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TMI Blog2017 (8) TMI 840X X X X Extracts X X X X X X X X Extracts X X X X ..... 4805/Mum/2015, A.Y. 2011 - 12. 2. Assessee-company is a joint-venture between Bharati Enterprises and AXA Group. It is engaged in the business of life insurance. In order to hedge its risk under the insurance contracts written as per market practice the assessee entered into Risk Premium Reinsurance Agreement (RPRA) with RG International Reinsurance Company Ltd. (RIRCL), Ireland, which is engaged in providing reinsurance globally to various life insurance companies and is a part of Reinsurance group of America. For the insurance risk transferred to RIRCL, the assessee pays reinsurance premium. The assessee did not deduct any tax for remittance of reinsurance premium made. In doing so, the assessee relied on the declaration provided by RIRCL to that effect. 3. The TDS Officer questioned the assessee about not deducting the tax at source for the payments made to the Ireland company and asked it to explain as to why it should not be treated as A-I-D. After considering the submission of the assessee, the TDS officer held that the assessee had failed to deduct tax at source u/s.195 of the Act on the payments made to Ireland Company, 4. Aggrieved by the order of the TDS officer, it fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee could be treated as an A-I-D for not deducting tax with regard to payments made to RIRCL. Here we would like to reproduce the relevant portion of the order of the Tribunal in the case of Swiss Reinsurance Co. Ltd. (supra), which reads asunder :- "2. Briefly stated, the facts are as under: Swiss Re-Insurance Company Limited i.e. the assessee is a company incorporated in Switzerland which receives income from providing reinsurance to various Cedants in India. The re-insurance premium received by the assessee is claimed as business income and it is further claimed that in absence of any Permanent Establishment (PE) in India the entire business income is not taxable in India. 2.1 During the course of assessment proceedings, the assessee filed necessary details and information in support of its claim. After carefully going through the information/details furnished by the assessee the AO observed that the business of the assessee is to provide reinsurance services to the clients in India. The AO further observed that in the course of such business Swiss Re-Services India Pvt. Ltd. (SRSIPL), which is an Indian Company and wholly owned subsidiary of the assessee is a PE of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling of agency PE does not arise. Attention was drawn to Article 5(5) of the DTAA between India and Switzerland and it was explained that the relationship between the assessee and SRSIPL do not satisfy the conditions mentioned under the aforesaid Article of the DTAA. Referring to Article 5(4) of the tax treaty, it was brought to the notice of the AO that an insurance company is liable to tax if collects insurance premium in India and ensures risk of Indian residents or their agents except in the case of reinsurance services. The assessee concluded by stating that it neither has a service PE nor an agency PE in India, therefore, no income can be attributed to India on account of PE in India. 2.4 The AO considered the detailed submissions and the contentions made by the assessee. However, the submissions made by the assessee did not find favour with the AO who at para 9.3.2 of his order observed as under: 9.3.2. From perusal of the facts and circumstances of the case, it emerges that the arguments of the assessee are not tenable on account of the following reasons: i, The re-insurance contract is an agreement between the insurer and the reinsurer, whereby a part of the risk get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vis-à-vis the assessee are against the facts of the case and not supported by the provisions of law. 4. Per contra, the Ld. DR supporting the findings of the AO stated that the services rendered by SRSIPL to the assessee make it an Agency PE. Further, the work was taken by the assessee from SRSIPL Dependent Agency PE. In support of the contention the Ld. DR relied upon the Ruling in AAR No.542 of 2001, (274 ITR 501), ITAT Delhi Bench in the case of Motorola Inc. v. DCIT 95 ITD 269. Ld. DR also relied upon the decision of the Hon'ble Supreme Court in the case of DIT (IT) vs. Morgan Stanley & Company, 292 ITR 416(SC) and Hon'ble Delhi High Court in the case of Centrica India Offshore P. Ltd. Vs. CIT, 44 taxamann.com 300 and Hon'ble Karnataka High Court in the case of Jebon Corporation India vs. CIT, 245 CTR 300(Kar). 5. Having heard the rival submissions, we have carefully perused the orders of the authorities below and the relevant documentary evidences brought to our notice in the light of judicial decisions relied upon by both sides. To begin with, let us first consider the relevant clauses of the service agreement between Singapore Branch of the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclude contracts on behalf of the non-resident, unless his activities are limited to the purchase of goods or merchandise for the non- resident; or (b) has no such authority, but habitually maintains in India a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the non-resident; or (c) habitually secures orders in India, mainly or wholly for the non-resident or for that non-resident and other non-residents controlling, controlled by, or subject to the same common control, as that non-resident: Provided that such business connection shall not include any business activity carried out through a broker, general commission agent or any other agent having an independent status, if such broker, general commission agent or any other agent having an independent status is acting in the ordinary course of his business : Provided further that where such broker, general commission agent or any other agent works mainly or wholly on behalf of a non-resident (hereafter in this proviso referred to as the principal non-resident) or on behalf of such non-resident and other non- residents which are controlled by the principal non-resident or have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely because services are provided to that enterprise. For example, services might be provided by an individual to his employer without that employer performing any services (e.g. an employee who provides manufacturing services to an enterprise that sells manufactured products). Another example would be where the employees of one enterprise provide services in one country to an associated enterprise under detailed instructions and close supervision of the latter enterprise; in that case, assuming the services in question are not for the benefit of any third party, the latter enterprise does not itself perform any services to which the provision could apply. 42.31 Also, the provision only applies to services that are performed in a State by a foreign enterprise. Whether or not the relevant services are furnished to a resident of the State does not matter; what matters is that the services are performed in the State through an individual present in that State." 5.5 Considering the services rendered by SRSIPL in the light of the OECD commentary, SRSIPL cannot be considered as PE of the assessee. The decision relied upon by Ld. DR do not support the Revenue on the facts of the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X
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