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TMI Blog2009 (8) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice through Network Hospitals and settlement or reimbursement of claims in accordance with the terms of the Health Insurance Policies. The petitioner also provides for 24x7 Call Centre Services to the Health Card holders on various aspects of Health Insurance Claims Pursuant to regulation 2 (h) of the T.P.A. Regulations, an agreement is entered into between TPA and insurance company registered under section 3 of the Act, prescribing the terms and conditions of health services, which may be rendered to and received by each of the parties thereto. It is the specific contention of the petitioners that TPA agreement would cover 'health insurance business' or health cover' as defined in regulation 2(f) of the, Registration of Indian Insurance Companies, Regulations, 2000 (for short "IRDA Regulation"). But, however, it does not include business of an insurance company or the soliciting, directly or through an insurance intermediary including an insurance agent. Suffice it to say that a number of individuals or groups of individuals take medi-claim policies by paying annual premia and avail medical insurance benefits provided by certain Insurance Companies. Apparently there is a contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding to the petitioners an individual will not come within the ambit of section 194J of the Act, In as much as, the payments are made in fulfillment of the contractual obligations between the insurance company and the policy holder and not towards rendering any professional services. Hence, according to the petitioners, sections 194J are not at all attracted to these payments. 3. The first respondent conducted the survey on 2.1.2009 under section 133A of the Act of the business premises of the petitioner and collected certain information including the details and copies of returns of the income filed by the petitioner for the years ending 31.3.2006, 31.3.2007 and 31.3.2008. The petitioner also furnished details of the TDS for the assessment years 2006-07, 2007-08, and 2008-09. The petitioner was called upon by the first respondent to furnish additional details in this regard. The petitioner was later on served with a show cause notice dated 19.1.2009 proposing to pass orders under sections 201(1) and 201(1A) of the Act. According to the petitioners, the said show cause not was issued by the respondent before collecting the relevant information and before ascertaining the facts fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was a controversy that any person who has failed to comply with the provisions of the Act in not deducting the TDS at source was not liable to be treated as default assessee. But however the amendment was introduced clarifying the position that if a person including the principal officer of a company does not comply with the provisions of the Act by not deducting the TDS, will be treated as assessee in default. Hence he submits that section 194J of the Act is applicable to the case on hand. 7. To appreciate the controversy, it is necessary to look into certain provisions of the Act. Section 194J of the Act would relate to fees for professional or technical services. Sub-section (1) of Section 194J would deal with individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of fees for professional services, or fees for technical services, shall at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by other mode, whichever is earlier, deduct an amount equal to five per cent of such sum as income tax on income comprised therein. The said provision i.e., s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and without affording an opportunity, the matter requires remittance. If it is found that sufficient opportunity was given, the question of remitting the matter would not arise. In this regard one will have to look into the impugned order passed by the authority. Indeed it is not in dispute that a show cause notice was issued and a reply is filed, The authority has specifically dealt with the issuance of the show cause notice to the assessee and a reply was also sought which was given by the petitioner. The assessee replied to the show cause notice and the same is extracted in the impugned order. Thereafter the authority has dealt with the applicability of section 194J of the Act and also whether the provisions of sections 201(1) and 201(1A) of the Act are attracted. 10. It is also required to be looked into whether there is any lack of application by the authorities, in as much as, the reference to some cases is made in the impugned order which does not relate to the petitioner's case. 11. In so far as those contentions are concerned, the impugned order discloses that the agreement with the insurance company which is referred to at para 9 no doubt gives an impression that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e terms of the TPA agreement but as to whether the petitioners who are third party administrator are required to deduct tax at source. Undisputedly the insurance company has entered into an agreement with the petitioners herein for the purpose of payment or reimbursing the amount which is spent by the policy holder. Indeed it is to be noticed that the insurance company issued cashless medi-claim policies and they are serviced through the TPAs. It is required to be looked into as to how this TPA operates. Indeed any policy holder who is desirous of availing the benefit of medi-claim policy is required to enter into a contract with the insurance company. Under the said contract the policy holder is insured and is assured of a free treatment up to a limit not exceeding the sum assured. Indeed the insurance company enters into an agreement with the TPAs to service their policies. The working of this arrangement is whenever a person is insured the insurer would send the copy of the policy to a particular TPA, the TPA in turn issues certain identity card to the insured, the policy holder thereafter is required to approach the said TPA for the service. The TPAs have a network of hospitals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s regard. This would be in the nature of TPA taking over a part of the work of the insurance company. The TPA would be working in the nature of the insurance company except the fact that they do not issue policy. Their decision as to the payment of bill and sending the insured to the accredited hospitals is final. Indeed it is to be noticed that after taking the policy from the Insurance company, the insurance company is not in touch with the insured at all, in as much as, they are not required to process the claim for approval. The decision of the TPA in this regard is final. 12. Another factor which would be a pointer to the fact that the TPA is required to deduct tax at source is to be found in the nature of operation of funds. A claim float account is opened in the name of the TPA The insurer would go on depositing certain sums of money in the said float account from which the TPA would draw the amount and pay the amount to the hospitals. As and when the amount in the float account is diminished or reduced, the insurer would replenish the account. The TPA is required to open float fund account with a designated bank specified by the insurer. The amount is transferred from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s admission and treatment which would indicate that in the event any TPA member is required to be admitted and treated by the hospital, as may be planned in advance, the hospital shall promptly send to the medi assist (petitioner) by fax or e-mail or any other communication as may be designated by the petitioner from time to time. The said clause would also indicate that the hospital shall take all necessary steps to ensure that the request of cashless beneficiary is duly filled and completed by the hospital as the TPA member only sends the request for cashless hospitalisation at the designated place. There are hosts of other clauses which are required to be performed by the hospital including emergency hospitalisation and processing of request for cashless hospitalisation. Processing of request form for cashless hospitalisation is to be found at clause 4 of the agreement with the hospital which would indicate that it is at the sole discretion of the casheless hospitalization with the petitioner. What is more relevant for our purpose to determine as to whether the TPA is required to deduct tax at source is to be found at clause 3.5. Indeed it would read that on receipt of the autho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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