Karnataka HC in the case of TTK Healthcare TPA Private Limited

Case Covered:

TTK Healthcare TPA Private Limited

Versus

The Deputy Commissioner of Income Tax (TDS)

Facts of the Case:

Factual background, in which the aforesaid substantial questions of law arise for our consideration in this appeal need mention. The assessee is a company engaged inter alia in the business of providing Third Party Administration (hereinafter referred to as the TPA for short) services on medical/health insurance policies issued by the insurance companies. The services provided by the assessee inter alia include enabling the policyholders viz., the patients to obtain medical treatment from the hospital without making upfront payments to the hospitals by the direct settlement i.e., cashless scheme and reimbursement of claims of policyholders in accordance with the terms of the insurance policy. The assessee makes payment to the hospitals under the cashless scheme in fulfillment of contractual obligations between the insurance companies and the policyholders on one hand and the insurance companies and the assessee on the other hand and not in consideration of any professional services rendered by the hospital. The assessee’s obligation to make payment to the hospitals is as an agent to the insurance companies and not in consideration for any professional services rendered by the hospital to the assessee.

Observations:

From close scrutiny of the aforesaid provision, it is axiomatic that in Section 194J(1), the expression, any person employed by the legislature in Section 194J(1) refers to the payer, which excludes individual or Hindu Undivided Family. The aforesaid provision mandates a deduction of an amount equal to 10%, where any person not being an individual or Hindu Undivided Family is responsible for paying to a resident any sum inter alia by way of fees for professional services.

The Decision of the Court:

We respectfully agree with the aforesaid findings recorded by the High Court and to the extent as held by the Bombay High Court, the impugned Circular is quashed. It is needless to state that the Assessing Officer and Appellate Authority shall independently apply their minds in the exercise of their quasi-judicial powers without being influenced by the Circular No. 11. For the aforesaid reasons, we are inclined to agree to the submission made on behalf of the assessee that while interpreting Section 194J, the High Court of Bombay and Delhi High Court have enlarged the scope of the Act. In fact, the language employed in Section 914J is plain and unambiguous, which does not admit of any two interpretations. It is also the submission that the courts have rewritten or recast Section 914J while interpreting the same is also untenable. Since Section 914J neither suffers from any ambiguity not admits of two interpretations. The question of taking a view that is favorable to the assessee does not arise. In view of the preceding analysis, as well for the reasons assigned by the High Court of Bombay and Delhi High Court in Dedicated Healthcare Services supra and Vipul Medcorp supra, we respectfully concur with the view taken by Bombay and Delhi High Court. As an upshot of the aforesaid discussion, the substantial questions of law framed are answered in terms of the decisions of the High Courts of Bombay and Delhi.

As a result, the appeal is disposed of.

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