Karnataka High Court
The Medi Assist India Tpa P Ltd vs Deputy Commissioner Of Income Tax ( Tds) on 13 August, 2009
Author: Ajit J Gunjal
Bench: Ajit J Gunjal
. A"-.,'CIVRCI;E--A',18(l), BETWEEN 1 IN THE HIGH COURT OF KARNATAKA, DATED THIS THE 1313 D O Bm>RE THE HON'BLE MR, O wan' PETrPION»i€;D.'"'i--137D D (By SR1 SufiRANG1'\N.DS_E:N1':0R counsm. ma ) Sn;t»: yam Ha, mv. " OIJMMISSIONER op INCOME TAX ( TDS) noon NO. 59, 4TH HM?' EEMVAN, BELLARY ROAD BAr§Gm.oRE-550032 #33 OR TI-VIE commssxoman or INCOME § "CIRCLE-18(1), R "HMT BHAVAN, BANGrALORE--560032 CENTRAL BOARD OF DIRECT TAXES REP. BY UNDER SECRETARY O T DIVISION, 4TH FLOOR DAY or _: " --« .. J" . .. PETITIONER. O R D E R
The petitioxxer is in all questioning the erder passed by . section 201(1) and 201 (1A';'V_c}£V.txhc°,- (for short 'the Act'), fag' the years. The petitioner is also' cause notice issued on I9.1.4i§GQ9, ;;&1mexure~I-I has
2. as follows:
The pmftiofier ;:s a Party Administrator licensed V. by and Development Authority %%Lk%;m¢f1e;rk xme» fwd Party Administrator Health Services (far short 'TPA Regulations"). The _ 'p¢titi(4$rxcf'«;is.V Engaged in the business of providing heaith ~.€t1s;i19'a:.nce claim services under varieus Health Insuranoe issued by several Insurers. The services include jjproviding cashless service through Network Hospitals and settlement or reimbursement of claims in aoccardance with fl' certain Insurance Companies. Apparently the1fe~ is a contract of insurance between the insurance the individual who takes the however subject to the terms and i 7 V definitions contained in the undertakes that if during the insured person who from any illness or sustain accident and if such such insured person by a physician or medica} specialist etc; Weuld pay through _'I'PA or hospital or nursing home. it such injured person is required to be ified physician, medical specials!' 'st, medical ' Indeed that weuki pmvide easy and i access to the healtheare services for the insured The Insurance Company enters into Service' Level . V e1'1t(SLA) with TPA for settling the insurance ciaim s among other obligatzions and duties as mentioned in the fl / X' s1,A. The TPA semes the bills raised by some cases reimburses the holders, fitam a separate : Lv account. Indeed the insur-igmg.-.
amounts which are nafade As and when the amount j flfiat amount diminishes, it ' _13,.a§ the insurance company. S . :35 to the (M011) with various h<>spita1sV"'a;()%d.V Under the M011, the TPA to the hospitals to reimburse/settle » policy holders. The Memorandum of 'Sm A K inter afia ailcws the p0IiC'Y holders to be hospital without the policy holda making A i.e., cashless facility. The payment of V' fisaimbursemcnt/settlement of insurance chm' s is desne in two ways ~ (1) when the pofiéy holdm gets treatment for a medicaloonditienaxldpaysbylfinzmlfdhecflytoflm hesspit'/al and (2) when a policy holder gets at the Netwerk hospital which has , to treat the mticnts who are '.
basis. The TPA reimbursement of the by the policy holder and the' Aomrding to the petitioners an the ambit of section the payments are made. éi obligations between the " the policy holder and not tlnk':"--vp¢§;itio11e1*s, sections 1944 are not at all A V ' ' . to mymcnts.
4 'i'h¢3a:_ respendent conducted the stmrey on under secfion 133A of the Act of the business A' of the pefitioner and oollcctw certain' infomlaticm the details and eoprics of returns of the income .0' J] filed by the petitioner for the years ending 31.3.2006, fl 9 against the petitioner. Before the competent authority the petitioner also relied upon the judgment ef the Apex Court in the case of Hindustan Cooo~Cola Beverage (P3 CIT, reported in 293 ITR 226, a copy of as Axmexuxe-D.
