Income Tax Appellate Tribunal - Bangalore
Ttk Healthcare Tpa Private Limited , ... vs Assessee on 13 February, 2013
Page 1 of 8 1 ITA Nos.865 to 870/Bang/2012
IN THE INCOME TAX APPELLATE TRIBUNAL,
BANGALORE BENCH 'C'
BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND
SHRI JASON P BOAZ, ACCOUNTANT MEMBER
ITA Nos.865 to 870/Bang/2012
(Asst. years 2004-05 to 2009-2010)
TTK Healthcare TPA Pvt. Ltd., The Deputy
#2, H.B.Complex, 100 Feet BTM Commissioner of
Ring Road, BTM 1st Stage, BTM Vs Income-tax (TDS),
Layout, Bengaluru-68. TDS Circle-18(2),
PA No. AABCT 9272 F Bangalore.
(Appellant) (Respondent)
Date of Hearing : 13.02.2013
Date of Pronouncement : 28.02.2013
Appellant by : Shri K P Kumar, Advocate
Respondent by : Shri Etwa Munda, CIT-III
ORDER
PER BENCH :
These six appeals instituted by the assessee company are directed against the consolidated order of the CIT (A)-II, Bangalore dated 17.4.2012. The relevant assessment years are 2004-05 to 2009-10.
2. As the issues raised by the assessee company being common and similar in all these appeals, they were heard, considered together and disposed off in this common order.
Page 2 of 8 2 ITA Nos.865 to 870/Bang/2012
3. The assessee had, in its grounds of appeal, raised seven grounds in an illustrative and exhaustive manner. However, the grievance of the assessee is confined to a solitary issue, namely:
'that the CIT (A) erred in confirming the action of the AO (TDS) on levy of interest u/s 201(1A) of the Act till the due date of filing of the returns of income for the relevant financial years concerned'.
4. The facts of the issue, in brief, are as under:
The assessee, a Private Limited Company, is engaged in the business of providing third party administration services (TPA) on health insurance issued by the Insurance Companies and is governed by the Insurance Regulatory and Development Authority (IRDA). There was an action u/s 133A of the Act in the office premises of the assessee on
5.1.2009 to verify the implementation of the provisions of TDS in the case of the assessee. It was noticed by the AO (TDS) that the assessee was not deducting TDS on the payments made to the hospitals. Being queried, the assessee explained that the assessee was not obliged to make TDS in respect of the payments made to the hospitals as such payments do not fall within the ambit of s. 194J of the Act. After due consideration of the assessee's submission and also analyzing the agreements the assessee entered into with the hospitals as well as with the Insurance Companies, extensively quoting the provisions of s. 194 J of the Act and its applicability in the assessee's case and also for the detailed reasons recorded in his impugned order(s) under consideration, the AO had treated the assessee 'an assessee in default' u/s 201(1) of the Act and also levied interest u/s Page 3 of 8 3 ITA Nos.865 to 870/Bang/2012 201(1A) of the Act for all the assessment years under appeal [AYs 2004-05 to 2009-2010].
5. Aggrieved, the assessee took up the issues before the then CIT (A) for relief. With regard to the levy of interest u/s 201(1A) of the Act, the then CIT (A) was of the view that interest u/s 201(1A) of the Act is to be charged only up-to the date of payment of taxes by the hospitals and directed the AO to re-compute the interest u/s 201(1A) of the Act accordingly.
5.1. While giving effect to the order of the CIT (A), the AO had, however, calculated (levied) the interest u/s 201(1A) of the Act up-to the due date of filing of the returns of income for the following reasons:
"Note:
..................................................................................................................... .................................................................................
The deductors pay advance tax in four installments starting from June to March. Some of the assessee clear the tax liability by way of self-assessment tax. In some cases after scrutiny further demand would have been paid. In the absence of all the above information, the due date of filing the return of income is taken for the purpose of calculation of interest u/s 201(1A). Auditor certificate does not give any of the above information and some certificates have stated that they have paid taxes for the income earned by them."
6. Aggrieved, the assessee took up the issue again with the CIT (A) for all the AYs under dispute with a contention that the AO had failed to comply with the then CIT (A)'s directions for restricting the levy of Page 4 of 8 4 ITA Nos.865 to 870/Bang/2012 interest u/s 201 (1A) of the Act till the date of payment of taxes by the hospitals. After considering the assessee's submission, the CIT (A) made the following observations:
"3.1. I may like to add that various Courts have held that interest u/s 201(1A) is to be levied only up-to the date of payment of taxes by the payee in cases where the payee has filed returns of income and paid taxes thereon. Even the CIT (Appeals)-V, Bangalore, in his order dated 22.2.2010 which has been given effect to by the AO, has held so. Once the deductor has failed to deduct tax, payment of taxes by the payee can be determined only when the payee files his return of income and pays tax and has to be read as 'date of filing of return' in case where the return of income is filed and taxes thereon already paid before filing the return of income or the date of actual payment of tax in case taxes due are paid subsequent to filing the return of income. In my view, the decisions of the judicial authorities and also the order of CIT (Appeals)-V, Bangalore referred to above are to be interpreted as such. No instance has been brought on record by the appellant to say that the return of income has been filed by the payee on a date prior to the due date of filing of the return of income. In such a case, the action of the AO in complying with the order of CIT (A)-V, Bangalore dated 22.2.2010 as has been done by him cannot be faulted with."
