Income Tax Appellate Tribunal - Delhi
Guy Carpenter & Co. Ltd.,, New Delhi vs Assessee on 3 October, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI 'C' BENCH
BEFORE SHRI R.P. TOLANI , JM & SHRI A.N. PAHUJA, AM
ITA No.5646/Del/2011
Assessment year:2008-09
M/s Guy Carpenter & Co. V/s. Assistant Director of
Ltd., 1,Tower Place W est, Income-tax, International
Tower Place, London Taxation, Circle 1(2),
EC3R,5BU-111111 New Delhi
[PAN : AACCG 5465 A]
(Appellant) (Respondent)
Assessee by S/Shri Pawan Kumar & Sanjay Arora,AR
Revenue by Shri D.K. Gupta, DR
Date of hearing 15-02-2012
Date of pronouncement 24-02-2012
ORDER
A.N.Pahuja:- This appeal filed on 15th December, 2011 by the assessee against an order dated 3rd October, 2011 of the Assistant DIT, Circle 1(2), international Taxation, New Delhi, raises the following grounds:-
1. "That on the facts and in the circumstances of the case and in law, the Assessing Officer has erred in his order dated October 3,2011 in holding that the receipts which are in the nature of reinsurance brokerage/commission of the appellant amounting to `26,289,574 as fees for technical services as per Article 13 of the India-United Kingdom (UK) Double Tax Avoidance Agreement (DTAA).
2. That on the facts and circumstances of the case and in law, the learned Assessing Officer has erred in fact and in law that:
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2.1 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 Section 9(1)(vii) of the Act.
2.2 The consideration received by the appellant make available experience, skill of the appellant to the Indian Insurance Companies, accordingly, the payment is also covered by the definition of FTS available in para 4(c) of Article 13 of the India UK DTAA.
3. The learned Assessing Officer has erred in not following the Hon'ble Tribunal's order in assessee's own case for assessment year 2006-07 where the Hon'ble Tribunal has held that the payment received by the appellant company in the process of placing the reinsurance risk of the Indian Insurance companies with international insurance companies does not qualify as fee for technical services under the DTAA between India-UK, and, therefore, not taxable in India.
4. Without prejudice to the above, whether on the facts and law, the learned AO erred in levy of interest u/s 234B of the Act ignoring the provisions of section 234B of the Act read with section 191, 208 & 209 of the Act which does not provide for charge under section 234B of the Act /where the entire income is subject to deduction of tax at source.
That the appellant craves leave to add, alter or amend or withdraw any ground of appeal either before or at the time of hearing of this appeal."
1.1 Subsequently vide letter dated 27th January 2011 , the assessee sought permission to raise the following three additional grounds of appeal: -
5 "That the direction issued by the Hon'ble Dispute Resolution Panel are in violation of section 144C(5) read with section 144C(8) of the Act to the effect that it has erred in concluding that the income of the appellant constitute royalties even when no such allegation was made in the draft assessment order.
3 ITA no.5646/Del./2011 6 Without prejudice to the ground No.5 above, the Ld. DRP has erred in fact and in law in holding that the services rendered by the appellant can also be covered under the term "Royalties".
Ground No.7: That the learned Assessing Officer has erroneously applied the tax rate of 15% while passing the final assessment order without assigning any reason whereas in the draft assessment order it was proposed that the income shall be taxed at the rate of 10% as per section 115A of the Act"
2. Facts in brief, as per relevant orders are that e-return declaring nil income filed on 23rd September, 2008 by the assessee, a foreign company & tax resident of the UK, was selected for scrutiny with the service of a notice u/s 143(2) of the Income-tax Act, 1961 (hereinafter referred to as the Act). The assessee, a reputed insurance broking firm licensed by the FSA to negotiate insurance/reinsurance business, did not have any office or place of business in India. During the year under consideration, the assessee's London offices were engaged by certain Indian insurance companies to help them place reinsurance business in the international market. The assessee claimed that all the activities relating to such work were carried out outside India and for providing such assistance, it retained a commission, being the prevailing fee for such work in the UK market. Inter alia, the assessee claimed that activities carried out in India, if any, were purely preparatory or auxiliary to the core activity of insurance intermediation carried out in London and elsewhere. To a query by the AO, the assessee submitted a copy of agreement with General Insurance Corporation of India, Mumbai, entered in conjunction with J.B. Boda Reinsurance Brokers Pvt. Ltd. and explained the process of selection of clients as under :-
a) "Originating insurer in India contacts Boda for placing identified risk/class of risks with international re-insurers.
b) Boda contacts one or more international firms of reinsurance brokers outside India requesting for proposals from international re-insurers/syndicates.
