Paramount Health Services (Tpa) P.Ltd, ... vs Department Of Income Tax

M/s. Paramount Health Services Dy. Commissioner of Income (TPA) Pvt. Ltd., Tax - 7(1), Elite House, 2nd Floor, Mumbai 54-A, Mathuradas Vasanji Vs. Road, Andheri (East), Mumbai - 400 093 PAN: AACCP4465H (Appellant) (Respondent)

ITA No.5269/M/2013 Assessment Year: 2010-11

Dy. Commissioner of Income M/s. Paramount Health Tax - 7(1), Services (TPA) Pvt. Ltd., Room No.622, Elite House, 2nd Floor, Aayakar Bhavan, Vs. 54-A, Mathuradas Vasanji M.K. Road, Road, Churchgate, Andheri (East), Mumbai - 20 Mumbai - 400 093 PAN: AACCP4465H (Appellant) (Respondent)

Assessee by : Shri Rajesh, S. Shah, A.R. & Nalin Gandhi, A.R Revenue by : Shri Narendra Kumar Chand, D.R.

Date of Hearing : 11.12.2014 Date of Pronouncement : 13.02.2015

ORDER

Per Sanjay Garg, Judicial Member:

The above titled cross appeals one by the Revenue and the other by the assessee have been preferred against the order of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] dated 10.05.2013 and the ITA No.5400/M/2013 & ITA No.5269/M/2013 2 M/s. Paramount Health Services (TPA) Pvt. Ltd.

same are taken together for disposal by this common order. First we take up the assessee's appeal i.e. ITA No.5400/M/2013.

ITA No.5400/M/2013 2. The sole issue agitated by the assessee through its grounds of appeal is relating to disallowance under section 40a(ia) of the Income Tax Act on account of payments made to hospitals without deduction of TDS in violation of provisions of section 194J of the Act.

3. The Assessing Officer (hereinafter referred to as the AO) had made addition of Rs.85,05,05,515/- invoking provisions of section 40(a)(ia) for non deduction of TDS as per the provisions of section 194J.

4. In appeal, the Ld. CIT(A) restricted the addition to Rs.10,65,669/- and deleted the remaining addition of Rs.84,94,39,847/- on the basis of certificates submitted by the payee hospitals under section 197 of the Act as they being exempt from income tax. The assessee, thus, has agitated the confirmation of addition of the remaining amount of Rs.10,65,669/-.

5. At the outset, the Ld. A.R. of the assessee has submitted that the assessee had not claimed these payments as expenditure, hence there was no question of disallowance of any expenditure. Once an expenditure has not been claimed, no question of disallowance of the same can arise. He has submitted that the provisions of section 40(a)(ia) thus are not attracted to the assessee's case. He has further submitted that subject to his submissions the assessee was not liable to deduct TDS on the payments made, even if it is presumed that the assessee by not doing so has violated the provisions of section 194J, the consequential liability will be only under section 201 & 201(1A) of the Act and not under section 40(a)(ia) of the Act because of the ITA No.5400/M/2013 & ITA No.5269/M/2013 3 M/s. Paramount Health Services (TPA) Pvt. Ltd.

fact that the assessee had not claimed any expenditure. He has further brought our attention to the decision of the Tribunal in the own case of the assessee for assessment year 2009-10 vide ITA No.2188/M/2013 dated 25.07.2014 wherein the Tribunal, after detailed discussion of the matter in para 7 of the order, has observed as under:

"7. Though the assessee is under the obligation to deduct tax at source under section 194J however, the consequential liability is only under section 201 and 201(1A) and the disallowance under section 40(a)(ia) cannot be automatic when the assessee has not claimed this payment as expenditure against the income. The assessee has shown the income, only the service charges receivable from insurance companies for rendering services as 3rd party administrator and not having any margin or profit element in the payment received from the insurers for the purpose of remitting to the hospitals to settle medical claim of the insured. Therefore, when the said payment has not been claimed as expenditure incurred for earning the income by the assessee then the provisions of section 40(a)(ia) is not attracted for non deduction of tax at source in respect of the said payment. Following the decisions of the Tribunal as relied upon by the assessee and discussion above we hold that no disallowance can be made under section 40(a)(ia) in respect of the payment in question. Accordingly the ground raised in assessee's appeal is allowed and ground raised in the revenue's appeal is dismissed."

6. We are in agreement with the above finding of the Tribunal. When there is no claim of expenditure there cannot be any disallowance of expenditure. Respectfully following the decision of the Tribunal in the immediate preceding assessment year in the own case of the assessee, this issue is decided in favour of the assessee and the disallowance made by the lower authorities under section 40(a)(ia) is hereby ordered to be deleted.

7. In the result, the appeal of the assessee is allowed.

8. Now we take up the Revenue's appeal i.e. ITA No.5269/M/2013.

ITA No.5269/M/2013 9. The Revenue, in its appeal, has taken three grounds of appeal. The first two grounds are in relation to disallowance under section 40(a)(ia) which has ITA No.5400/M/2013 & ITA No.5269/M/2013 4 M/s. Paramount Health Services (TPA) Pvt. Ltd.

been deleted by the Ld. CIT(A) on the basis of certificates furnished under section 197 of the Act by the payee hospitals. Without further going into the merits of the case, we have already held in the assessee's appeal that the addition on the basis of so called disallowance under section 40(a)(ia) is not attracted in this case. Since we have held that no addition under section 40(a)(ia) is attracted, hence, the grounds taken by the Revenue have become infructuous and are accordingly dismissed.

10. Vide ground No.3, the Revenue has agitated the deletion of disallowance of Rs.1,70,027/- on account of unreconciled receipts. It has been agitated on behalf of the Revenue that the Ld. CIT(A) deleted the disallowance without properly appreciating the factual and legal matrix of the case. A perusal of the impugned order reveals that the Ld. CIT(A), after going through the reconciliation statement, had accepted the contention of the assessee that the difference was on account of different method of accounting of Revenue. The assessee had shown income much more than as reflected in the ICS data. He agreed with the contentions of the assessee that the differential amount had been shown either in earlier or later years. We do not find any infirmity in the above findings of the Ld. CIT(A) in deleting the disallowance on account of differences in the reconciliation statement.

11. In view of our above findings, the appeal of the assessee is allowed and the appeal of the Revenue is hereby dismissed.

Order pronounced in the open court on 13.02.2015.

Sd/- Sd/- (R.C. Sharma) (Sanjay Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 13.02.2015. * Kishore, Sr. P.S. ITA No.5400/M/2013 & ITA No.5269/M/2013 5 M/s. Paramount Health Services (TPA) Pvt. Ltd.

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [

By Order

Dy/Asstt. Registrar, ITAT, Mumbai.