Case Law Details
Medicare TPA Services India Pvt. Ltd. Vs ACIT-TDS (ITAT Kolkata)
Interest u/s 201(1A) of the Act could be charged only upto the date of payment of taxes by the deductees and not upto the date of filing of return of income.
We find lot of force in this argument of the ld AR in as much as the interest u/s 201(1A) of the Act is only compensatory in nature and the Government should be compensated for the delayed remittance of TDS from the date of default by the deductor to the actual date of remittance of taxes by the deductees.
The ld AR further argued that since the ld AO had held that the assessee is not to be treated as an ‘assessee in default’ u/s 201(1) of the Act. Having held so, he ought not to have charged interest u/s 201(1A) of the Act. In this regard, we find that the provisions of section 201(1A) of the Act are independent of section 201(1) of the Act inasmuch as it starts with ‘Without Prejudice to the provision of sub-section(1), There is no choice available to the revenue and interest u/s 201(1A) of the Act is to be mandatorily charged for the delayed period of remittance and is automatic in nature. It is not in dispute before us that the tax is required to be deducted by assessee TPA on payments made to hospitals. Hence we are not inclined to agree with the argument of the ld AR in this regard. Hence we hold that the ld AO had rightly levied interest u/s 201(1A) of the Act in the instant case. With regard to the calculation of interest u/s 201(1A) of the Act, we have already directed the ld AO to re-compute the said interest upto the date of actual remittance of taxes by the deductees and not upto the date of filing of return of income by the deductees.
FULL TEXT OF THE ITAT ORDER
1. This appeal by the Assessee arises out of the order of the Learned Commissioner of Income Tax(Appeals)-24, Kolkata [in short the ld CIT(A)] in Appeal No. 1526/CIT(A)-24/Kol/2011-12 dated 21.01.2016 against the order passed by the ACIT, Circle-58 (TDS), Kolkata [ in short the ld AO] under section 201(1)/201(1A) of the Income Tax Act, 1961 (in short “the Act”) dated 31.03.2011 for the Assessment Year 2008-09.
2. The assessee had raised an additional ground of appeal before us along with the original grounds of appeal. But we find that the effective issue involved in all these grounds is as to whether the assessee could be charged with the levy of interest u/s 201(1A) of the Act, in the facts and circumstances of the case.
3. The brief facts of this case are that the assessee is a company functioning as Third Party Administrator (TPA in short) for which it had obtained license from Insurance Regulatory Development Authority (IRDA in short). As a licensed TPA, it renders services in connection with health insurance business or health cover to various customers. It makes payment to hospitals for the treatment of policy holders. The ld AO found that no TDS was made on such payments to hospitals. The ld AO observed in his order the working of a typical TPO as under:-
Any person desirous of availing the benefit of mediclaim policy approaches the insurance company. Under this policy, the insured is assured of free treatment up to a limit not exceeding the assured amount. With a view to provide faster treatment , speedy disposal of claims and timely payments to insured and reimbursement to hospitals, the insurance companies enter into agreement with TPA to serve these policies. Whenever a person is insured, the insurer sends the policy copy to that particular empanelled TPA. The TPA in turn enrolls the policy and issues identity card to the insured. The TPA also have a network of hospitals with which it has arrangements for cashless treatment, and which is informed to the insured. Whenever the policy holder is in need of medical treatment, he can approach any of the network hospital to avail cashless facility. The hospital sends request to the TPA and upon their approval will start the treatment. After the full treatment and discharge, the hospital sends the detailed bill along with investigation reports and discharge sheet to the TPA. Upon receipt of the documents, the TPA does a medical scrutiny, financial scrutiny and audit to finalise the eligible amount. After the claim is processed, the payment is released to the hospital. The mode of payment can be direct payment, that is, payment made insurer directly to hospital or through float fund account. In case of latter, the TPA gets reimbursed upon the amount of claim processed.
3.1. The assessee company has agreements with M/s New India Assurance , M/s United India Insurance, M/s National Insurance and M/s Oriental Insurance. After studying the issue, it was felt that apparently the assessee is taking on the role of insurance companies in settling the claims of policy holder. From the point of view of TDS, it can be said that the assessee is the person responsible for making payments to hospitals under cashless system for the medical services rendered by them to the policy holders. The ld AO observed that the service rendered by the TPAs could be compared with that of service rendered by Central Government Health Scheme (CGHS). Under this scheme , the central government employees pay monthly subscription to the Government. When need arises they take treatment from the hospitals and hospitals raise the bill to CGHS. The CGHS after verification, releases the payments to the hospitals after TDS. CGHS in turn gets funds from the Government of India. In the instant case, the insurance companies replaces Government, the assessee TPA replaces CGHS and the policy holder replaces employees.
3.2. The ld AO placed reliance on the decision of Hon’ble Karnataka High Court in the case of Medi Asisst India TPA (P) Ltd vs DCIT reported in 324 ITR 356 (Kar) wherein it was held that TPAs have to deduct tax at source u/s 194J of the Act while making payment to hospitals. The ld AO observed that in the instant case, the assessee had submitted evidences from deductees stating that the payments made by the assessee herein have been included in the income of the deductees and taxes paid thereon. The amounts covered for such evidences were about Rs 13 crores which cover more than 90% of the total amount. Accordingly, the ld AO held that the assessee cannot be treated as an ‘assessee in default’ u/s 201(1) of the Act. However, he proceeded to charge interest u/s 201(1A) of the Act for the period of delay in making payment of taxes by the deductees in the sum of Rs 21,16,420/- in the assessment framed u/s 201(1) / 201(1A) of the Act dated 31.3.2011 for the Asst Year 2008-09. The action of the ld AO was upheld by the ld CITA. Aggrieved, the assessee is in appeal before us.
4. We have heard the rival submissions. At the outset, we find that the assessee had raised an additional ground of appeal before us stating that show cause notice has not been issued by the ld AO u/s 201(1) and 201(1A) of the Act before charging interest u/s 201(1A) of the Act on the assessee. In this regard, we find that the ld AO in his assessment order had categorically recorded that the assessee has been given several show cause notices in the course of assessment proceedings stating as to why it should not be treated as an ‘assessee in default’ u/s 201(1) of the Act and consequential charging of interest u/s 201(1A) of the Act. In fact the assessee had even replied to the said show cause notices. The ld AO after examining the replies of the assessee and the evidences filed on record, concluded that the assessee cannot be treated as an ‘assessee in default’ u/s 201(1) of the Act, but however charged interest u/s 201(1A) of the Act for the delayed period of remittance of tax dues to the exchequer. Hence the additional ground of appeal raised by the assesee is devoid of any merit and is hereby dismissed.
4.1. We find that the ld AR argued that the decision relied upon by the ld AO of Hon’ble Karnataka High Court in the case of The Medi Assist India TPA (P) Ltd reported in 324 ITR 356 (Kar) in W.P. No. 11376 of 2009 dated 13.8.2009 was subjected to writ appeal before the same court. In Writ Appeal, the Hon’ble Karnataka High Court vide its order dated 14.3.2012 had held that the interest u/s 201(1A) of the Act could be charged only upto the date of payment of taxes by the deductees and not upto the date of filing of return of income. To this extent, the Hon’ble Karnataka High Court diluted the applicability of CBDT Circular No. 8/2009 dated 24.11.2009. We find lot of force in this argument of the ld AR in as much as the interest u/s 201(1A) of the Act is only compensatory in nature and the Government should be compensated for the delayed remittance of TDS from the date of default by the deductor to the actual date of remittance of taxes by the deductees. Accordingly, we direct the ld AO to recomputed the interest u/s 201(1A) of the Act accordingly.
4.2. The ld AR further argued that since the ld AO had held that the assessee is not to be treated as an ‘assessee in default’ u/s 201(1) of the Act. Having held so, he ought not to have charged interest u/s 201(1A) of the Act. In this regard, we find that the provisions of section 201(1A) of the Act are independent of section 201(1) of the Act inasmuch as it starts with ‘Without Prejudice to the provision of sub-section(1), There is no choice available to the revenue and interest u/s 201(1A) of the Act is to be mandatorily charged for the delayed period of remittance and is automatic in nature. It is not in dispute before us that the tax is required to be deducted by assessee TPA on payments made to hospitals. Hence we are not inclined to agree with the argument of the ld AR in this regard. Hence we hold that the ld AO had rightly levied interest u/s 201(1A) of the Act in the instant case. With regard to the calculation of interest u/s 201(1A) of the Act, we have already directed the ld AO to re-compute the said interest upto the date of actual remittance of taxes by the deductees and not upto the date of filing of return of income by the deductees.
5. In the result, the appeal of the assessee is partly allowed for statistical purposes.
Source- Medicare TPA Services India Pvt. Ltd. Vs ACIT (TDS),(ITAT Kolkata); I.T.A No. 2352/Kol/2016; 05/09/2018; 2008/09