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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 the Indian Insurers which makes the final decisions. Based on the decisions made by the Indian Insurer 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 re-insurers in the Lloyds market.
e) Separately the intermediation fee (brokerage) is shared by a mutually agreed ratio which accounts for their relative contributions 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 re-insurance transaction more than one insurance intermediary may be involved at the India and overseas level."
2.1 To a further inquiry by the AO as to why the amount received by the assessee for services rendered for reinsurance business from Indian insurance companies be not taxed as fee for technical services in terms of provisions of the Act and the DTAA between India and UK, the assessee replied while referring to decisions in Cushman & Wakefield (S) Pte Ltd. in re [2008]305 ITR 208;Skycell Communications Ltd. Vs. DCIT (119 Taxman 496) (Madras); Raymond ltd. vs.DCIT,86 ITD 791(Mumbai);Pan AmSat International Systems Inc.,103 TTJ861;CESC Ltd. vs. DCIT,87 ITD 653(Cal.);NQA Quality Systems Register Ltd. vs. DCIT,92 TTJ 946(Del.) that no technology or knowhow was made available by the assessee to any of its Indian clients and therefore, the income received by them did not qualify as fee for technical services. However, the AO did not accept the submissions and following his findings in the preceding assessment year, proposed to bring to tax an amount of ``2,62,85,579/- received by the assessee @10% in terms of provision of section 115A of the Act.
3. The assessee approached DRP and raised a number of objections. The DRP in their order dated 9.8.2011concluded as under:-
5 ITA no.5646/Del./2011 "6. The basic issue pertains to whether the services rendered by the assessee for advising the right reinsurance option to the Indian Insurance Companies can be termed as Fee for Technical Service under the Income Tax Act and Fee for Included Service under the Indo-UK DTAA or not. To answer the question it would be imperative to understand the key steps/process undertaken by the assessee to earn commission income from Indian Insurance Companies.
Reinsurance is insurance that is purchased by an insurance company from another insurance company as a means of risk management, to transfer risk from the insurer to re-insurer. In Indian insurance industry, usually insurers have a preferred insurance broker in India. The reinsurance broker located in India in turn contacts reputable re-insurance brokers outside India to find a proper and efficacious solution of re-insurance need of the Indian insurers. The assessee is one of the reputed reinsurance brokers, who have a repository of contacts, information, commercial experience, skill, know-how of locating a proper solution for particular kind of risk sought to be re-insured by the Indian insurer. The assessee contacts the reinsurance companies located abroad and advises the Indian company to enter into contracts with such companies. The nature of services rendered by the assessee clearly shows that it is rendering consultancy services to the Indian concerns, which is covered under the definition of Fee for Technical Services under section 9(1)(vii) of the Income Tax Act. We also find that the case law of Raymond Limited relied upon by the assessee in fact supports the contention of the A.O. that the services rendered are in the nature of consultancy service. In the case of Raymond Limited, services of underwriter in issuing of GDR was held taxable as consultancy services under section 9(1)(vii) of the Income Tax Act by the ITAT Mumbai. Thereafter the ITAT goes on to hold that such services are not FIS under Indo-US Treaty. However as regards taxability under the Income Tax Act, it was held taxable as FTS.
We further see that the payment of commission paid to the assessee can also be said to be for the use of information of commercial experience, skill, know how etc, which also falls within the definition of royalties under section 9(1)(vi) of the Income Tax Act.