4. The Assessing Authoritjz rdV j'i:ox"i:tie" show cause notice as well as the repiy that the pefitioner was obliged at source; that hav1ng' net a clear violation of the provisions of ef the Act. The total sum _.})ayat)_2efl.foIf*t11e &.e., for the year 2002-03 was 'Rs; ;I4»,78--,,A(_)42,..:¥';'The said determination is assailed in this wetepaziaengé-"t"s:s ' ~ M-1r'. learned senior counsel appearing for ; ____'theAAVpetfitieneI' would vehemently submit that in the given tsettof circumstances, section 194-J of the Act is not at all applicable. He submits that the expiarmtion to section % 11 with the provisions of the Act in not deducting ti1e: fi;_D--$ at source was not liable to be treated as A' however the amendment was 1' position that if a person irncludiré . company does not comply ' not deducting the TDS, 'as. aesessec in default. Hence he of the Act is applicable to tlyekfiese V' V' '7. it is necessary to look into certaifi' Act. Section 1940' of the Act V. 'fees-.__.fer professional or technical services. V"--..AS1$b4seetien:v'{i:)'of Section 194a would deal with individual or' family, who is responsible for paying a any sum by Way of fees for professional ' or fees for technical services, shall at the time of V' of such sum to the account of the payee or at the V jtime of payment thereof in cash or by issue of a cheque or drafi or by other mode, whichever is earlier, deduct an}
8. Section 201 of the Act deals with failure to deduct or pay the tax wfigich is (1) fipeaks about the cases principal officer and thc.»"r::)_:mp."a{1:_x:r"" of principal officer does not o§* any part of the tax or after required by or under the ht-; ~;~;si"-..§éI1A to any other it be deemed to be an tile tax. Sub-section (1A) was which would indimte that aomimstanding jjiasmed in sub»-section (1), if any ._ or oorapany as is referred to in that ' not deduct the whole or any part of the H fails to pay the tax as required by or 4 Act, he shall be liable ta pay simple interest at V' * i1Q%é annu1I1 oil the amount at' such tax from {he date Lcn which such tax was deductible ta 'Jae date on which R such tax is actually paid. Thaw are the broad pmrvisians which would ralats to if that: tax is not deducted at seume./a I X 14 One mu have to consider whether the 'Would come within the ambit of section 194.} 201(1) and 201(1A) ofthe Act.
9. The facts relating to aioog with the relevant proxgisio1fas;' the case on merits, Whether to deduct tax at source, the proceedings disclose Armexure-H is passed in of natural justice and without aff'ordi1'i;goQs'.11'tJ.fie matter requires remittance. If it V, 'V found suflicient opportunity was given, the .' qtxestioo the matter would not arise. In this "' otis have to look into the impugned order passed Indeed it is not in dispute that a show "c*auzseV}1ot:ice was issued and a reply is filed. The authority specifically dwlt with the issuance of the show cause u "notice to the assesses and a reply was also sought which was gven by the petitioner. The assesses replied to thefl I 16 petitioner as well as the authority. The correspondence is at Annexlme-D a Show cause notice was given "
that they have denied that ttioygre 1ial'if1ct'o' o at source under section reasons stated in the reply. would make a mquest that to collect the relevant in the naizure of and third party the insurance company and the cut between the thm:I' party . admidisfjator hospitals; agrwent betaween the the hospital and aoent between the ix:'1Smc"1Iu " A and the hospitals. 'I*h.at would . 44 Ioo1:cI41 i<:!o"'t§n.é reply with a request that they are not in a o to mnecz; the data of this magnm mic and it would some mom me. Hence two weeks we was sought submit all the detafis. Another oofimfion on 2.2.2007, a copy of which is at Annexuxe-E miter-amxg the I //.7"
I7 fact that they would require some more _f£a,c necessary information.
Annexure-F is also to the em;
process of collecting the d mm. The Iast of * 12.3.2009 which would once time to do the needfu} at in receipt of the copies they a comprehensive reply was received by the authofity on .__N'dve1theIess, the authority has dated 23.7.2009. It is no doubt a_ made on 12.3.2009 £21 seeldng to collect the data and fiie a comprehensive repé1:y.'A is not a case where it can be said ttmt the denied of an opportlmity, in as much as, on V' occasions time was grantad and the petitioners A' hdve filed a reply. What was lashing is only the docum-eats were not available which are the WA agwent. Indeed the question is not one 0f interpretation of the terms J; .
I9 tllercafter is requined to approach the said TPA for the service. The 'I'PAs have a network of hospitals with which it has arranged for cashless tzreatrment, which lzo the insured. If the policy holder or sf medical treatment he can hospitals to avail the said :'Then procedure would be the nogpiiggisexids ithel to me TPA and upon their liisldéii would be treated in the hospital. and dischaxge, the hsspital V.Vsé;1f§1.s.j'€iit:i.:_i2ili aiong with the irivestigation report to' the TPA upon receipt of the , " doguinsfits for reimbiixsement of the medical the claim is pssed payment is haspitai by the TFA directly. Indeed the ',_TPA44"gg£s.:.r.éimbu1'sed of an the amount of claim processed. V' Vltizac on hand, it is ts be noticed that the TEA takes a list of insurance compan1c' s in settling' the '4 siaims of the policy holder. Since the maney is paid finm the 'claim float account' of the TPA, it is the TPA who isw 29 responsible for making payments to the hospital --imdcr cashless system under the medi--c1aim service hoidcr. in fact the role of TPA can be termed the insurance company. It b i contention is taken that payment of sums as therc fox;
rendering the pmfessioijai which is made available along i cicarly disclose some of the ~T€ioi:vi1:i"'*ii3VV ageement which .. l};1')u Then' is required to provide ncccssary treatment;
'- F'{2} will not provide cashless benefit to beneficiary without authority letter; .. ' After bcncficiaity is discharged from the hospital the provider will submit oriflial final bill amongst other documents; fl 21 (4) Ali payments in respect of the ooxnpletc:/aplTig'blc bills shall be made by the TPA provider.
