2014 (12) TMI 1328 - AT - Income Tax

TDS u/s 194J - amount received from the insurance companies and deposited in Float A/c by the assessee being Third Party Administrator (TPA) - addition u/s 40(a)(ia) - Held that - This issue is covered in favour of the assessee by the decisions of this Tribunal in the case of ACIT Vs. Health India TPA Services P. Ltd. 2014 (2) TMI 1153 - ITAT MUMBAI as well as the decision in the case of Paramount Health Services (TPA) Pvt. Ltd. Vs. ITO 2015 (3) TMI 185 - ITAT MUMBAI . We find that an identical issue has been considered by this Tribunal in those cases by holding that the payment made by the assessee is only to replenish the amount in floating account and therefore the disallowance u/s 40(a)(ia) cannot be made when the assessee has not claimed any such expenditure in P&L Account. - Decided in favour of assessee.

Summary

Issues:
- Disallowance under section 40(a)(ia) of the Income Tax Act for non-deduction of tax at source by the assessee.
- Justification of CIT(A) in deleting the addition made by the Assessing Officer.

Analysis:
1. The appeals by the revenue were against the orders of CIT(A) for the A.Y. 2008-09, raising common grounds related to the addition made under section 40(a)(ia) of the Act amounting to &8377; 11,89,18,600. The primary issue was whether the disallowance made by the Assessing Officer was justified.

2. The Assessing Officer disallowed the amount as the assessee failed to deduct tax at source under section 194J from payments made to hospitals for insurance policy holders. The CIT(A) later deleted the addition, stating that the payment was not for professional services but acted as a pass-through between insurer and insured, thus not requiring TDS deduction.

3. The Authorized Representative of the assessee cited previous Tribunal decisions in similar cases to support the claim that the disallowance was not applicable as the payment was to replenish the floating account, and the assessee had not claimed such expenditure in the Profit & Loss Account. The Tribunal upheld this argument based on previous rulings.

4. The Tribunal referred to a decision by the Hon'ble High Court of Karnataka regarding the obligation of TPAs to deduct tax at source under section 194J. It was established that the disallowance under section 40(a)(ia) could not be made if the assessee did not claim the expenditure in the Profit & Loss Account, as seen in various Tribunal cases.

5. Following the precedents set by previous Tribunal decisions, the Tribunal found no error in the CIT(A)'s order and dismissed the revenue's appeals. The judgment was pronounced on December 10, 2014.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive understanding of the reasoning behind the decision made by the Appellate Tribunal ITAT MUMBAI.