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TMI Blog2015 (11) TMI 1876X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that the assessee functioned as independent broker and that there was no business connection in India, without appreciating that the assessee acted as collecting agent of the non- resident reinsures, that the payment made to the agent amounts to payment made to the non resident reinsurers and that the payment was made in India. Even as per IRDA regulations the payment made to the agent amounts to payment made to the reinsurance companies. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that the assessee was not required to deduct tax on the reinsurance premium paid to the non resident reinsurance companies in the non treaty countries. 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that the assessee was not an assessee was not in default u/s.201 and 201(1A) of the Income Tax Act. 5. The appellant prays that the order of ld. CIT(A) on the above ground(s) be set aside and that of the Assessing Officer restored." 3. Rival contentions have been heard and record perused. Brief facts are that asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO and submission of the AR. It is seen that the assessee is an insurance broker in the insurance market. The appellant acts as a reinsurance broker between Re-insurers generally located in India and NRRs generally located outside India. Its main job is to identify and place the risk of time to the selected NRRs or progress as the case may be. It may be noted that the reinsurance contracts and agreements between Indian insurers and the foreign insurers on a principle to principle basis. The appellant in its capacity as a broker may handle the premium funds to provide administrative convenience to the insurers and reinsurers but has no authority to act as an agent. Whereas an agent is allowed to act only on behalf of one insurance company. Once a broker is appointed as an agent of a particular insurance company he cannot solicit business of any other insurance company. An agent has to work under the supervision, control and direction of the insurance company which appoints him as an agent. Broker on the other hand is not restricted like an agent who is allowed to act only on behalf of one insurance company. In other words a broker can solicit business of many insurance companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procuring the insurance business. The insurance companies do not procure business for the reinsurance company nor does the Re-insurers pay commission or other payment for soliciting the business from the insurance companies. Therefore it was concluded that for making payment to NRRS the provisions of section 195 are not attracted. "In view of these facts it is seen that the assessee is an independent broker and not an agent who does not carry out any activity on behalf of anyone entity and has no authority to enter into contracts in India. Therefore provisions of section 192 to section 195 relating to TDS are not at all applicable to the applicant. Hence the appellant was not required to deduct tax at source on the payments made to NRRs. It is also held that the non-resident insurers do not carry out any operation in India at all and the insurance business has been specifically excluded of are, independent broker under the proviso to section 9(1)(i) of the Act. Thus in absence of any operations being carried out by NRRs in India no income should be deemed to accrue or arise in India u/s.9(1) of the Act which is also fortified by a decision of Supreme Court in the case of CIT Vs. A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the AO himself has held that no TDS is required in respect of payments made to ultimate beneficiaries who were located in countries with whom India has DTAA. Therefore, remittances are not chargeable to tax in India. 1.3.5 As regards remittance made to non-treaty countries, it is seen that the appellant is an independent broker and has no business on behalf of NRRs of India and there is no P.E. of the NRR in India. The income arrived from the transactions of reinsurance arrangements cannot be treated as accrued or arise to NNRs u/s.9(1)(i) of the Act. Hence the appellant was not required to make TDS on the reinsurance premium remitted. 1.3.6 As regards remittances made to Re-insurers situated in Australia, I agree with the appellant that there is no concept of deemed permanent establishment for insurance premium under Article 5 and 6 OECD Model Convention. It is also seen that no services rendered in India , the assessee contracts broker and he does not know who is the person to whom he is making payment. Therefore the appellant being independent broker has no business connection. Hence the appellant was not required to make TDS on remittances made to NRRs & Australia. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lan 263 ITR 706, "In our view the contention of the assessee proceeds on the fallacious premise that the liability to taxation is same as payment of tax. Liability to taxation is a legal situation, payment of tax is a fiscal fact." 9. As per ld. CIT DR, as long as the remittance is chargeable, whether or not actually charged, obligation to deduct arises. It cannot therefore be interpreted that since the payee was not charged, the obligation of the payee gets diluted or waived off. Such an interpretation will be erroneous and contrary to the view taken by Hon'ble Supreme Court in the case of Azadi Bachao Andolan (supra). 10. With regard to assessee reliance placed on Mahindra and Mahindra, Crompton Greaves, VSNL, Shipping Corporation, the contention of ld. CIT DR was that an important point to note is that there was amendment in section 201 w.e.f 1/04/2010. In none of these cases, this aspect has been discussed that it was only after 1/04/2010, a time limit was introduced to pass order u/s 201. As per ld. CIT DR sub sections 3 and 4 to section 201 were inserted by Finance Act 2009 wef 1/4/2010. Till then there was no limit on passing an order u/s 201 to treat assessee in de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that once an order u/s 201 is passed lawfully within time and was valid as on date of passing such order, then subsequently on happening or non happening of any other event will not make such order void ab initio unless the order was conditional by itself or there was specific statutory requirement to be fulfilled later to maintain the validity of such order. It has already been explained in earlier paragraphs that there was no such requirement under the Act and particularly no requirement under Act in case of nonresidents even after amendment. There is no decision of any High court or Supreme court holding the invalidity of a valid 201(1) order due to mere passage of time. How just by delaying the appeal at any forum, can the appellant be allowed to make an argument that now the order u/s 201 is barred as no action has been taken in hands of payee. If the appellants appeal before ITAT would have been decided prior to the 4/6 years period, could this objection have been raised by appellant; the answer is No. Thus holding a valid order to be invalid just due to passage of time wherein some action in case of payee has not been taken would be against the legal principles that too ..... X X X X Extracts X X X X X X X X Extracts X X X X
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