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TMI Blog2012 (5) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... al services"? 3. Whether nature of reinsurance brokerage/commission which is assessable as fees for Technical Services within the meaning of section 9(1)(vii) of the Act and/or Article 13 of the India United Kingdom (U.K.) Double Tax Avoidance Agreement (DTAA)? 4. Whether the services provided by the assessee are consultancy in nature and the payments fall within the definition of fees for technical services within the meaning of Sec. 9 (1) (vii) of the Act?" 2. At the outset we would like to state that none of the above questions, according to us, are substantial question of law and the only issues which arise are factual in nature which has already been determined by the Income Tax Appellate Tribunal, being the final fact finding authority insofar as the scheme under the Income Tax Act, 1961 (hereinafter referred to as 'the said Act') is concerned. Unless and until some perversity in a finding of fact returned by the Tribunal is pointed out, there is no scope for interference by this court under section 260A of the said Act. The reasons for us arriving at this conclusion are indicated below. 3. Before the Tribunal the issue which arose for consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is placed with the Lloyds market. Further, as per normal industry practice the reinsurance premium net of brokerage of 10% as per the policy contract is remitted to Guy Carpenter for onward transmission to the reinsurers in the Lloyds market. (e) Separately the intermediation fee (brokerage) is remitted by New India to JB Boda, Guy Carpenter and other Indian and overseas intermediaries based on a mutually agreed ratio which accounts for their relative contribution in the reinsurance process. Typically however, the Indian and overseas reinsurance intermediaries would share the total brokerage income equally. It may however, be noted that in any reinsurance transaction more than one insurance intermediary may be involved at the India and overseas level. For e.g. in the illustrative transaction the Indian brokers involved were JB Boda and MB Boda and international brokers involved are Guy Carpenter & Alsford Page and Gems Ltd." 5. It was also made clear by the assessee that there were occasional business visits by two or three persons from the assessee company to India to maintain general business awareness and to reinforce business contacts/ relationship in India for 15 calen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee preferred an appeal before the Income Tax Appellate Tribunal which ultimately decided in favour of the assessee by virtue of the impugned order. 8. Before we go on to examine the findings of the Tribunal it would be pertinent to refer to article 13 of the DTAA to the extent it is relevant:- "ARTICLE 13- Royalties and fees for technical services- 1. Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the law of that State; but if the beneficial owner of the royalties or fees for technical services is a resident of the other Contracting State, the tax so charged shall not exceed: (a) In the case of royalties within paragraph 3 (a) of this Articles, and fees for technical services within paragraphs 4 (a) and (c) of this Article,- (i) during the first five years for which this Convention has effect; (aa) 15% of the gross amount of such royalties or fees for technical services when the payer of the royalties or fees for technical ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of Article 13(4)(c) of the DTAA indicates that 'fees for technical services' would mean payments of any kind to any person in consideration for the rendering of any technical or consultancy services which, inter alia, "makes available" technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design. According to the Tribunal this "make available" condition has not been satisfied inasmuch as no technical knowledge, experience, skill, know-how, processes, have been made available by the assessee to the insurance companies operating in India. It also does not consist of the development and transfer of any technical plan or technical design. 10. The Tribunal examined the evidence available on record in order to return a finding on the issue as to whether the payments received by the assessee from the insurance companies operating in India would fall within the expression 'fees for technical services' as appearing in article 13(4)(c) of the DTAA read with section 9(1)(vii) of the said Act. While doing so the Tribunal, inter alia, found that the assessee company was an international reinsurance intermedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace. It has been pointed out that the originating insurer in India would contact J.B. Boda/ M.B. Boda for placing identified risks/ class of risks with international reinsurers. J.B. Boda, in turn, would contact one or more international firm(s) of reinsurance broker(s) like the assessee for competitive proposals from the international reinsurer. Then, the international reinsurance brokers like the assessee would contact other primary brokers and various syndicates in the Lloyds market for competitive proposals. Based on the various offers or proposals given by the international reinsurance brokers, like the assessee, to J.B. Boda, the latter would present various options to the originating insurer in India, which would take a final decision in the matter. Based on the decision of the originating insurer in India, the policy terms would then be agreed upon and the risk would be placed with the international reinsurer. It was also pointed out that as per the normal industry practice, the reinsurance premium net of brokerage of 10% as per the policy contract is remitted to the assessee, i.e., reinsurance brokers, for onward transmission to international reinsurers. The intermediation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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