The contention of the assessee that the payment in question does not get covered under fee for included service under Article 13 of Indo-UK DTAA has been considered. The Indian insurance company who have been receiving services relating to finding of 6 ITA no.5646/Del./2011 appropriate reinsurance company with whom they ultimately enters the contract, get to know the specialty risk bearing capacity, their contacts as well. So in a way commercial experience of the assessee also becomes available to the Indian insurer and they can apply such commercial experience directly in cases when they find that a particular re-insurance company with whom it had earlier arrangement by virtue of advice given by the assessee, is able to satisfy their requirements. They need not take the advice of the reinsurance broker i.e the assessee again. Hence, in a way, it can be seen as a case where technical and commercial experience is made available to the recipient of service. Without prejudice to the above, a recent ruling of AAR in the case of Verizon Data Services India limited, after elaborately interpreting the provisions of Article 12 of the Indo·US DTAA and guiding protocol to the Treaty has concluded that it is not necessary to make available consultancy know how to the recipient in order to hold the same taxable under FIS. Since the scope of FIS is similar in Indo-UK treaty as in Indo- US Treaty and assistance of explanation and examples given in the protocol of Indo-US treaty is widely accepted, we find sufficient merit in the contention that it is not necessary to actually make available the consultancy know how to the recipient in order to become taxable under Article 13 of the Indo-UK DTAA. Relevant extracts from the ruling of the AAR is reproduced below:-
"The applicant's contention is that these managerial services are consultancy services and are covered under Article 12 (4) of the DTAA. The Article12 (4) reads as under:
"4. For the purposes of this Article, "fees for included services"
means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services:
(a) Are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or
(b) Make available technical knowledge/experience/skill, know-how or process, or consist of the development and transfer of a technical plan or technical design."
7 ITA no.5646/Del./2011 The applicant contends that as the managerial services are not made available to the applicant, the services rendered by the seconded employees are not covered under Art 12(4)(b) of the DTAA. In this connection we may refer to the memorandum of understanding of the DTAA which explains the meaning of ''fees for included services" as under:
"Article 12 includes only certain technical and consultancy services. By technical services we mean in this context services requiring expertise in a technology. By consultancy services we mean in this context advisory services. The categories of technical and consultancy services are to some extent overlapping because a consultancy service could also be a technical service. However, the category of consultancy services also includes an advisory service, whether or not expertise in a technology is required to perform it.
Under paragraph 4, technical and consultancy services are considered included services only to the following extent; (1) as described in paragraph 4(a), if they are ancillary and subsidiary to the application or enjoyment of a right, property or information for which a royalty payment is made; or (2) as described in paragraph 4(b) if they make available technical knowledge experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design. Thus, under paragraph 4(b), consultancy services which are not of a technical nature cannot be included services:"
The phrase technical or consultancy services appearing in Article 12(4)(b) of the DTAA, is further explained In the MOU as under:
''Paragraph 4(b) of Article 12 refers to technical or consultancy services that make available to the person acquiring the service technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design to such person. (For this purpose, the person acquiring the service shall be deemed to include an agent, nominee, or transferee of such person.) This category is narrower than the category described in paragraph 4(a) because it excludes any service
8 ITA no.5646/Del./2011 that does not make technology available to the person acquiring the service. Generally speaking, technology will be considered "made available" when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical knowledge, skills, etc. are made available to the Person purchasing the service, within the meaning of paragraph 4(b). Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available."
7. From the memorandum of understanding of the DTAA it is clear that the services which are not in the nature of technical services, the make available clause would not apply. As the services provided by GTE-OC are in the nature of managerial services, the payments made by the applicant are covered under "fee for included services" under Art.12(4) of the DTAA.As the services are managerial in nature, the payments are also covered under "fee for technical services" as defined under Explanation 2 to section 9(1)(vii) of the Act."
Secondly the services rendered by the assessee can also be covered under the term royalties which covers the payment received as consideration for use or right to use of information concerning commercial ,industrial or scientific experience.
In view of the detailed discussions in the foregoing paragraphs, the Panel is of the considered view that the payments received by the assessee is taxable as Fee for Technical Service and/or royalties under relevant provisions of Income Tax Act as well as DTAA between India and UK.
8.1.6.7 Accordingly, the AO is right in taxing the consideration received by the assessee as royalty in terms of clause (v) of Explanation 2 to clause (vi) of subsection (1) of Section 9 of the Act as also under Article 13(3) of the Indo-UK DTAA. No intervention is ,therefore, required u/s 144C(5) of the Act with reference to ground of objection No.1"
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4. In the light of aforesaid directions of the DRP, the AO following his own findings in the assessment order for the AY 2006-07,concluded that the services provided by the assessee fall within the definition of Fees For Technical Services as defined in Explanation 2 to section 9(1)(vii) of the Act as also within the clause 4(c )of the Article 13 of the tax treaty between India & UK read with para 2 of the Article 13 of the treaty. Accordingly, the AO brought to tax gross receipts of `2,62,89,574/- in his order dated 3rd October, 2011 as fee for technical services and not by way of royalty..
