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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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