The order of the Bench was delivered by
B R Mittal: -The assessee has filed this appeal for assessment year 2010-2011 against order of ld CIT(A) dated 15.11.2011 on the following grounds:
“1. On the facts and circumstances of the case the Learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Learned Assessing Officer who has invoked, the provisions of Section 201(1) of Income-tax Act, 1961 in respect of payments made to various hospitals. The appellant submits that they are not liable to deduct tax at source on such payments to the hospitals and hence there is no default on the part of the appellant and the provisions of Section 201(1) can not be invoked. The appellant prays that the provisions of Section 201(1) is not applicable on the facts of the case and there is no default of the part of the appellant in terms of Section 201(1) of the Income Tax Act, 1961.
2. The appellant prays that they have not availed any professional services as contemplated u/s. 1 94J of Income-tax Act, 1961 and hence are not liable to deduct tax at source in respect of the payments made to the hospitals.
3. Without prejudice to the ground Nos. 1 &2, that the provisions of Section 1 94J are not applicable to the appellant and is not liable to deduct tax at source, on the facts and circumstances of the case the Learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Learned Assessing Officer to the effect that the appellant is liable to deduct tax at source on the gross payments to the hospitals of Rs. 9,92,48,570/- u/s. 194J of Income-tax Act, 1961. The appellant prays that they are not liable to deduct tax at source on the gross payment of Rs. 9,92,48,570/- u/s. l94J of the Income-tax Act, 1961.
4. On the facts and circumstances of the case the appellant submits that the hospitals to whom the payments have been made by the appellant, have included in their respective return of income the said receipts and have paid the tax on the same. The hospital, being, recipient of the income was obliged to pay the tax and once they have paid the tax, the appellant does not have any liability to deduct the tax at source.
5. On the facts and circumstances of the case the Learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Learned Assessing officer invoking the provisions of Section 201(lA) of Income-tax Act, 1961 and levying interest of Rs. 3,42,092/-. The appellant denies the liability of payment of interest u/s. 201(1 A) of Income-tax Act, 1961. The appellant also prays that the learned Assessing Officer has wrongly calculated the interest u/s. 201(lA) at Rs. 3,42,092/-. The interest levied u/s. 201(1A) may be deleted.”
2. In sum and substance in the grounds of appeal, following three issues are involved:
“a. Whether provisions of Sec.194J is applicable on payment made to the hospitals/nursing homes by the appellant. b. Without prejudice to above, the deductor cannot be called upon to pay the tax, if the deductees i.e. hospitals, nursing homes have paid such tax in view of decision of the Hon’ble Supreme Court in the case of Hindustan Coco Cola Beverages Pvt Ltd.
c. The calculation of interest amount levied u/s.201(1A) by the Assessing Officer for non-deduction of tax u/s.201(1), so far as the period of default is concerned.”
3. The relevant facts are that assessee is a Third Party Administrator (TPA) duly holding license from Insurance Regulatory and Development Authority (IRDA) underThird Party Administrator Health Services Regulations, 2001. Assessee is engaged in the business of providing health insurance claim services under various health insurance policies issued by several Insurance Companies. Assessee company provides various services to the insurance companies like hospitalization, call centers, cashless access services, etc. The hospitals which are empanelled by the assessee have to provide health care to the individuals’ i.e. insured persons who require medical treatment. The payments to these hospitals are made by the assessee. Assessee had not deducted TDS on such payments. The Assessing Officer held that the services rendered by the assessee are covered under section 194J of the Income tax Act as technical services. Therefore, assessee committed default under section 201(1) and 201(1A) of the Income tax Act. Being aggrieved, assessee filed appeal before ld CIT(A).
4. Ld CIT(A) allowed the appeal of the assessee in part. Hence, this appeal before the Tribunal.
5. In respect of issue as to whether provisions of section 194J is applicable on such payments made by the assessee to the hospitals/nursing homes, ld A.R. conceded that the said issue is covered against the assessee in view of the decision of Hon’ble Bombay High Court in the case of Dedicated Health Care Services TPA vs. ACIT, 324 ITR 345(Bom), wherein, the Hon’ble High Court has held as under:
“Where the provision of medical services takes place within the institutional framework of the hospital, services were rendered as part of an umbrella of services provided by the hospital which engages qualified medical professionals who practice the medical profession. There were services rendered in the course of carrying on the medical profession. Hence, TPAs, when they made payment to hospitals were liable to deduct tax at source under the provision of Sec. 194J”
6. In view of above decision of Hon’ble High Court, we observe that ld CIT(A) has rightly held that assessee was required to deduct TDS u/s.194J of the Act in respect of payments made by the assessee to the hospitals/nursing homes. Therefore, above issue is decided against the assessee and consequently, Ground Nos.1 & 2 of appeal taken by assessee are rejected.