5. The assessee is now in appeal before us against the aforesaid findings of the AO. The ld. AR on behalf of the assessee while inviting our attention to decision dated 30.9.2011 of a co-ordinate Bench in the assessee's own case for the AY 2006-07 in ITA no.2443/D/2011 pleaded that the payment received by the assessee from Indian Insurance Company in the process reinsurance risk placed with International reinsurance companies, is not taxable as "fee for technical services." The ld. AR pointed out that the DRP exceeded their jurisdiction while holding the payment as royalty and in this connection relied upon the decision of the Hon'ble Karnataka High Court in GE India Technology Centre (P) Ltd. Vs. Dispute Resolution Panel and Anr. (2011) 338 ITR 416 (Kar).On the other hand, the ld. DR supported the findings of the AO in the light of decision dated 27th May, 2011 of the AAR in the case of Verizon Data Services India Private Limited in re 865 of 2010.In his rejoinder, the ld. AR submitted that the said decision of AAR has been set aside by the Hon'ble Madras High Court vide their order dated 9th August, 2011 in WP 14921 of 2011.
6. We have heard both the parties and gone through the facts of the case as also the decisions relied upon by both the sides. Indisputably, the AO in his draft order dated 7.12.2010, brought to tax the payment received by the assessee from Indian Insurance Companies on account of reinsurance business in the year under consideration, as fee for technical services , on the basis of his own findings for the AY 2006-07. Even though the DRP in their order dated 9th August,2011 observed that the payment received by the assessee is taxable as 10 ITA no.5646/Del./2011 Fee for Technical Service and/or royalties under relevant provisions of the Act as well as DTAA between India and UK, the AO in his order dated 3.10.2011,taxed the amount as fee for technical services within the meaning of explanation 2 to section 9(1)(vii) of the Act as also within the clause 4(c ) of the Article 13 of the tax treaty between India & UK. Nowhere in the said order, now disputed before us, the AO brought to tax the amount as royalty.
6.1 Before proceeding further ,we may have a look at the decision dated 27th May, 2011 of the AAR in the case of Verizon Data Services India Private Limited in re 865 of 2010 ,relied upon by the ld. DR. In that case, the issue before the AAR was as to whether the amounts ,representing salary and benefits payable by GTE-OC to Expatriate employees, reimbursed by the applicant therein to GTC-OC was income, liable to deduction of tax at source u/s 195 of the Act and whether the same was taxable as Fees for Included Services under the Act read with Indo-US DTAA. The AAR decided both the questions in the affirmative. We find that the said decision of AAR on the issue of applicability of Art. 12(4)(b) of the Indo-US DTAA has been set aside by the Hon'ble Madras High Court vide their order dated 9th August, 2011 in WP 14921 of 2011 in the following terms:
"28..................In the circumstances ,we feel that this portion of the order of the Advance Ruling Authority merits to be set aside and has to be remanded back to the Advance Ruling Authority for fresh consideration on the issue as to whether the services rendered by the seconded employees, which are recorded by the Advance Ruling Authority as purely managerial in nature, could be fitted in with the consultancy services as given in paragraph 4(b) of Article 12 of DTAA and as enumerated in the Memorandum of Understanding.
29. In the circumstances, we set aside the order of the Advance Ruling Authority with regard to question no.2 and remit the matter back to the Advance Ruling Authority for giving an opportunity to the assessee to state its case as to the nature of services given by the seconded employees and for rendering a finding in terms of what is provided in paragraph 4(b) of Article 12 of DTAA and the Memorandum of Understanding. Since the said issue is remanded , we feel, in fitness of things, question Nos. 3 to 5 also merit fresh consideration at the hands of Advance Ruling Authority."
11 ITA no.5646/Del./2011 6.11 In view of aforesaid decision of the Hon'ble Madras High Court, we are of the opinion that reliance by the ld. DR on the aforesaid decision of the AAR, rendered in different facts and circumstances is totally misplaced.
