MEDI ASSIST INDIA TPA P. LTD. REP. BY ITS CHIEF EXECUTIVE OFFICER SRI. B. MADHAVAN S/O SRI. M. BALASUBRAMA Vs. DEPUTY COMMISSIONER OF INCOME TAX (TDS), THE COMMISSIONER OF INCOME TAX (TDS), CENTRAL BOARD OF DIRECT TAXES REP. BY UNDER SECRETARY O

JUDGEMENT

(1.) THE petitioner is in all these writ petitions is questioning the order passed by the first respondent under Section 201(1) and 201(1A) of the Income Tax Act, 1961 (for short 'the Act'), for the respective assessment years. The petitioner is also questioning the show cause notice issued on 19.1.2009, pursuant to which Annexure -H has been passed.

(2.) THE facts in a nut -shell are as follows: The petitioner is a Third Party Administrator licensed by the Insurance Regulatory and Development Authority under the Third Party Administrator Health Services Regulations, 2001 (for short "TPA Regulations"). The petitioner is engaged in the business of providing health insurance claim services under various Health Insurance Policies issued by several Insurers. The services include providing cashless service through Network Hospitals and settlement or reimbursement of claims in accordance with the terms of the Health Insurance Policies. The petitioner also provides for 24x7 Call Centre Services to the Health Card holders on various aspects of Health Insurance Claims. Pursuant to Regulation 2(h) of the T.P.A. Regulations, an agreement is entered into between TPA and insurance company registered under Section 3 of the Act, prescribing the terms and conditions of health services, which may be rendered to and received by each of the parties thereto. It is the specific contention of the petitioners that TPA agreement would cover 'health insurance business' or 'health cover' as defined in regulation 2(f) of the Registration of Indian Insurance Companies, Regulations, 2000 (for short "IRDA Regulation"). But, however, it does not include business of an insurance company or the soliciting, directly or through an insurance intermediary including an insurance agent. Suffice it to say that a number of individuals or groups of individuals take medi -claim policies by paying annual premia and avail medical insurance benefits provided by certain Insurance Companies. Apparently there is a contract of insurance between the insurance company and the individual who takes the medi -claim policy. But however subject to the terms and conditions exclusions and definitions contained in the policy. The insurance company undertakes that if during the subsistence of the policy any insured person who contracts any disease or suffers from any illness or sustain any bodily injury through accident and if such disease or injury requires and any such insured person is required to be treated by a physician or medical specialist or medical practitioner etc; would pay through TPA to the insured person or hospital or nursing home. It also stipulates that such injured person is required to be treated by a qualified physician, medical specialist, medical practitioner etc. Indeed that would provide easy and convenient access to the healthcare services for the insured persons. The Insurance Company enters into Service Level Agreement (SLA) with TPA for settling the insurance claims among other obligations and duties as mentioned in the SLA. The TPA settles the bills raised by hospitals or in some cases reimburses the insurance claims to the policy holders, from a separate account which is claim float account. Indeed the insurance company deposits certain amounts which are made available to the TPA. As and when the amount in the said claim float account diminishes, it has to be replenished by the insurance company. The TPA in order to provide better services to the policy holders of the insurance company enters into an memorandum of understanding (MoU) with various hospitals and nursing homes. Under the MoU, the TPA gives an undertaking to the hospitals to reimburse/settle the bills of the policy holders. The Memorandum of Understanding inter alia allows the policy holders to be treated in the hospital without the policy holder making any payment i.e., cashless facility. The payment of reimbursement/settlement of insurance clams is done in two ways - (1) when the policy holder gets treatment for a medical condition and pays by himself directly to the hospital and (2) when a policy holder gets himself treated at the Network hospital which has an agreement with the TPA to treat the patients who are their members on cashless basis. The TPA processes the medical documents for reimbursement of the medical expenses incurred by the policy holder and the amount to paid. According to the petitioners an individual will not come within the ambit of Section 194J of the Act, in as much as, the payments are made in fulfillment of the contractual obligations between the insurance company and the policy holder and not towards rendering any professional services. Hence, according to the petitioners, Sections 194J are not at all attracted to these payments.

(3.) THE Assessing Authority having regard to the show cause notice as well as the reply given was of the view that the petitioner was obliged to deduct the tax at source; that having not been done, there is a clear violation of the provisions of Section 194J of the Act. The total sum payable for the relevant year i.e., for the year 2002 -03 was Rs. 14,78,042/ -. The said determination is assailed in this writ petition.