9911796707
TMI Blog2012 (5) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... The Revenue is in appeal before us being aggrieved by the order dated 30.09.2011 passed in ITA No. 2443/Del/2011 pertaining to the assessment year 2006-07. The Revenue has proposed that the following questions are substantial question of law which ought to be considered by us:- "1. Whether payments received by the assessee in consideration of services rendered to insurance Co. in India in the process of re-insurance of the risk placed by Indian Insurance Co. with international re-insuracne companies is amounted to "fees for technical services" within the meaning of the same under the DTAA between India and U.K? 2. Whether learned ITAT erred in holding that the payment received by the assessee from Indian Insurance Co. in the process of reinsurance risk placed by Indian Insurance Co. with International reinsurance companies is not taxable in India as "fees for technical 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer's query with regard to the process by which clients were selected, the assessee submitted the following information, pertaining to, New India Assurance Co. Ltd:- "Key Steps ( a ) Originating insurer in India (New India) contacts JB Boda/MB Boda for placing identified risks/ class of risks with international reinsurers. ( b ) JB Boda contacts one or more international firms of reinsurance brokers outside India requesting for proposals from international reinsurers/syndicates. ( c ) International reinsurance brokers like Guy Carpenter contact other primary brokers and various syndicates in the Lloyds market for competitive proposals. ( d ) Based on the various offers received JB Boda presents the various options to New India which makes the final decisions. Based on the decisions made by New India the policy terms are agreed and the risk 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract the information. (4) The proposal presentations from Brokers/ Reinsurers always help in better understanding the nature of business, international market, trends and the impact of global phenomena. (5) Normally the payments are done from our Foreign Currency bank account in London/New York if the payments are done directly to Guy Carpenter. If the business is co-broked by JB Boda payment is done to J.B. Boda." However, despite the above information, as pointed out above, the Assessing Officer came to the conclusion that the nature of payment received by the assessee came within the definition of fees for technical services as defined under the said Act as also under article 13(4)(c) of the DTAA. 7. The Commissioner of Income Tax (Appeals) also concurred with the view taken by the Assessing Officer. Being aggrieved thereby, the assessee 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle shall not include amounts paid: ( a ) for services that are ancillary and subsidiary, as well as inextricable and essentially linked, to the sale of property, other than property described in paragraph 3 (a) of this Article; ( b ) For services that are ancillary and subsidiary to the rental of ships, aircraft, containers or other equipment used in connection with the operation of ships, or aircraft in international traffic; ( c ) For teaching in or by educational institutions; ( d ) For services for the private use of the individual or individuals making the payment; or ( e ) To an employee of the person making the payments or to any individual or partnership for professional services as defined in Article 15 (Independent personal services) of this Convention. (6), (7), (8) and (9)** ** **" 9. A plain reading 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 10% brokerage. From the role played by the assessee in the reinsurance process as discussed above, it is evident to us that the assessee was rendering only intermediary services while acting as an intermediary/facilitator in getting the reinsurance cover for New India Insurance Co. There exists no material or basis on the basis of which, it would be said that the assessee was rendering any kind of technical/consultancy service within the meaning of Article 13 of Indo-UK treaty. The consideration received by the assessee acting as an intermediary in the reinsurance process cannot, by any stretch of imagination, be qualified as a consideration received for rendering any financial analysis related consultancy services, rating agency advisory services, risk based capital analysis etc. as alleged by the A.O." The Tribunal also noted the process by which the transaction takes place. 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 propo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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