Thus a perusal of the 1' 'fine '.
TPA is responsible for for rendering the modioal The TPAS enter into an hospitals for the ' aforesaid Itijaas to when the serv1ces' by the TPA. Servioes can provided if they are provided soiiie Voas the request of the TPA. Indeed "tho power in this regard. This
- nature of TPA taking over a part of the w¢r;; of. i;.ns1rrance company. The T¥'A would be 'world11g. the nature of the insurance commny except the they do not issue policy. Their decision as to the of bill and sending the insumd to the accredited ' hospitals is final, Indeed it is to be noficed that aftear taking the policy from the insurance oompany, the insurance fl :
'3 ?
company is not in touch with the insured at as, they are not required to process the The decision of the 'rPAm this = ' T }
12. Another factor which the faot that the TPA is at is to be found in the of i A claim float account is; TPA. The insurer W0lfld gQ_(V')Afi» of money in the said float TPA would draw the amount and hospitals. As and when the _ Q the fiocount is diminished or reduced, the ' ___replenish the account. The TPA is required H account with a designa' ted bank specified by The mount is transferred fiom the 'V of the insurer after the claim process and payment is omade. As observed once the funds are exhausted the same would be replenished by the insurer. Indeed it is to be noticed that it is the TPA which is in control of making 4 X' the payments to the hospitals. The liability of' only of replenishing of the fnndisfm _ of.
funds the control of the funds iee..FI9?g§ % once the amount is The applieafien of the fzmds tea party i.e., the insured and the..;i'PA;A«V. of the network and as to how the avaiiable, the ultimate the hospital is the TPA. between the insurer and the is essentially between the TPA and regard it is necessary for us « ._,...ment itself which is made available, '--.Whiei1.i_sv---as Service Level Agreement. 2 of the ageement wouid relate to the which would read that the TPA agrees to provide " services by itself in the service area in the panel of IGIPSA Companies. outside the serviee area to the insurer and the insured persons on the terms and conditions and g .1 o .
24 in the manner more particularly set out in the What is service fees is to be found in clause indicate that the insurer shall pay to' _ detailed in the schedule. cmusg 5:' would relate to the of the Govt. or any Governlnezgtal to the fees payable, shall be {me by jprqvided the TPA is regular payee, of 2 having the service tax department: of the Govermnent in the service charge bill by "findeed, a pemlsal of this ciagzse eat gve" :.¢aV1:rV1V§f"__&i&I:41dica1:'ton that the TPA is not at source, which would be with :fefereI1.ceéto~'oi.1l5}é--'3;f> service tax. f petitioners have also made available the hospitals the mnel of the TPA. One such agecment ;w.i§f;v.eeepaneled hospital is made available along with the petitiazi papers. The ageement entered into between the 35/ 26 discretion of the casheless hospitalization petitioner. 'What is more relevant for out':
determine as to whether the TPA it ' at source is to be found at clause u that on receipt of the aumofizsifion iettei' ' it the hospital shall admit it 'approved TPA members, the charges reimbursed by medi assist to « of the insurance company tlmit is a medi-claim policy helider; terms and conditions of the ai1tl1o1isatioi1_Viiiette1*__'issued by the Medinassist and the For pl.H'pOS6S of the ageement, that is the TPA member shall mean those TPA memheis fespect to whose admission and treatment at the hes'pita1,Vt;o which the TPA has issued an authorisation iii} accordance with the terms of the ageement. V. Payments to be made are to be found at clause 5. Clause V I would relate to the obligation on the part of the TPA to reimburse the hospital on behalf of the insurance company % 27 with the approved TBA member who is a medi claixjzypolicy holder and under no circumstance the TPA is _to pay the hospitai any amounts that will not 4_ by the insurance company.
15. A perusal of the indicate that it is the dmy aI;d***t5.?iif:.O'"b1igati£3nv<;f TPA to pay the hospitals. if:- this regard will not have any mg: .30 '_:;1;i}c§.1as, it is only to replenish a1Ii<3:tiu11'f:' "account once the amount deposited thefeigi Uitimately the agreement ¢n§ered_»» the hospital and the TPA for of holds the fiald. In the circumstance, it the TPA who is the authority ___or the _ tfie amount to the hospital is :1c>*.: to me at seurce am! secfion 194:} is not attracted be accepted". I fl 29 obliged to deduct the tax at source under section 194d of the Act, in as much as, moneys are paid by it the hospitals in respect of cashless trwxtment,
18. Having gven my anxious consideration, _t}1c View that the petition does not merit vge