2014 (2) TMI 1153 - AT - Income Tax

Disallowance u/s 40 - whether the learned Commissioner of Income-tax (Appeals) was justified in deleting the disallowance made under section 40(a)(ia) of the Act for non- deduction of tax at source under section 194J of the Act on the hospital charges paid by it, by disregarding Circular No. 8 of 2009 dated November 24, 2009 issued by the Central Board of Direct Taxes - Held that - As per assessee's own previous case assessee is only facilitating the payments by insurer to the insured for availing of the medical facilities. The assessee has not rendered any professional services to the insurer or insured and only collecting the amount from the insurer and passing it on to various hospitals who were providing medical services to the insured. Since, there is no claim of expenditure by the assessee, disallowance under section 40(a)(ia) as was done by the Assessing Officer does not arise. It may be different issue that the amounts paid may be covered by the provisions of section 194J as was held by the hon'ble Karnataka High Court in the case of Medi Assist India TPA P. Ltd. v. Deputy CIT Bangalore (2009 (8) TMI 85 - HIGH COURT OF KARNATAKA), relied upon by the Assessing Officer. In that case, the provisions of section 201 was applicable but certainly disallowance under section 40(a)(ia) does not arise as the assessee is not claiming any such expenditure in its profit and loss account. Moreover, the Revenue accepted the order of the Commissioner of Income-tax (Appeals) in the earlier year - No reason to interfere with the order of the learned Commissioner of Income- tax (Appeals) - Decided against Revenue.

Summary

Issues Involved:
- Disallowance under section 40(a)(ia) for non-deduction of tax at source under section 194J on hospital charges paid by the appellant.

Analysis:
The appeal before the Appellate Tribunal ITAT Mumbai concerned the deletion of disallowance made under section 40(a)(ia) of the Income Tax Act for non-deduction of tax at source under section 194J on hospital charges paid by the appellant. The appellant, a third party administrator (TPA), facilitated payments by insurers to insured individuals for medical services without claiming any expenditure in its profit and loss account. The Assessing Officer disallowed the payments, citing section 194J. However, the Commissioner of Income-tax (Appeals) deleted the disallowance, following a precedent set in the appellant's own case for the previous assessment year. The Tribunal upheld this decision, stating that the appellant merely acted as a conduit for payments and did not provide professional services, thus disallowance under section 40(a)(ia) did not apply. The Tribunal also noted that the Revenue had accepted the Commissioner's decision in the earlier year. Consequently, the Tribunal dismissed the Revenue's appeal based on the precedent set in the appellant's case for the assessment year 2008-09.

This case hinged on the interpretation of whether the appellant's actions fell under the purview of section 194J for tax deduction at source on hospital charges. The Tribunal emphasized that the appellant's role as a TPA did not involve claiming any expenditure, leading to the conclusion that disallowance under section 40(a)(ia) was not applicable. The Tribunal's decision was influenced by a previous ruling in the appellant's favor for the assessment year 2007-08 and the acceptance of the Commissioner's decision by the Revenue in the past. By following the precedent set in the appellant's own case and considering the absence of claimed expenditure, the Tribunal affirmed the Commissioner's decision to delete the disallowance. The Tribunal's adherence to the earlier ruling and the absence of expenditure claims by the appellant were pivotal in dismissing the Revenue's appeal and upholding the decision in favor of the appellant.