ASST CIT (IT) 4(2)(2), MUMBAI V. SWISS RE-INSURANCE COMPANY LTD, MUMBAI

ITA 1351/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0845 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 11-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Double taxation relief; Permanent establishment; Wholly owned subsidiary
• Section: 143(3); 5(2)

Judgement Text

ITA NOS.1350 &1351/MUM/2016 SWISS REINSURANCE COMPANY LIMITED ASSESSMENT YEARS-2011-12 & 2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI . , , BEFORE SHRI C.N. PRASAD, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NOS.1350 & 1351/MUM/2016 ( / ASSESSMENT YEARS: 2011-12 & 2012-13) ASSISTANT COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION) 4(2)(2) SCINDIA HOUSE, BALLARD PIER N.M.ROAD, MUMBAI 400 038 / VS. SWISS RE - INSURANCE C OM PANY LIMITED C/O SRBC & ASSOCIATES LLP 14 TH FLOOR, THE RUBY 29, SENAPATI BAPAT MARG, DADAR (WEST), MUMBAI-400 028 !' ./ ./ PAN/GIR NO.AACCS-2650-M ( '$ /APPELLANT ) : ( %'$ / RESPONDENT ) REVENUE BY : SAMUEL DARSE, LD. CIT(DR) ASSESSEE BY : JASMIN AMALSADVALA & NISHANT THAKKAR, LD. ARS / DATE OF HEARING : 22/01/2018 / DATE OF PRONOUNCEMENT : 22/01/2018 /O R D E R PER BENCH 1. IN THE CAPTIONED APPEALS FOR ASSESSMENT YEARS [A Y] 2011-12 & 2012- 13, THE REVENUE IS AGGRIEVED BY CERTAIN DIRECTIONS GIVEN BY DISPUTE RESOLUTION PANEL. SINCE, THE ISSUES ARE COMMON IN B OTH THE APPEALS, WE DISPOSE-OFF THE SAME BY WAY OF THIS COMMON ORDER FO R THE SAKE OF CONVENIENCE AND BREVITY. ITA NO. 1351/MUM/2016 AY 2011-12 2 ITA NOS.1350 &1351/MUM/2016 SWISS REINSURANCE COMPANY LIMITED ASSESSMENT YEARS-2011-12 & 2012-13 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL AGAINST DIRECTION GIVEN BY DISPUTE RESOLUTION PANEL-2, MUMBAI, OBJECTION NO.24 8 DATED 18/12/2015: - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE HONBLE DRP HAS ERRED IN HOLDING THAT THE ASSESSEE COMPANY DOES NOT HAVE ANY PE IN INDIA WITHIN THE MEANING OF ARTICLE 5(1), 5(2) AND 5(3) AND ARTICLE 5(5)? THE DRP FAILED TO APPRECIATE THAT M/S.SWISS RESERVICES INDIA PVT.LTD. (SRSIPL) WAS PE RFORMING CORE FUNCTIONS, WHICH WERE INEXTRICABLY INTERTWINED TO ASSESSEES REINSURANCE BUSINESS AND WERE NOT PREPARATORY OR AUXILIARY IN NATURE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE HONBLE DRP HAS ERRED IN HOLDING THAT THE REINSURANCE BUSINESS HAS BEEN SPECIFICALLY EXCLUDED FROM CONSTITUTING A PE IN INDIA UNDER THE TREATY. THE DR P FAILED TO APPRECIATE THAT ARTICLE 5(4) OF THE DTAA IS NOT A DISABLING CLAUSE, RATHER IT IS AN ENABLING CLAUSE WHICH CREATE DEEMING FICTION OF EXISTENCE OF PE ENGAGED IN INSURANCE BUS INESS AND THEREFORE DOES NOT RESTRICT THE APPLICABILITY OF CLAUSES (2), (3), AND (5) OF T HE DTAA IN CASE OF REINSURANCE BUSINESS, IF THE CONDITIONS MENTIONED THEREIN ARE SATISFIED. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE HONBLE DRP HAS ERRED IN HOLDING THAT M/S. SWISS RESERVICES IND IA PVT. LTD. (SRSIPL) IS AN INDEPENDENT ORGANIZATION AND IT HAS NOT ACTED AS AN AGENCY OF THE ASSESSE COMPANY AND THEREFORE, CANNOT BE HELD TO BE AN AGENCY PE OR SER VICE PE AS PER ARTICLE 5(5) OF THE DTAA? THE DRP FAILED TO APPRECIATE THAT M/S. SWISS RESERVICES INDIA PVT. LTD. (SRSIPL) WAS PERFORMING CORE FUNCTIONS, WHICH WERE INSEPARAB LE PART OF THE ASSESSEES REINSURANCE BUSINESS. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE HONBLE DRP IS CORRECT IN HOLDING THAT THE ASSESSEES REINSURAN CE PREMIUM RECEIPTS/INCOME FROM REINSURANCE CONTRACT AGREEMENT WITH SWISS RESERVICE S INDIA PVT. LTD. (SRSIPL), CANNOT BE TAXED IN INDIA UNDER THE DEEMING PROVISION OF SE CTION 9(1)(I) OF THE INCOME TAX ACT,1961 THOUGH THE ASSESSE HAS REGULAR FLOW OF INCOME EMANA TING FROM INDIA? 5. THE APPELLANT PRAYS THAT THE ORDER OF THE DRP BE SET ASIDE ON THE ABOVE GROUNDS AND THE DRAFT ORDER OF THE ASSESSING OFFICER RESTORED. 3.1 FACTS IN BRIEF ARE THAT THE ASSESSEE BEING NON-RESIDENT CORPORATE ASSESSEE WAS ASSESSED AT RS. NIL U/S 143(3) READ WITH SECTION SEC.144C(13) OF THE INCOME TAX ACT,1961 ON 22/01/2016 PURSUANT TO THE DIRECTIONS OF DISPUTE RESOLUTION PANEL-2 [ DRP] DATED 18/12/2015. THE 3 ITA NOS.1350 &1351/MUM/2016 SWISS REINSURANCE COMPANY LIMITED ASSESSMENT YEARS-2011-12 & 2012-13 REVENUE IS AGGRIEVED BY CERTAIN DIRECTIONS GIVEN BY DRP PURSUANT TO WHICH FINAL ASSESSMENT ORDER HAS BEEN PASSED. 3.2 DURING PROCEEDINGS, IT WAS NOTED THAT THE ASSES SEE COMPANY, BEING A COMPANY INCORPORATED IN SWITZERLAND, WAS ENGAGED IN THE BUSINESS OF PROVIDING RE-INSURANCE SERVICES IN INDIA TO VARIOUS CEDANTS THROUGH ITS BRANCH AT SINGAPORE AND EARNED RE-INSURANCE PREMIUM, WHICH WAS CLAIMED AS BUSINESS INCOME . THE ASSESSEE CLAIMED THAT SINCE IT HAD NO PERMANENT ESTABLISHMENT [PE] IN INDIA, THE BUSINESS INCOME EARNED IN THE SHAPE OF RE-INSURANCE PREMIUM WAS NOT TAXABLE IN INDIA IN TE RMS OF DOUBLE TAXATION AVOIDANCE AGREEMENT [DTAA]. HOWEVER, LD. AO OPINED THAT THE WHOLLY OWNED SUBSIDIARY OF THE ASSESSEE NAMELY SWISS RE SERVICES INDIA PRIVATE LIMITED [SRSIPL] CONSTITUTED ASSESSEES SERVICE & AGENCY PE IN INDI A AND HENCE, THE INCOME EARNED THERE-FROM WAS LIABLE TO BE TAXED AND ACCORDINGLY ESTIMATED THE PROFITS @10% OF TOTAL REC EIPTS AND AFTER ATTRIBUTING THE SAME TO THE EXTENT OF 50% TO INDIAN PE, WORKED OUT ESTIMATED INCOME @5% OF TOTAL RECEIPTS WHICH CAME TO RS.23.18 CRORE S. 3.3 THE ASSESSEE RAISED OBJECTIONS AGAINST THE DRAFT ASSESSMENT ORDER WITH SUCCESS BEFORE LD.DRP VIDE IMPUGNED DIRECTIONS U/S 144C(5) DATED 18/12/2015 WHERE LD. DRP FOLLOWING THE ORDER OF THI S TRIBUNAL FOR AY 2010- 11 HELD THAT THE ASSESSEE DID NOT HAVE ANY BUSINESS CONNECTION IN INDIA WITHIN THE MEANING OF EXPLANATION-2 TO SECTION 9(1) AND FURTHER SRSIPL DID NOT CONSTITUTE SERVICE / DEPENDENT AGENT / SUBSIDIARY PE IN INDIA. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4 ITA NOS.1350 &1351/MUM/2016 SWISS REINSURANCE COMPANY LIMITED ASSESSMENT YEARS-2011-12 & 2012-13 4. THE LD. AUTHORISED REPRESENTATIVE [AR] FOR THE A SSESSEE, AT THE OUTSET, BY PLACING RELIANCE ON THE DIRECTIONS OF DRP CONTENDED THAT THE MATTER SQUARELY STOOD IN ASSESSEES FAVOR BY THE OR DER OF THIS TRIBUNAL FOR AY 2010-11 AS WELL FOR AY 2013-14. THE COPIES OF TH E RELEVANT ORDERS HAVE BEEN PLACED BEFORE US. THE LD. DEPARTMENTAL REPRESE NTATIVE [DR], WHILE FAIRLY CONCEDING THE SAME, CONTENDED THAT THE ORDER S OF THE EARLIER YEARS HAVE BEEN CHALLENGED BY THE REVENUE BEFORE HONBLE BOMBAY HIGH COURT AND THE SAME ARE SUB-JUDICE . 5. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED CITED ORDER OF THE TRIBUNAL. WE FIND THAT, THE MATTER, AT PRESE NT, STOOD COVERED IN ASSESSEES FAVOR BY THE ORDER OF THIS TRIBUNAL FOR AY 2010-11 ITA NO. 1667/MUM/2014 DATED 13/02/2015 WHICH HAS BEEN FOLLO WED WHILE DECIDING THE MATTER FOR AY 2013-14 ITA NO. 2759/MUM/2017 DAT ED 04/07/2017. THE RELEVANT FINDINGS OF THE TRIBUNAL AS GIVEN IN ORDER FOR AY 2010-11 ARE EXTRACTED BELOW FOR EASE OF REFERENCE:- 5.6 TO SUM UP, THE ASSESSEE DOES NOT HAVE ANY BUSIN ESS CONNECTION IN INDIA IN THE LIGHT OF EXPLANATION-2 TO SECTION 9(1) OF THE ACT. THE ASSESSEE DOES NOT HAVE PE IN INDIA. THE FACTS ON RECORD SHOW THAT THERE IS NEITH ER SERVICE PE NOR AGENCY PE IN THE FORM OF SESIPL. CONSIDERING THE FACTS IN TOTALITY I N THE LIGHT OF THE RELEVANT PROVISIONS OF THE LAW AND DTAA AND THE JUDICIAL DECISIONS REFERRE D TO HEREIN ABOVE, WE HAVE NO HESITATION IN SETTING ASIDE THE ASSESSMENT ORDER AN D ACCORDINGLY WE DIRECT THE AO NOT TO TREAT THE INCOME OF THE ASSESSEE AS TAXABLE UNDER T HE ACT. WITH THIS GROUND NO. 1,2 AND ALL ITS SUB-GROUNDS ARE ALLOWED. RESPECTFULLY FOLLOWING THE BINDING JUDICIAL PRECEDE NT, TAKING THE SAME VIEW, WE DISMISS REVENUES APPEAL. ITA NO. 1350/MUM/2016 AY 2012-13 5 ITA NOS.1350 &1351/MUM/2016 SWISS REINSURANCE COMPANY LIMITED ASSESSMENT YEARS-2011-12 & 2012-13 6. AGGRIEVED ON SIMILAR FACTS AND CIRCUMSTANCES FOR AY 2012-13, THE REVENUE HAS RAISED IDENTICAL WORDED GROUNDS OF APPE AL. SINCE FACTS ARE SIMILAR EXCEPT FOR MINOR VARIATIONS, TAKING THE SAM E VIEW, WE DISMISS REVENUES APPEAL. CONCLUSION 7. BOTH THE APPEALS FILED BY THE REVENUE STANDS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY, 2018. SD/- SD/- (C. N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 22 .01.2018 SR.PS:- THIRUMALESH ! / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. %'$ / THE RESPONDENT 3. - ( ) / THE CIT(A) 4. - / CIT CONCERNED 5. '/ , / , / DR, ITAT, MUMBAI 6. 01 / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI