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TMI Blog2017 (8) TMI 840X X X X Extracts X X X X X X X X Extracts X X X X ..... are adjudicating all the appeals together for the sake of convenience. The details of dates of orders under section 201 and 201(1A), taxes levied and interest levied can be summarised as under: A . Y . Dt . of order u / s . 201 201 ( 1A ) Tax Levied Interest levied 2011-12 26/03/2014 Rs.41.09 lakhs Rs.10.30lakhs 2012-13 26/03/2014 Rs.41.09 lakhs Rs.10.30 lakhs 2013-14 26/03/2014 Rs.41.09 lakhs Rs.10.30 lakhs 2014-15 26/03/2014 Rs.41.09 lakhs Rs.10.30 lakhs ITA / 4805 / Mum / 2015, A . Y . 2011 12 . 2 . Assessee-company is a joint-venture between Bharati Enterprises and AXA Group. It is engaged in the business of life insurance. In order to hedge its risk under the insurance contracts written as per market practice the assessee entered into Risk Premium Rei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an enquiry, that it could not be misused, that the assessee had taken all prudent measures to arrive at the bonafide belief that it had not to deduct tax, that the TDS officer had resorted to various assumptions to the facts to arrive at the conclusion. He referred to the order of the Tribunal in the case of Swiss Reinsurance Co. Ltd. (ITA/1667/Mum/2014-AY10-11, dtd.13/ 2/2015), wherein the identical issue was decided against the AO and in favour of the assessee. Finally, he held that assessee could not be treated as an A-I-D u/s. 201 (1A) of the Act. 5 . During the course of hearing before us the Departmental Representative (DR) supported the order of the AO and the Authorised Representative (AR) referred to the order of the Tribunal in the case of Swiss Reinsurance Co. Ltd. (supra). 6 . We have heard the rival submissions and perused the material before us. We find that the main issue is as to whether the assessee could be treated as an A-I-D for not deducting tax with regard to payments made to RIRCL. Here we would like to reproduce the relevant portion of the order of the Tribunal in the case of Swiss Reinsurance Co. Ltd. (supra), which reads asunder :- 2 . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities of the assessee . It was explained and strongly contended that services provided by SRSIPL do not create existence of a PE in India . It was explained that SRSIPL is a separate legal entity and its entire control and management is in India . The decisions regarding its business are taken and executed in India . It is both legally and functionally independent company . It was explained that the employees of SRSIPL render services to SRSIPL and not to the assessee, either as assessee's employees or on behalf of SRSIPL . It was pointed out to the AO that the pricing between SRSIPL and the assessee is at arms length . The profit earned by SRSIPL belongs to it and cannot be treated as profits of the assessee and such profits are assessed to tax in India in the hands of SRSIPL . 2 . 3 Referring to the service agreement between the assessee and SRSIPL it was pointed out to the AO that it is specifically mentioned that SRSIPL is neither an agent nor a broker or legal representative of assessee and hence, acting on principle to principle basis, therefore, the question of falling of agency PE does not arise . Attention was drawn to Article 5 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities have grossly erred in ( i ) treating the assessee having a Dependent Agency Permanent Establishment; ( ii ) the assessee has a clear cut business connection in India; ( iii ) treating SRSIPL as service PE and ( iv ) treating as SRSIPL as Agency PE . Ld . Counsel stated that the assessee does not fulfill any of the mandatory conditions for the aforementioned allegations . Referring to Article 5 ( 4 ) of the Indo - Swiss Treaty, Ld . Counsel for the assessee stated that the Article categorically excludes cases of reinsurance services . Ld . Counsel further drew our attention to the agreement between the assessee and SRSIPL and pointed out that the services provided by the SRSIPL does not include contracts of reinsurance and confirmation of liability . In the process, the Ld . Counsel relied upon the decision of the Hon'ble Delhi High Court in the case of E - Funds IT Solutions, 42 taxamann . com 50 and the decision of the Mumbai Tribunal Bench in the case of Varian India Pvt . Ltd . , 33 taxamann . com 249 . Ld . Counsel also relied upon the decision of the Mumbai Tribunal Bench in the case of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l - agency relationship between the Company and the Branch of SRZ . All Company personnel will be considered solely Company employees or gents, and Company will be responsible for ( i ) compliance with all Laws relating to such personnel and ( ii ) payment of all wages, Taxes and other cost and expenses relating to such personnel ( including unemployment, social security and other payroll taxes ) and compliance with all withholding requirements as required by Law . 5 . 1 Before we proceed to examine, whether SRSIPL and its activities constitute PE of the assessee or whether SRSIPL can be considered as a Service PE / Agency PE of the assessee, it would be appropriate at the outset to consider the decision of the Hon'ble Delhi High Court in the case of E - Funds IT Services ( supra ) , wherein Hon'ble Court has held that establishing subsidiary in the other treaty country would not result in creating and establishing a PE of a foreign holding company in the said third country . Thus, at the outset the subsidiary SRSIPL of the assessee does not constitute a PE of its holding company i . e . the assessee . Now let us see whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnishing of technical services, other than services as defined in Article 12, within a Contracting State by an enterprise through employees or toher personnel, but only if :- ( i ) activities of that nature continue within that State for a period or periods aggregating more than 90 days within any twelve month period; or ( ii ) the services are performed within that State for a related enterprise ( within the meaning of paragraph 1 of Article 9 ) for a period or periods aggregating more than 30 days within any twelve - month period . 5 . 3 Assuming that conditions of ( i ) ( ii ) mentioned herein above are fulfilled, we do not find that the employees of SRSIPL are providing services to the assessee as if they were the employees of the assessee . Therefore, condition laid down under Article - 5 of the Treaty are also not fulfilled to treat SRSIPL as PE of the assessee . Article 5 ( 4 ) of the Treaty reads as under :- Notwithstanding the preceding provisions of this Article, an insurance enterprise of Contracting State shall, except in regard to re-insurance, be deemed to have a permanent establishment in other Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perquisite to the employees of the assessee and the assessee paid salaries to the employees, on these facts the Indian subsidiary was considered as place of business . However, facts of the case in hand clearly show that the employees of the SRSIPL has only provided services to SRSIPL and there is no noting on record to prove that the employees had provided services to the assessee or the assessee is paying their salaries or perquisites . The decision of the Hon'ble Supreme Court in the case of Morgan Stanley ( supra ) has been duly considered by the Hon'ble Delhi High Court in the case of E - Funds IT Solutions ( supra ). The decision in the case of Jebon Corporation of Indi ( supra ) is not at all relevant on the facts of the case in hand . 5 . 6 To sum up, the assessee does not have any business connection in India in the light of Explanation - 2 to section 9 ( 1 ) of the Act . The assessee does not have any PE in India . The facts on record show that there is neither Service PE nor Agency PE in the form of SRSIPL . Considering the facts in totality in the light of the relevant provisions of the law and the DTAA and the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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