6.2 We further notice that after the objections of the assessee against draft assessment order were disposed of by DRP vide their order dated 9.8.2001, a co-ordinate Bench while considering an identical issue in the assessee's own case for the AY 2006-07 in their order dated 30th September, 2011, referred to a decision of the Mumbai Bench in the case of Raymond Ltd. Vs. DCIT,86 ITD 791 and concluded as under:-
"27. In the illustrative transaction, New India Insurance Co. Ltd. In India has entered into an agreement to reinsure on an Excess Loss basis the catastrophe risk arising from its primary insurance cover in conjunction with J.B. Boda and Alsford Page and Gems Ltd. (the reinsurance brokers). The terms of the agreement specifies that the assessee in conjunction with J.B.Boda are recognized as intermediary, through whom all communications relating to this agreement shall pass. The terms of the agreement further provides that the assessee will provide all the details of agreed endorsements to the reinsurers by e-mail or facsimile and shall submit the slip policy to XIS (Lloyd's processing market) for signing. The assessee will act as a claim administrator and will submit claims advices to relevant market systems. For the services rendered, the assessee along with the other reinsurance brokers acting as an intermediary in the reinsurance process for New India Assurance Co. will be entitled 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 could 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.
28. On going through the definition of "Fees for technical services"
given in the DTAA between India and UK so as to find out whether the 12 ITA no.5646/Del./2011 services rendered by the present assessee would fall under the purview of "Fees for technical services" as enumerated in Article 13(4) of DTAA between India& U.K., it is clear that Article 13(4) emphasis on rendering any technical or consultancy services, which are ancillary and subsidiary to the application for enjoyment of any right, property or information for which a payment is received, or made available technical knowledge, experience, skill, knowhow or processes or consist of the development and transfer of technical plan or technical design. In the present case, we are concerned with the scope of meaning of Article 13(4)(c) of Indo-UK Treaty, which emphasizes a rendering of any technical or consultancy services (including provisions of services of technical or other personnel), which made available technical knowledge, experience, skill, know-how or processes or consist of the development and transfer of technical plan or technical design.
28.1 From the nature of services rendered by the present assessee as noted above, the services do not fit into either of the categories defined in Article 13, since the services rendered by the assessee do not involved technical expertise, nor did the assessee made available any technical knowhow, experience, skill etc. What was being done by the assessee was basically acting as an intermediary in the process of finalization of reinsurer suggesting various options to the Indian Insurance Co. for their consideration and acceptance. From the agreement of services entered into by the assessee with Indian company for acting as an intermediary, it is clear that what was made available by the assessee to the Indian Insurance co. was advisory services and opinion for selection of reinsurer in the international market. It has been mentioned by the AO that the services provided by the assessee were consultancy in nature as it provides a host of financial analysis related consultancy services, rating agency advisory services, risk based capital analysis etc. on the basis of some observations found mentioned in the assessee's website but the AO has not been able to point out any material or evidence on the basis of which, it could be said that the consideration received by the assessee during the year under consideration is towards any financial analysis related consultancy services, rating agency advisory services, risk based capital analysis etc.
29. At this stage, it is pertinent to note that the language used in Article 13(4) excludes "Managerial services". It emphasizes only a rendering of any technical or consultancy services. It is further noticed that in the Article 13(4)(c), the expression used is "make available". The meaning ascribed to the words "make available" has been elaborately appreciated by the ITAT, Mumbai Bench `C' in the case of Raymond Ltd. Vs. DCIT (supra), where it 13 ITA no.5646/Del./2011 has been observed that once sec. 9(1)(vii) of the Income-tax Act stops with the "rendering" of technical services, the DTAA between India & UK goes further and qualifies such rendering of services with words to the effect that the services should also make available technical knowledge, experience, skills, know-how or processes to the person utilizing the services. The Hon'ble Tribunal further observed that the word "which" occurring in the said Article after the word "services" and before the words "make available"
not only describes or defines more clearly the antecedent noun ("services") but also give additional information about the same in the sense that it requires that the services should result in making available to the user technical knowledge, experience, skill, know-how or processes etc. Thus, the normal, plain and grammatical meaning of the language employed in the said Article 13(4)(c ) is that a mere rendering of services is not roped in unless the person utilizing the services is able to make use of the technical knowledge, experience, skills, know-how or processes by himself in his business or for his own benefit and without recourse to the performer of the services in future. The technical knowledge, experience, skill, know- how or processes must remain with the person utilizing the services even after the rendering of the services has come to an end. A transmission of the technical knowledge, experience, skills, know-how or processes from the person rendering the services to the person utilizing the same is contemplated by the Article 13(4)(c) of the Indo-UK Treaty. Some sort of durability or permanency of the result of the "rendering of services" is envisaged which will remain at the disposal of the person utilizing the services. The fruits of the services should remain available to the person utilizing the services in some concrete shape such as technical knowledge, experience, skills, know-how or processes.
