DCIT, CHENNAI V. M/s. United India Insurance Co. Ltd., CHENNAI

ITA 1690/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61123 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-12-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 13-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB IRS
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Unexplained investment; Unexplained expenditure; Double taxation relief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NOS.1622 TO 1630(MDS)/2011 A.YS : 2002-03, 2003-04, 2003-04, 2004-05, 2005-06, 2005-06, 2006-07, 2007-08 & 2008-09 M/S.ROYAL SUNDARAM ALLIANCE INSURANCE COMPANY LTD., SUNDARAM TOWERS, 45 & 46, WHITES ROAD, CHENNAI-600 002. PAN AABCR7106G. VS. THE ASSISTANT COMMISSIONER/DEPUTY COMMISSIONER OF INCOME- TAX, LARGE TAX PAYER UNIT, CHENNAI. (APPELLANT) (RESPONDENT) ITA NOS.1662 TO 1670(MDS)/2011 A.YS.: 2002-03, 2003-04, 2003-04, 2004-05, 2005-06, 2005-06, 2006-07, 2007-08 & 2008- 09 THE DEPUTY COMMISSIONER M/S.ROYAL SU NDARAM OF INCOME-TAX, VS. ALL IANCE INSURANCE CO. LTD., LARGE TAX PAYER UNIT, 45 & 4 6, WHITES ROAD, CHENNAI. CHENNAI. (APPELLANT) (RESPONDENT) - - ITA 1622 TO 1630/11 ETC. 2 ITA NOS.1618, 1619,1620 & 1621(MDS)/2011 & 2146(MDS )/2008 A.YS.: 2003-04, 2004-05, 2006-07, 2007-08 & 2005-06 M/S.CHOLAMANDALAM MS THE ASST./DY. COMMISSIONER GENERAL INSURANCE CO. LTD., VS. OF INCOME-TA X, DARE HOUSE (II FLOOR), LARGE TAX PAYER UNIT, 2-NSC BOSE ROAD, CHENNAI . CHENNAI-600 001. PAN AABCC6633K. (APPELLANT) (RESPONDENT) ITA NOS.1674, 1675, 1759 & 1676(MDS)/2011 & 40(MDS) /2009 A.YS.: 2003-04, 2004-05, 2006-07, 2007-08 & 2005-06 THE ASST./DY.COMMISSIONER M/S.CHOLAMAND ALAM MS OF INCOME-TAX, VS. GENE RAL INSURANCE CO. LTD., LARGE TAX PAYER UNIT, 2-NSC B OSE ROAD, CHENNAI. CHENNAI. (APPELLANT) (RESPONDENT) ASSESSEES BY : SHRI R.VIJAYARAGHAVAN, AD VOCATE DEPARTMENT BY : SHRI SHAJI P JACOB, IRS, CIT. ITA NOS. 1603 TO 1610 & 1753(MDS)/201 1 A.YS.: 2001-02 TO 2008-09 & 2003-0 4 M/S.UNITED INDIA INSURANCE THE ADDL./JT./ DY.COMMISSIONER CO. LTD., 24-WHITES ROAD, VS. OF INCOME-TAX, CHENNAI-600 014. LARGE TAX PAYER UNIT/ PAN AAACU5552C. CO.RANGE III, C HENNAI. (APPELLANT) (RESPONDENT) AND - - ITA 1622 TO 1630/11 ETC. 3 ITA NOS.1671 TO 1673, 1688 TO 1693, 1798 TO1802, 19 89, 905 & 906(MDS)/2011, 892(MDS)/2007 & 217(MDS)/2009 & C.O. NO.150(MDS)/2011 IN ITA NO.905(MDS)/2011 A.YS. : 2001-02, 2002-03, 2003-04, 2004-05, 2005- 06, 2005-06, 2006-07, 2007-08, 2008-09, 2007-08, 2008-09, 2009-10, 2010-11, 2002-03, 2003-04, 2004-05, 2003-04, 2003-04 & 2004-05. THE INCOME-TAX OFFICER(TDS)/ M/S.UNITED IND IA INSURANCE ASST.COMMR., CO.CLE.III(3)/ VS. CO. LTD., 24- WHITES ROAD, DY.COMMR., LTU, CHENNAI. CHENNAI-600 01 4. (APPELLANTS) (R ESPONDENT/CROSS OBJECTOR) ASSESSEE BY : S/SHRI G.SITARAMAN & S.SUNDARAR AMAN, CAS. DEPARTMENT BY: SHRI SHAJI P JACOB, IRS, CIT. DATE OF HEARING : 9 TH MAY, 2012 DATE OF PRONOUNCEMENT : 9 TH MAY, 2012 O R D E R PER BENCH: THIS IS A BUNCH OF 56 APPEALS AND ONE CROSS OBJEC TION. BOTH THE REVENUE AND THE ASSESSEES HAVE FILED APPEA LS. THE ASSESSEES ARE GENERAL INSURANCE COMPANIES, NAMELY, M/S.ROYAL SUNDARAM ALLIANCE INSURANCE COMPANY LIMITED; M/S. CHOLAMANDALAM MS GENERAL INSURANCE COMPANY LIMITED AND M/S.UNITED INDIA INSURANCE COMPANY LIMITED. - - ITA 1622 TO 1630/11 ETC. 4 2. IN THE CASE OF M/S.ROYAL SUNDARAM ALLIANCE INSURANCE COMPANY LIMITED, THE ASSESSEE AS WELL AS THE REVENUE HAVE FILED NINE APPEALS EACH, TOTALING TO E IGHTEEN APPEALS. THE RELEVANT ASSESSMENT YEARS ARE 2002-03 TO 2008-09. 3. IN THE CASE OF M/S.CHOLAMANDALAM MS INSURANCE COMPANY LIMITED, THE ASSESSEE HAS FILED FIVE APPEAL S; SO ALSO THE REVENUE HAS FILED FIVE APPEALS, TOTALLING TO TE N APPEALS. THE ASSESSMENT YEARS INVOLVED ARE 2003-04 TO 2007-08. 4. IN THE CASE OF M/S.UNITED INDIA INSURANCE COMPA NY LIMITED, THE ASSESSEE HAS FILED NINE APPEALS ALONGW ITH ONE CROSS OBJECTION, TOTALLING IN ALL TO TEN. THE REVENUE HA S FILED NINETEEN APPEALS; ALTOGETHER 29. THE RELEVANT ASSESSMENT YE ARS ARE 2001-02 TO 2010-11. 5. IT IS THUS, IN TOTAL THIS BUNCH IS HAVING 56 AP PEALS AND ONE CROSS OBJECTION. - - ITA 1622 TO 1630/11 ETC. 5 6. WE HEARD SHRI SHAJI P JACOB, THE LEARNED COMMISSIONER OF INCOME-TAX, APPEARING FOR THE REVEN UE IN ALL THESE 57 CASES. 7. WE HEARD SHRI R.VIJAYARAGHAVAN, THE LEARNED COUNSEL APPEARING FOR M/S.ROYAL SUNDARAM ALLIANCE I NSURANCE COMPANY LIMITED AND M/S.CHOLAMANDALAM MS GENERAL INSURANCE COMPANY LIMITED. 8. SHRI G.SITHARAMAN, THE LEARNED CHARTERED ACCOUNTANT, ALONGWITH SHRI S.SUNDARARAMAN, APPEARED FOR M/S.UNITED INDIA INSURANCE COMPANY LIMITED AND ARGU ED THE CASE. 9. THE MAIN ISSUE INVOLVED IN ALL THESE APPEALS IS THE DISALLOWANCE OF REINSURANCE PREMIUM PAID BY THE ASS ESSEE COMPANIES TO NON-RESIDENT REINSURANCE COMPANIES. T HIS ISSUE IS COMMON IN ALL THE APPEALS FILED BY THE ASSESSEES. ANOTHER COMMON ISSUE RAISED IS THAT OF TREATING THE UNEXPIR ED PREMIUM RESERVE AS INCOME. IN THE CASE OF M/S.CHOLAMANDALA M MS INSURANCE COMPANY LIMITED THE ABOVE TWO ISSUES ARE INVOLVED. - - ITA 1622 TO 1630/11 ETC. 6 10. IN THE CASE OF M/S.ROYAL SUNDARAM ALLIANCE INSURANCE COMPANY LIMITED, IN ADDITION TO THE ABOVE STATED COMMON GROUNDS, ISSUES LIKE DISALLOWANCE OF DEPRECI ATION, UNEXPLAINED EXPENDITURE, UNEXPLAINED INVESTMENT, PR OFIT ON SALE OF INVESTMENT, ETC. ARE ALSO INVOLVED. 11. IN THE CASE OF UNITED INDIA INSURANCE COMPANY LIMITED, IN ADDITION TO THE COMMON ISSUES, THERE AR E ALSO GROUNDS RELATING TO DISALLOWANCE MADE UNDER SECTION 40(A)(I) AND OTHER GROUNDS, ETC. 12. IN SHORT, ALL THE THREE ASSESSEES HAVE RAISED COMMON GROUNDS RELATING TO REINSURANCE PREMIUM AND ALSO OTHER MULTIPLE GROUNDS FOR DIFFERENT ASSESSMENT YEARS. 13. ONE OF THE IMPORTANT SUPREME COURT DECISIONS RELIED ON BY THE COUNSELS APPEARING FOR THE ASSESSE ES IS THE DECISION RENDERED IN THE CASE OF GE INDIA TECHNOLOG Y CENTRE PRIVATE LIMITED VS. COMMISSIONER OF INCOME-TAX, IN CIVIL APPEAL NOS.7541 7542 OF 2010, DATED 9-9-2010, WHEREIN TH E HONBLE APEX COURT HAS CONSIDERED THE QUESTION WHETHER MERE LY ON ACCOUNT OF SUCH REMITTANCE TO THE NON-RESIDENT ABRO AD BY AN INDIAN COMPANY PER SE, COULD IT BE SAID THAT INCOME CHARGEABLE - - ITA 1622 TO 1630/11 ETC. 7 TO TAX UNDER THE INCOME-TAX ACT, 1961 ARISES IN IND IA. THIS DECISION IS HIGHLY RELIED ON BY THE ASSESSEES TO SU BSTANTIATE THEIR ARGUMENTS ON THE QUESTION OF REINSURANCE PREMIUM PA ID TO NON- RESIDENT REINSURANCE COMPANIES. 14. THE ASSESSEES HAVE ALSO RELIED ON THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) F OR THE ASSESSMENT YEAR 2005-06, WHEREIN HE HAS HELD THAT CHARGEABILITY TO TAX IN INDIA OF THE REINSURANCE PR EMIUM PAID TO NON-RESIDENT REINSURANCE COMPANIES MUST BE ESTABLIS HED IN EVERY CASE. HE HAS HELD THEREIN THAT REINSURANCE P REMIUM PAID TO NON-RESIDENT REINSURANCE COMPANIES DIRECTLY, WHE RE DTAA EXISTS, AND THEY HAVING NO PLACE OF PERMANENT ESTAB LISHMENT IN INDIA, CANNOT BE DISALLOWED IN THE HANDS OF THE ASS ESSEE UNDER SECTION 40(A)(I), AS THEY ARE NOT LIABLE TO TAX IN INDIA. THE MAIN ISSUE RAISED IN THESE APPEALS WITH REFERENCE TO REI NSURANCE PREMIUM IS THAT THE PAYMENTS CLAIMED BY THE ASSESSE ES HAVE BEEN DISALLOWED BY THE ASSESSING AUTHORITY ON THE G ROUND THAT NO TDS WAS MADE. AS TDS WAS NOT MADE, DISALLOWANCE WA S MADE UNDER SECTION 40(A)(I) OF THE ACT. THE COMMISSIONE R OF INCOME- TAX(APPEALS) ALSO HELD THAT EVEN THE BROKERS, THROU GH WHOM - - ITA 1622 TO 1630/11 ETC. 8 PAYMENTS WERE MADE, DO NOT HAVE ANY PERMANENT ESTAB LISHMENT IN INDIA, SUCH PAYMENTS ARE NOT TAXABLE IN THE HAND S OF THE NON- RESIDENT COMPANIES. 15. DETAILED PAPER-BOOKS HAVE BEEN FILED IN THE CA SES OF M/S.ROYAL SUNDARAM ALLIANCE INSURANCE COMPANY LI MITED AND M/S.CHOLAMANDALAM MS GENERAL INSURANCE COMPANY LIMITED. DETAILS OF REINSURANCE PREMIUM CEDED TO N ON-RESIDENT INSURANCE COMPANIES, PROFIT MARGIN OF THE ASSESSEE COMPANIES, EXPLANATION ON THE CONCEPT OF UNEXPIRED RISK RESERV E, ETC. HAVE BEEN FURNISHED. THEY HAVE ALSO PLACED ON RECORD TH E DOUBLE TAX AVOIDANCE AGREEMENTS ENTERED INTO BETWEEN INDIA AND SWITZERLAND AND INDIA AND JAPAN. 16. IN ADDITION TO THAT, THEY HAVE RELIED ON A NUM BER OF JUDGMENTS ALSO TO SHOW THAT THE REINSURANCE PREMIUM PAID TO NON-RESIDENT REINSURANCE COMPANIES ARE NOT TAXABLE IN THEIR HANDS AND, THEREFORE, THE QUESTION OF DEDUCTING TAX AT SOURCE DOES NOT ARISE. 17. BUT, WE FIND THAT MANY OF THE FINE DETAILS NOW PLACED BY THE ASSESSEES BEFORE US, WERE NOT AVAILABLE BEFO RE THE LOWER - - ITA 1622 TO 1630/11 ETC. 9 AUTHORITIES. IT IS ALSO TO BE SEEN THAT THE RECENT JUDICIAL PRONOUNCEMENTS ARE ALSO VERY MUCH RELEVANT IN CONSI DERING THE ISSUES INVOLVED IN THESE APPEALS. 18. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT IT IS APPROPRIATE TO REMIT BACK ALL THESE FILE S TO THE CONCERNED ASSESSING AUTHORITIES TO REFRAME THE ASSESSMENTS IN THE LIGHT OF THE NEW MATERIALS AND THE LATEST JUDICIAL PRONOUNCE MENTS. THIS IS ALSO NECESSARY FOR REFLECTING A CONSISTENT VIEW OF THE REVENUE ON THE DISPUTED ISSUES SO THAT A UNIFORM APPROACH I S TAKEN BY THE DEPARTMENT ON ALL THESE ISSUES. 19. THEREFORE, WE SET ASIDE THE ORDERS OF THE LOWE R AUTHORITIES IN ALL THESE CASES AND REMIT BACK THE F ILES TO THE ASSESSING AUTHORITIES FOR DE NOVO DISPOSAL IN ACCOR DANCE WITH LAW AFTER GIVING THE ASSESSEES REASONABLE OPPORTUNI TY OF BEING HEARD. 20. IN RESULT, THE APPEALS AND THE CROSS OBJECTION FILED BY THE ASSESSEES AND THE APPEALS FILED BY THE REVEN UE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. - - ITA 1622 TO 1630/11 ETC. 10 ORDERS PRONOUNCED IN THE OPEN COURT AT THE TIME O F HEARING ON WEDNESDAY, THE 9 TH OF MAY, 2012 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 9 TH MAY, 2012. V.A.P. COPY TO: 1. ASSESSEES 2. DEPARTMENT 3. CIT 4. CIT(A) 5. DR 6. GF.