Delhi HC reserves order on whether tax at source can be deducted from Third Party Administrator

Delhi HC reserves order on whether tax at source can be deducted from Third Party Administrator

2.9.2011 (UNI) The Delhi High Court today reserved its order on the petition filed by TPA (Third Party Administrator) challenging the Central Board of Direct Taxes (CBDT)’s decision for asking them to deduct tax at source from the patients who get cashless treatment under the Medical Insurance Policy scheme.

The TPAs are bodies acting on behalf of the insurance companies in connection with the settlement of medical insurance policies issued by them.

A bench comprising Chief Justice Dipak Misra and Justice Sanjeev Khanna after hearing the arguments from both sides reserved its order.

Senior advocates S Ganesh, Yasobant Das, Amol Sinha and Anshuman Jain appearing for TPA Vipul Medicorp and others argued that the hospitals are exempted from Tax Deduction at Source (TDS )under section 194J of IT Act as they come under the business income category.

The TDS is only applicable on individuals and professionals, and the Income Tax under this category cannot be charged from hospitals, Mr Ganesh argued.

Mr Kamal Sahani, appearing on behalf of the CBDT, argued that the hospitals render professional medical services, therefore, they come under the professional income and TDS can be charged from them.

Mr Ganesh, however, argued that any payment made by the TPAs to the insurance companies includes overwhelming large amount of bill which includes number of items like room rent, sale of medicines, use of equipment such as ventilator, oxygen tank, food charges, diagnostics which cannot by any process of logic and reason ever be considered to be fees for professional services.

The entire amount paid to the hospital bill is covered under business income and cannot be treated as professional fees,’ the petitioners argued. UNI