DDIT, Pune V. Bajaj Allianz General Insurance Co Ltd., Pune

ITA 1509/PUN/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9512 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-01-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 10-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; Permanent establishment
• Section: 201(1); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NOS.1509 TO 1513/PN/2012 (ASSESSMENT YEARS : 2005-06 TO 2009-10) DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION-I), PUNE. . APPELLANT VS. BAJAJ ALLIANZ GENERAL INSURANCE COMPANY LIMITED, 1 ST FLOOR, GE PLAZA, AIRPORT ROAD, PUNE 411 006. PAN : AABCB5730G . RESPONDENT DEPARTMENT BY : SHRI RAJESH DAMOR ASSESSEE BY : SHRI NIKHIL MUTHA DATE OF HEARING : 28-01-2015 DATE OF PRONOUNCEMENT : 06-02-2015 ORDER PER G. S. PANNU, AM THE CAPTIONED FIVE APPEALS BY THE REVENUE ARE DIREC TED AGAINST A CONSOLIDATED ORDER PASSED BY THE COMMISSIONER OF IN COME TAX (APPEALS)-I, PUNE DATED 08.12.2011 WHICH, IN TURN, HAS ARISEN FR OM A CONSOLIDATED ORDER PASSED BY THE ASSTT. DIRECTOR OF INCOME TAX (INTERN ATIONAL TAXATION)-II, PUNE (IN SHORT THE ASSESSING OFFICER), U/S 201(1) R.W. S. 195 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) DATED 30.03.2009 PERTAINI NG TO THE ASSESSMENT YEARS 2005-06 TO 2009-10, HOLDING THE ASSESSEE AS AN ASS ESSEE IN DEFAULT FOR NON- DEDUCTION OF TAX AT SOURCE AND CERTAIN PAYMENTS MAD E TO NON-RESIDENTS AND ACCORDINGLY DIRECTING THE ASSESSEE TO PAY RS.34,69, 791/-. 2. IN BRIEF, THE RELEVANT FACTS ARE THAT THE RESPON DENT-ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE CO MPANIES ACT, 1956 AND IS A JOINT VENTURE BETWEEN BAJAJ AUTO LIMITED, INDIA A ND ALLIANZ AG, GERMANY. ITA NOS.1509 TO 1513/PN/2012 THE RESPONDENT-ASSESSEE IS ENGAGED IN THE BUSINESS OF GENERAL INSURANCE AND IN TERMS THEREOF FOR THE YEAR UNDER CONSIDERATI ON IT WAS ENGAGED IN FIRE, MARINE, MOTOR AND MISCELLANEOUS (WORKING COMPENSATI ON EMPLOYERS LIABILITY, PUBLIC PRODUCT LIABILITY, ENGINEERING, AVIATION, HE ALTH, PERSONAL ACCIDENT, ETC.) INSURANCE BUSINESSES. IN THE MARINE INSURANCE AND AVIATION INSURANCE PRODUCTS OFFERED BY THE ASSESSEE, INSURANCE COVER I S PROVIDED TO COMPENSATE FOR THE LOSSES/DAMAGES TO GOODS/PROPERTY IN TRANSIT . TO SETTLE OVERSEAS CLAIMS ARISING OUT OF SUCH POLICIES, ASSESSEE APPOINTED NO N-RESIDENT SURVEYORS TO ASSESS THE DAMAGES, SO THAT THE ASSESSEE COULD DECI DE THE AMOUNT TO BE COMPENSATED TO THE INSURED UNDER SUCH INSURANCE CON TRACTS. IN ORDER TO ASSESS THE DAMAGES, THE SURVEYORS ROLE WAS TO CARR Y OUT SURVEYS AND TO ASSESS THE EXTENT OF DAMAGES TO THE GOODS BELONGING TO THE INSURED AND ISSUANCE OF SURVEY REPORTS TO THE ASSESSEE ON THE B ASIS OF THEIR ASSESSMENT OF LOSSES/DAMAGES. SUCH SURVEYS ARE CLAIMED TO BE CAR RIED OUT ENTIRELY OUTSIDE OF INDIA BY THE NON-RESIDENT SURVEYORS AND THE ASSE SSEE PAID FEE FOR THEIR SERVICES, BY DIRECT REMITTANCES INTO THEIR OVERSEAS BANK ACCOUNTS. 3. AS PER THE REVENUE, ASSESSEE WAS REQUIRED TO DED UCT TAX AT SOURCE U/S 195 OF THE ACT ON SUCH REMITTANCES AND FOR THE FAIL URE OF THE ASSESSEE TO DO SO, ASSESSEE WAS HELD TO BE AN ASSESSEE IN DEFAULT WITHIN THE MEANING OF SECTION 201(1) OF THE ACT FOR THE ASSESSMENT YEARS 2005-06 TO 2009-10 AND ACCORDINGLY A DEMAND OF RS.34,69,791/- WAS RAISED B Y THE ASSESSING OFFICER IN TERMS OF HIS ORDER DATED 30.03.2009 PASSED U/S 2 01(1) R.W.S. 195 OF THE ACT. BROADLY SPEAKING, AS PER THE REVENUE, THE SURVEY FE E PAID TO THE NON- RESIDENCE SURVEYORS ARE TAXABLE UNDER THE ACT U/S 9 (I)(VII) OF THE ACT SINCE THE SERVICES PROVIDED BY THE SURVEYORS ARE COVERED WITH IN THE MEANING OF FEES FOR TECHNICAL SERVICES PROVIDED IN THE AFORESAID SECTI ON. THE ASSESSING OFFICER ALSO HELD THE SURVEY FEE PAID TO NON-RESIDENT SURVE YORS AS TAXABLE UNDER THE RESPECTIVE DOUBLE TAXATION AVOIDANCE AGREEMENTS (DT AA) WHICH CONTAINED ITA NOS.1509 TO 1513/PN/2012 ARTICLES FOR FEE FOR TECHNICAL SERVICES (FTS)/FEE FOR INCLUDED SERVICES (FIS) IN TERMS OF ARTICLE 12 OR 13 OF THE RESPECTIVE DTAA S. IN COMING TO SUCH CONCLUSION, THE ASSESSING OFFICER HELD THAT THE TER M MAKE AVAILABLE CONTAINED IN ARTICLE 12 OR 13 OF THE RESPECTIVE DTTAS, SHOULD BE UNDERSTOOD TO MEAN THAT THE TECHNICAL SERVICES ARE OFFERED OR MADE ACCES SIBLE TO THE RECIPIENT ASSESSEE. 4. ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO HAS HELD THAT THE SAID PAYMENT DID NOT CONSTITUTE EITHER FTS OR FIS IN TERMS OF THE RESPECTIVE DTAAS AND THEREFORE, THE ASSESSEE WAS NO T REQUIRED TO DEDUCT TAX AT SOURCE. FURTHER, THE CIT(A) ALSO CONSIDERED THE APPLICATION OF ARTICLE 12 ON BUSINESS PROFITS OF THE RELEVANT DTAAS AND CONCLUDE D THAT IN VIEW OF THE UNDISPUTED FACTS THAT THE NON-RESIDENT SURVEYORS DI D NOT HAVE ANY PERMANENT ESTABLISHMENT (PE) IN INDIA THE PAYMENTS MADE BY TH E ASSESSEE TO SUCH PARTIES WERE ALSO NON-TAXABLE THEREOF. 5. FURTHER, IN RELATION TO THE SURVEY FEES PAYS TO NON-RESIDENT SURVEYORS SITUATED IN COUNTRIES WITH WHOM INDIA DID NOT HAVE DTAAS, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO RECONSIDER THE POSITION IN THE LIGHT OF SECTION 115A OF THE ACT. THE PLEA OF THE ASSESSEE WAS THAT THE ASS ESSING OFFICER ERRED IN APPLYING THE RATE OF 30% AND INSTEAD RATE OF 10% SH OULD HAVE BEEN APPLIED. THE CIT(A) NOTICED THAT THE ONLY ISSUE WAS AS TO WH AT RATE