January 2019

Sections 40(a)(ia) and 194J Business expenditure Disallowance u/s. 40(a)(ia) Payments liable to TDS Third party administrator for insurance companies Payments merely routed through assessee Disallowance u/s. 40(a)(ia) not warranted

K. B. Bhujle
Advocate

32.  CIT vs. Dedicated Healthcare Services (TPA) India Pvt. Ltd.; 408 ITR 36 (Bom): Date of order: 17th September, 2018 A. Y. 2008-09

 

Sections 40(a)(ia) and 194J Business expenditure Disallowance u/s. 40(a)(ia) Payments liable to TDS Third party administrator for insurance companies Payments merely routed through assessee Disallowance u/s. 40(a)(ia) not warranted


The assessee carried on business as a third party administrator for insurance companies. According to the Department, the insurance companies issued policies that were serviced by the third party administrator who acted as a facilitator and charged fees, provided services, such as hospitalisation, cashless access, billing and call centre services, and all the claims payable by the insurance companies for these services were routed through the third party administrator.

 

It was further stated, that the receipts and disbursements were routed the bank account of the assessee for which the assessee passed certain book entries, that on receipt of the amount, the bank account was debited and the account of the insurance company was credited and that on payment of claims to the hospital/insured, the account of the insurance company was debited and the bank account was credited.

 

For the A. Y. 2008-09 it was found that the assessee had made payments to various hospitals during the year without deducting the tax at source u/s. 194J of the Income-tax Act, 1961 (hereinafter for the sake of brevity referred to as the "Act") which called for disallowance u/s. 40(a)(ia) of the Act. Relying on the CBDT circular No. 8 of 2009, dated 24/11/2009, the Assessing Officer held that the third party administrator was required to deduct tax at source u/s. 194J from all such payments made to hospitals, etc.

 

The Commissioner (Appeals) allowed the appeal filed by the assessee. The Tribunal upheld the decision of the Commissioner (Appeals).

--->

Past Issues

Flip-Book
HTML View
Current Issue