7. In respect of Ground Nos.3 to 5, ld A.R. filed a chart and submitted that assessee made in the assessment year under consideration payment of Rs. 9,92,48,570 but cheques of payment of Rs. 6,54,765 were cancelled. Hence, the total payments made from 1.4.2009 to 17.9.2009 to the cashless hospitalization claim comes to Rs. 9,85,93,805. Ld A.R. submitted that there were certain payments which were less than Rs. 20,000/- which aggregate to Rs. 15,04,127. He submitted that no TDS was required to be deducted in respect of above payments and AO did not consider the same. Further, ld A.R. submitted that there were exemption certificates received u/s.197 of the Act to the extent of Rs. 1,46,68,052. During the course of hearing, ld A.R. submitted that said amount was required to be deducted while computing the TDS liability u/s.201(1) of the Act.
8. We agree with ld A.R. that if certificate has been given by the Assessing Officer of the payee for Nil deduction of tax, there is no liability of the payer to deduct TDS on the payments made to such payees to deduct TDS and consequently, action of the AO to impose the liability on the payer for non-deduction of TDS on such payment is not justified. In this regard, the matter is restored to the file of AO with a direction that AO will examine the said certificate, issued by the Assessing Officer of the payees for nondeduction of TDS, as may be produced by the assessee and due credit may be given by him to the assessee.
9. Similarly, in respect of payments which were less than Rs. 20,000/-, we agree that there is no obligation to deduct TDS and the AO will consider the same on receipt of details from the assessee.
10. Ld A.R. further submitted that in respect of payments of Rs. 89,61,485, assessee produced certificates of the auditors that such payments have been made by the deductee i.e. payee in their returns filed. AO did not give credit to the assessee while computing the amount on which TDS was not deducted.
11. We observe that ld CIT(A) in para 8 after considering the decision of Hon’ble Supreme Court in the case of Hindustan Coco cola Beverages Pvt Ltd vs CIT, 293 ITR 226(SC) r.w CBDT Circular No.8 of 2009 dated 24.11.2009 has stated that it is an admitted position of law that wherever assessee company proves that tax has been paid by the deductee, recovery of demand cannot be enforced. Ld CIT(A) has stated that in order to determine whether the deductee has paid the tax or not, a certificate from the auditor of the deductee company stating that tax and interest due from the deductee assessee has been paid for the concerned assessment year would be produced by the assessee company and shall be verified by the Assessing Officer. We observe that ld CIT(A) had directed the AO to give due credit to the assessee if the assessee company produced such certificate and recovery of TDS amount u/s.194J should not be enforced to that extent. We are of the considered view that there is no infirmity in the said order of ld CIT(A) as he has given direction to the AO that if the assessee company produces such certificates of the auditors of the deductee company stating that the tax and interest due from the deductee has been paid by them for the concerned assessment year, recovery of TDS amount u/s.194J should not be enforced.
12. During the course of hearing, ld A.R. from the said chart submitted that the only balance amount left out of Rs. 9,92,48,570 is Rs. 7,34,60,140 on which assessee is liable to pay TDS. Ld A.R. also conceded that assessee is also liable to pay interest u/s.201(1A) of the Act on the TDS payable on Rs. 7,34,60,140 and is also liable to pay interest on the TDS payable of Rs. 89,61,485 till the date of payment of tax thereon by the deductee. Ld D.R. has no objection to that extent subject to the condition that assessee should furnish the requisite certificates as per CBDT Circular No.8 of 2009 dated 24.11.2009.
13. We agree with above contention of ld A.R. and, accordingly, restore the issue to the file of AO with a direction to calculate the TDS payable by the assessee and the liability of interest u/s.201(1A) of the Act subject to the observations made hereinabove after giving due opportunity of hearing and also considering such evidences as may be produced by the assessee before him. Hence, Ground Nos.3 & 5 of appeal are allowed.
14. In the result, appeal filed by assessee is allowed in part.
The order pronounced in the open court on 17 April, 2013.