OF TAX, SUCH PAYMENTS ARE TO BE TAXED CONSIDERING THE DATE OF AG REEMENT PURSUANT TO WHICH THE PAYMENTS HAVE BEEN MADE, AS PER THE REQUI REMENTS OF SECTION 115A OF THE ACT. THE CIT(A) DIRECTED THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE HAVING REGARD TO THE DATE OF AGREEM ENT PURSUANT TO WHICH THE PAYMENTS HAVE BEEN MADE AND CONSEQUENTLY LEVY THE T AX AT THE APPLICABLE RATES AFTER GIVING EFFECT TO THE PROVISIONS CONTAIN ED IN SECTION 115A OF THE ACT. IN SUM AND SUBSTANCE, THE APPEALS OF THE ASSESSEE W ERE PARTLY ALLOWED BY THE ITA NOS.1509 TO 1513/PN/2012 CIT(A). AGAINST THE SAID DECISION OF THE CIT(A), R EVENUE IS IN APPEAL BEFORE US BY RAISING FOLLOWING GROUNDS OF APPEAL FOR ASSES SMENT YEAR 2005-06, WHICH ARE COMMON TO THE OTHER FOUR :- 1. ON THE FACTS AND CIRCUMSTANCES AND AS PER THE RELEVANT DTAA, THE LEARNED CIT(A) ERRED IN HOLDING THAT PAYMENT TO SURVEYORS IN UK, NETHERLAND, SINGAPORE ARE NOT MADE AVAILABLE WHEN THE FACT IS THAT AFTER CONDUCTING THE SURVEY, THE SERVICE PROVIDER HAS MAD E AVAILABLE THEIR TECHNICAL KNOWLEDGE FOR THE ASSESSEE AND THE SAME IS OF ENDUR ING NATURE CAPABLE OF BEING UTILIZED INDEPENDENTLY BY THE ASSESSEE WITHOU T RECOURSE TO THE SERVICE PROVIDER. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND T HE LAW, THE LEARNED CIT(A) HAS ERRED IN CONCLUDING THAT THE TER M MAKE AVAILABLE MEANS TO TRANSFER OF TECHNICAL KNOWLEDGE, SKILLS, ETC. FR OM THE SERVICE PROVIDER TO THE RECIPIENT. 6. BEFORE US, THE LEARNED COUNSEL FOR THE RESPONDEN T-ASSESSEE SUBMITTED THAT IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07, THE TRIBUNAL VIDE ITS ORDER IN ITA NO. 119/PN/2011 DATED 06.05.2 013 HAS CONSIDERED THE ASPECT OF TAXABILITY OF SURVEY FEES PAID TO SURVEYO RS OF DTAAS COUNTRIES WITH MAKE AVAILABLE CLAUSE AND ALSO PAYMENTS TO PERSON S OF NON-DTAAS COUNTRIES. THE TRIBUNAL HAD CONSIDERED THIS ASPECT IN THE CONTEXT OF THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY INVOK ING SECTION 40(A)(IA) OF THE ACT ON THE GROUND THAT THE REQUISITE TDS WAS NO T DEDUCTED BY THE ASSESSEE ON PAYMENTS OF SURVEY FEES TO THE NON-RESI DENT SURVEYORS. THE TRIBUNAL CONSIDERED THE RIVAL STANDS AND CAME TO CO NCLUDE THAT THE PAYMENTS MADE TO THE NON-RESIDENT SURVEYORS OF COUNTRIES WIT H DTAAS HAVING MAKE AVAILABLE CLAUSE OR HAVING MFN CLAUSE WERE NOT TAX ABLE AS THE NON-RESIDENT SURVEYOR DID NOT MAKE ANY TECHNICAL KNOW-HOW, ETC. AVAILABLE TO THE ASSESSEE COMPANY. IN COMING TO SUCH CONCLUSION, THE TRIBUNA L ALSO REFERRED TO SIMILAR FINDINGS OF THE DISPUTE RESOLUTION PANEL (DRP) IN A SSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09. THEREFORE, SO FAR AS THE PAYMENTS