TMI Blog2015 (11) TMI 1876X X X X Extracts X X X X X X X X Extracts X X X X ..... er the non-resident reinsurer nor any independent insurance company have any control over the assessee. AO has also accepted in order u/s.201/201(1)(A) of the Act that the countries with which India do not have a DTAA, the income of NRRs could be taxed in India only if the NRRs has permanent establishment in India. Since the assessee has no business activity on behalf of the NRRs, the provision of Section 192 to 195 are not applicable, hence, the question of tax deduction at source does not arise at all. It is pertinent to mention that none of the earlier/subsequent years, the assessee was found to be liable for deduction of tax u/s.192 to 195 of the IT Act. - Decided against revenue. - ITA Nos. 5184 to 5186/Mum/2009 - - - Dated:- 30-11-2015 - Shri R.C. Sharma, AM And Shri Sanjay Garg, JM For the Revenue : Ms. Vandana Sagar. For the Assessee : Shri Porus Kaka. ORDER PER R.C. SHARMA (A.M) : These are the appeals filed by the revenue against the order of CIT(A), Mumbai, for the assessment years 2006-07 to 2008-09, in the matter of order passed u/s.201(1)/201(1A) of the I.T. Act. 2. Common grounds have been taken in all the three assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he insurance company (the buyer of reinusrance) is fully protected. The A.O has noted that a survey u/s.133A of the Act was conducted on 12.02.2008 at the business premises of the assessee and it was gathered during the course of survey that the assessee was not deducting any tax at source before making payment of reinsurance premium to the non-resident Re-insurer. The AO has further observed that the assessee has not collected tax residency certificates (TRCs) of the NRRS to verify their residency and their tax liability in India nor the assessee has made any application u/s.195 of the Act for withholding order. The AO also further noted that the assessee has also remitted money to reinsurers located in the countries with which India does not have any DTAA. 4. In view of the above observations the AO held that assessee is liable to deduct tax at source on the re-insurer remittance made in three financial year to non-resident reinsurer (NRRs) @ 41.82%. The AO also charged interest u/s.201(1)/201(1A) on these remittance. 5. Against the above order of AO, assessee preferred appeal before the CIT(A). The contention of assessee before the CIT(A) was that provisions of Section 192 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er: 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 Thus the above proviso to section 9(1)(i) is very clear about business connection of a broker. The proviso specifically excludes an independent broker. Neither the non resident insurers nor any Indian insurance company have any control over the appellant. Therefore the appellant is having an independent status and acting in the ordinary course of its business. It is also seen that the reinsurance money received is a trust money and the remittance is carried out to discharge appellant's function as reinsurance broker only with a obligation to remit the same as per IROA regulations. Therefore the appellant is not liable to make TDS on the remittance made to non resident insurers. The appellant is a registered broker and has to abide by regulation of IROA, which does not permit any deduction from trust money other than charges, fees or commission e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remand report was called for from the AO to examine and report that the reimbursed payments made to AON London were in fact made to ultimate beneficiaries which were located in countries with which India has a DTAA agreement. The AO vide his remand report dated 20.05.09 submitted that the additional evidence filed by the assessee is liable to be rejected as the assessee could not produce these evidences for remittance either during the course of survey proceedings or proceedings u/s 201. However, without prejudice, the AO examined the details filed by the assessee in the form of 5 box files in respect of remittances to AON London and it was found that the ultimate beneficiaries of the reinsurance premium in all but one case were located in country with which India is having a DTAA. With regard to remittance of Rs.96,98,839/- mentioned at S.No.29 in respect of reinsurance premium received from New India Insurance made on 25.05.06, the assessee could not furnish the relevant details so it could not be verified. However, during the course of appellate proceedings, the appellant has furnished documentary evidence in respect of the said payment of Rs.96,98,839/ vide his letter dated 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay High Court in Clifford Chance vs DCIT(221 CTR 1)(Bom). Thus the ground No.1 to 3 is allowed. 1.3.7 As regards ground No.4 of computing of profit @ 20% is concerned it is treated as allowed in view of findings that remittances made to NRRs have been held as not taxable in India. 1.3.8 In the light of above discussion the appellant's appeal is allowed in respect of all the four grounds of appeal and the AO is directed not to treat appellant in default u/s.201 and 201(1A). Consequently, the tax of Rs.1,95,32,001/- u/s.201 and interest of Rs.35,14,966/- u/s.201(1A) is deleted. 2.0 In the result the appeal is allowed. 6. Against the above order of CIT(A), the revenue is in further appeal before us. 7. Smt. Vandana Sagar, ld. CIT DR appeared on behalf of the revenue and contended that the Non Resident Reinsurer (NRR) received payment directly from the assessee, a resident of India. Thus, there was a direct source of Income in India. As per ld. CITDR It is also a matter of fact that the assets which have been insured, are located in India. Thus, there is accrual of income indirectly from an asset in India. The Insurance Companies which pay reinsuranc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of 6 year as per ratio of Mahindra Mahindra 313 ITR(AT)263(Mumbai)(SB) needs to appreciated on facts of each case and the said special bench decision cannot be applied ipso-facto to each case in view of the subsequent Supreme court and High court decisions and amendments to I T Act. The question before the special bench as appearing on pg 278 was: whether on facts and circumstances of the case and in law an order u/ s 195 read with 201 is barred by limitation within 4 years from end of relevant asstt year in absence of any express provision in the Act The SB held that that maximum time limit for initiating the proceedings u/s 201(1) is four/six years and maximum time for completion of these proceedings is one year from end of FY in which proceedings were initiated. The question of time by which an assessment has to be made in hands of payee was never for consideration before SB and it was only to explain its view of ascertaining the limit of 4/6 years for passing 201 order that the SB also drew support from the time limit available for making assessment in case of payee. The said observation of SB was therefore out of context of the question referred to it and hence in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding has been recorded by the CIT(A) to the effect that assessee is an independent broker and not an agent. The assessee does not carry out any activity on behalf of anyone in India and has no authority to enter into any contract in India. In these circumstances, the provisions of Section 192 to 195 relating to tax deduction at source are not applicable to the assessee. The provisions of Section 9(1)(i) specifically excludes an independent broker, neither the non-resident reinsurer nor any independent insurance company have any control over the assessee. Furthermore, the AO has also accepted in para 6 of his order u/s.201/201(1)(A) of the Act that the countries with which India do not have a DTAA, the income of NRRs could be taxed in India only if the NRRs has permanent establishment in India. Since the assessee has no business activity on behalf of the NRRs, the provision of Section 192 to 195 of the IT Act are not applicable, hence, the question of tax deduction at source does not arise at all. It is pertinent to mention that none of the earlier/subsequent years, the assessee was found to be liable for deduction of tax u/s.192 to 195 of the IT Act. The detailed finding recorde ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
