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January 2010

Clarification regarding applicability of Section 194J to Third Party Administrators — Circular No. 8/2009, dated 24-11-2009.

By Pinky Shah, Sonalee Godbole, Gaurang Gandhi, Nimesh Dedhia, Vijay Kewalramani
Chartered Accountants
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  1. Clarification regarding applicability of Section 194J to Third Party Administrators — Circular No. 8/2009, dated 24-11-2009.

It has been clarified in this Circular that payments made by TPAs to the hospitals on behalf of the insurance companies are liable to deduct tax at source under Section 194J of the Act. However, in case, in the past defaults have occurred in this matter, the Board has clarified the following :

  •  No proceedings u/s.201 be initiated after expiry of six years from end of financial year of default

  •  No demand u/s.201(1) be enforced if TPAs are able to satisfy the jurisdictional TDS officer that the hospitals have duly paid the taxes along with a certificate to this effect from the auditors of hospitals.

However, the liability of interest u/s.201(1A) of the Act till payment of taxes by hospitals as well as penalty implications would apply to the TPAs.

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