7. Aggrieved, the assessee has come with the present appeals. During the course of hearing, the submissions made by the learned A R are summarized as under:
(i) that the CIT (A) grossly erred in confirming the stand of the AO (TDS) on levy of interest u/s 201(1A) of the Act till the due date of filing of return of income for the relevant financial year concerned;Page 5 of 8 5 ITA Nos.865 to 870/Bang/2012
(ii) that she ought to have held that the above action of the AO was contrary to the directions of the CIT (A)-V;
(iii) that she had grossly erred in holding that the date of filing of returns for the relevant FY concerned ought to be taken as the date of payment of income-tax by the hospitals for the purpose of computing interest u/s 201(1A) of the Act; and that she had failed to appreciate that the date of filing of return cannot be substituted for the date of payment of taxes for the purpose of computing interest u/s 201 (1A) of the Act;
(iv) that the CIT (A) had failed to appreciate that despite its sustained efforts, the hospitals have turned down its request to provide the relevant particulars to the assessee;
(v) that the CIT (A) had failed to direct the AO to summon the hospitals concerned and collect the relevant information required to correctly compute interest.
The assessee relies on the ruling of the Hon'ble jurisdictional High Court in the assessee's own case in WP Nos.6385786 and 6471- 73/2010 dated 14.3.2012 on the same issue.
7.1. On the other hand, the learned D R present supported the stand of the authorities below on the issue.
8. We have carefully considered the submissions of either parties, perused the relevant materials on record.
8.1. At the out-set, we would like to recall the ruling of the Hon'ble jurisdictional High Court while dealing with the assessee's W.P.Nos.6385-86 & 6471-73/2010 dated 14.3.2012. For appreciation of facts, we extract the observations of the Hon'ble Court as under:
Page 6 of 8 6 ITA Nos.865 to 870/Bang/2012
"(On page 8) 4. It is also submitted that, in the Circular it is made clear how the interest is to be calculated. The grievance is in respect of the said Circular instead of calculating the interest till the date of payment of the tax by the deductees, the interest is calculated up-to the due date of filing of return. In fact, this Court had an occasion to consider this question in the case of Solar Automobiles India (P) Ltd v. Deputy Commissioner of Income-tax reported in 2011-TIOL-815-HC-KAR-IT where at para-9 it is held as under:
'9. In so far as payment of interest under section 194A is concerned, the interest is payable for the period it is not paid after deduction. The principal liability of paying tax is that the creditor and a statutory duty is cast on the debtor to deduct tax on the income of interest payable and remit the same to the company irrespective of liability of the principal debtor. Unless the principal debtor files the return and pays tax, then the vicarious liability exists on the persons who should have deducted at source or ought to have deducted at source. The revenue cannot collect tax on interest from both the principal and the agent. In that context, the order passed by the authorities holding that the assessee is liable to pay interest from the date of default till the date of the order is erroneous. However, the authorities have to find out whether the creditor has filed the returns and paid the tax. If he has filed the returns and paid the tax, the liability of the assessee ceases from the day they have paid the tax. That exercise is possible only after verifying the records of both the assessee and the creditor of the assessee.Page 7 of 8 7 ITA Nos.865 to 870/Bang/2012
To that extent the impugned order passed is set aside. Accordingly, the appeal is partly allowed and the matters are remitted back to the assessing authority to undertake the exercise and find out the liability of interest payable by the assessee. Ordered accordingly. No costs.' Even otherwise the law is well settled that the payment of interest under the Act is compensatory in nature. The authorities shall re-do the exercise of calculating the interest and thereafter issue a fresh demand if they choose to recover the same. That would meet the ends of justice......................"
8.2. On a decisive perusal of the observations of the Hon'ble Court (supra), it is observed that the AO has to find out whether the creditors (hospitals) have filed their returns and paid the taxes. If they have filed the returns and paid the taxes, the liability of the asessee ceases from the day they have paid the taxes. This exercise has not been done by the AO with letter and spirit, instead, he had adopted the due date of filing of return of income for the purpose of calculation of interest u/s 201(1A) of the Act which, in our considered view, goes contrary to the substance of the ruling of the Hon'ble Jurisdictional Court. 8.3. In view of the above, the AO is directed to undertake the exercise and find out the liability of interest payable by the assessee and to issue a fresh demand, if need be. It is ordered accordingly. 8.3.1. In essence, the appeals of the assessee for the AYs 2004-05 to 2009-2010 are treated as allowed for statistical purposes. Page 8 of 8 8 ITA Nos.865 to 870/Bang/2012
9. In the result: The assessee's appeals for the assessment years 2004-05 to 2009-2010 are treated as allowed for statistical purposes.
Order pronounced in the open court on 28th day of February, 2013 Sd/- Sd/-
(JASON P BOAZ) (GEORGE GEORGE K)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Copy to : 1. The Revenue 2. The Assessee 3. The CIT concerned.
4. The CIT(A) concerned. 5. DR 6. GF MSP/ By order Senior Private Secretary, ITAT, Bangalore.