MADE TO NON- RESIDENT SURVEYORS OF COUNTRIES WITH DTAAS HAVING MAKE AVAILABLE CLAUSE IN THE ARTICLE ON FEES FOR TECHNICAL SERVICES, THE T RIBUNAL DELETED THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT. OSTENSIBLY, FOR THE REASON THAT THERE WAS ITA NOS.1509 TO 1513/PN/2012 NO REQUIREMENT TO DEDUCT TAX AT SOURCE ON SUCH PAYM ENTS. IN SO FAR AS THE PRESENT GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2005- 06 ARE CONCERNED, THE SAME RELATE TO THE PAYMENTS MADE TO SURVEYORS IN UK , NETHERLAND, SINGAPORE WHICH ARE COUNTRIES WITH WHOM THERE ARE DTAAS AND T HEIR ARTICLE ON FEES FOR TECHNICAL SERVICES HAVE A MAKE AVAILABLE CLAUSE. THEREFORE, IN VIEW OF THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 DATED 06.05.2013 (SUPRA) AND ALSO THE DECIS ION OF THE DRP IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09, WE FIND NO ERROR IN THE PART OF THE CIT(A) IN ALLOWING THE RELIEF TO THE AS SESSEE. 7. FOR OTHER ASSESSMENT YEARS, COUNTRIES INVOLVED W ITH WHOM DTAAS HAVING SPECIFIC MAKE AVAILABLE CLAUSE EXISTS ARE UNITED STATES OF AMERICA, CANADA, AUSTRALIA AND PORTUGAL, AND THE DISPUTE IN SUCH CASES IS COVERED BY THE AFORESAID DECISION. SIMILARLY, FOR THE ASSESSM ENT YEARS 2006-07, 2007-08, 2008-09 AND 2009-10 PAYMENTS ALSO RELATE TO SPAIN, BELGIUM, ISRAEL COUNTRIES WITH WHOM DTAAS CONTAIN AN MFN CLAUSE, WHICH RESULT S IN APPLICABILITY OF THE MAKE AVAILABLE CONDITION. IN RELATION TO THESE C OUNTRIES ALSO THE DRP IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 HAS HELD THAT THE SAME ARE NOT LIABLE TO BE TAXED IN INDIA AS THE NON-RESIDENT SURVEYOR HAS NOT MADE ANY TECHNICAL KNOW-HOW ETC. AVAILABLE TO THE ASSESSEE C OMPANY. THUS, ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE U/S 195 OF THE ACT ON SUCH PAYMENT ALSO. FOR THE AFORESAID REASON, WHICH HAVE NOT BEE N CONTROVERTED BY THE REVENUE BEFORE US, EVEN ON ACCOUNT OF PAYMENTS TO M AKE SURVEYORS RESIDING IN SUCH COUNTRIES, THE CIT(A) MADE NO MISTAKE IN HO LDING THAT THERE WAS NO JUSTIFICATION FOR TREATING THE ASSESSEE LIABLE FOR DEDUCTION TAX AT SOURCE U/S 195 OF THE ACT. ITA NOS.1509 TO 1513/PN/2012 8. IN THE RESULT, THE GROUNDS OF APPEAL RAISED BY T HE REVENUE, ARE DISMISSED IN VIEW OF THE AFORESAID PRECEDENTS AND T HE ORDER OF THE CIT(A) IS HEREBY AFFIRMED QUA THE AFORESAID ISSUES. 9. IN THE RESULT, THE CAPTIONED FIVE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THIS 06 TH DAY OF FEBRUARY, 2015. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 06 TH FEBRUARY, 2015. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, PUNE; 4) THE CIT-I, PUNE; 5) THE DR, A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE