless benefit to any beneficiary without authority letter; (3) After beneficiary is discharged from the hospital the provider will submit original final bill amongst other documents; (4) All payments in respect of the complete/eligible bills shall be made by the TPA directly to the provider. Thus a perusal of the agreement itself discloses that the TPA is responsible for making the payment to the hospital for rendering the medical service to the policy holders. The TPAs enter into an agreement with the hospitals for the aforesaid purpose. It is not necessary as to when the services are required to be provided by the TPA. Services can also be said to have been provided if they are provided through same one else on the request of the TPA. Indeed the TPA is given unbridled power in this regard. This would be in the nature of TPA taking over a part of the work of the insurance company. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the agreement. What is service fees is to be found in clause 3, which would indicate that the insurer shall pay to the TPA the fees as detailed in the schedule. Clause 3.2 of the agreement would relate to the applicable taxes and other levies of the Govt. or any Governmental authority in relation to the fees payable, shall be borne by the insurer provided the TPA is regular payee of service tax and they are having the service tax account with the concerned department of the Government which should be mentioned in the service charge bill raised by the TPA. Indeed, a perusal of this clause does not give any indication that the TPA is not obliged to deduct the tax at source, which would be with reference to only to the service tax. 14. The petitioners have also made available the hospitals which are the panel of the TPA. One such agreement with empaneled hospital is made available along with the petition papers. The agreement entered into between the TPA as well as the hospital has certain obligations to the reperform on either part. It would relate to procedure for approval cashless admission and treatment which would indicate that in the event any TPA member is required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount deposited therein is exhausted. Ultimately the agreement entered into inter se between the hospital and the TPA for payment of money holds the field. In the circumstance, it cannot be said that the TPA who is the authority or the person to pay the amount to the hospital is not required to deduce the tax at source and section 194J is not attracted cannot be accepted. 16. A feeble attempt was made by Mr. Sarangan, learned senior counsel with reference to the definition of profession under section 2(36) and business under section 2(3) and profits and gains, to buttress his contention that it is only the profession and business which are required to deduct the tax at source under section 194J. He would also press into service the provisions of sections 121 of the Act which would relate to direct payment and section 28 which would relate to profits and gains from the business and profession. I am of the view those provisions do not advance the case of the petitioner, in as much as, they are required to be looked into with regard to the terms of the agreement whether section 194J and sections 201(1) and 201(1A) of the Act are attracted. 17. A perusal of the impugned or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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