Applicability of TDS in case of Third Party Administrator (TPA) providing health insurance claim services

A perusal of the terms of payment would clearly indicate that it is the duty and the obligation of the TPA to pay the hospitals. Indeed the insurer in this regard will not have any role to play, in as much as, it is only to replenish the amount in the float account once the amount deposited therein is exhausted. Ultimately the agreement entered into inter se between the hospital and the TPA for payment of money holds the field. In the circumstance, it cannot be said that the TPA who is the authority or the person to pay the amount to the hospital is not required to deduce the tax at source and section 194J is not attracted cannot be accepted.

 A feeble attempt was made by Mr. Sarangan, learned senior counsel with reference to the definition of profession under section 2(36) and business under section 2(3) and profits and gains, to buttress his contention that it is only the profession and business which are required to deduct the tax at source under section 194J, He would also press into service the provisions of sections 121 of the Act which would relate to direct payment and section 28 which would relate to profits and gains from the business and profession. I am of the view those provisions do not advance the case of the petitioner, in as much as, they are required to be looked into with regard to the terms of the agreement whether section 194J and sections 201(1) and 201(1A) of the Act are attracted.

A perusal of the impugned order does not indicate that it has not addressed itself to the contentions urged. Having re-examined the matter, I am of the view that the impugned order cannot be faulted and the petitioner is obliged to deduct the tax at source under section 194J of the Act, in as much as, moneys are paid by it to the hospitals in respect of cashless treatment.

JUDGMENT

The petitioner is in all these writ petitions is questioning the order passed by the first respondent under section 201(1) and 201 (1A) of the Income Tax Act, 1961 (for short the Act”), for the respective assessment years. The petitioner is also questioning the show cause notice issued on 19.1.2009, pursuant to which Annexure-H has been passed.

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