29.1 By making available the technical skills or know-how and the like, the recipient of the service will get equipped with that knowledge or expertise and be able to make use of it in future, independent of the service provider. In other words, to fit into terminology "make available", the technical knowledge, skills, know-how or processes must remain with the person receiving the services even after the particular contract comes to an end. It is, thus, fairly clear that mere provision of technical services is not enough to attract Article 13(4)(c ) of the Indo-UK Treaty. It additionally requires that the service provider should also make his technical knowledge, experience, skill, know-how etc. known to the recipient of the service so as to equip him to independently perform the technical function himself in future, without the help of the service provider. In other words, payment of consideration would be regarded as fees for technical services only if the twin test of rendering services and making technical knowledge available at the same time is satisfied.
14 ITA no.5646/Del./2011 30 . The identical view taken by the Income-tax Appellate Tribunal, Mumbai Bench `C' in the case of Raymond Ltd. (supra), has also been taken in the following cases:-
1. Invensys Systems Inc., In re (2009) 317 ITR 438 (AAR).
2. Intertek Testing Services India P. Ltd., In re (2008) 307 ITR418 (AAR).
3. R.R. Donnelley India Outsource P. Ltd., In Re (2011) 335 ITR 122(AAR).
4. CIT Vs. Vice Roy Hotel Ltd. (2011) 11 Taxmann.com 216 (Hyd)/46 SOT 4 URO decided by ITAT, Hyderabad Bench.
31. In the present case, the New India Insurance Co. or other Insurance Company in India, who avails the services of the assessee as a broker in the process of the re-insurance of the risk is left with no technical knowledge, experience, skill, know-how or processes so as to bring the services rendered by the assessee within the ambit of Article 13(4)(c) of the Treaty. As already observed above, the nature of services rendered by the assessee are also not in the nature of any technical or consultancy services which make available technical knowledge, experience, skill, know-how or processes to the user. We, therefore, hold that the payment received by the assessee in consideration for rendering intermediary or advisory services in the process of selecting re-insurer, cannot be qualified to be in the nature of fees for technical services as contemplated under Article 13(4)(c) of the DTAA between India & UK. Since the DTAA between India & UK applies to the present case and the benefit of the provisions contained in DTAA with UK are available to the assessee as so well settled, and since the payment received by the assessee is not qualified to be in the nature of fees for technical services within the meaning of Article 13(4)(c ) of the treaty, we hold that the payment received by the assessee from the Insurance Company in India, cannot be brought to tax in India as fees for technical services.
32. It is not the case of the revenue that the assessee has a PE in India so that the amount received by the assessee is otherwise taxable in India under any other Articles of DTAA between India and U.K.
33. In the light of the discussion made above, we, therefore, hold 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". We, therefore, delete the addition confirmed by the CIT(A) by setting aside the orders of the authorities below and allow this appeal filed by the assessee."
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7. Indisputably and as pointed out by the AO also, the facts and circumstances in the year under consideration are parallel to the facts and circumstances in the AY 2006-07. Accordingly, following the view taken by the co-ordinate Bench in their decision in the assessee's own case for the AY 2006- 07, we have no alternative but to hold that the payment received by the assessee from Indian Insurance Company in the process of re-insurance risk placed with International Insurance Companies, is not taxable in India as fee for technical services within the meaning of Article 13(4)(c ) of the treaty. Accordingly, addition made by the AO is deleted. Consequently, ground nos. 1 to 3 in the appeal are allowed.
8. Ground no.4 relating to levy of interest u/s 234B of the Act, being consequential nor the ld. AR having made any submissions before us on this ground while the entire addition made by the AO having been deleted by us , this ground becomes academic in nature and , therefore, does not survive for our adjudication.
9. As regards additional grounds nos. 5 &6 sought to be raised before us , we find that the these issues in relation to taxation of income as royalty ,do not emerge from the impugned order dated 3.10.2011 of the AO before us nor the ld. AR referred us to any such finding of the AO regarding taxation of the amount as royalty. It is only the order of the AO, which is in dispute before us and not the order of the DRP .In fact, the AO taxed the amount as fee for technical services within the meaning of explanation 2 to section 9(1)(vii) of the Act as also within the clause 4(c )of the Article 13 of the tax treaty between India & UK. In these circumstances, when the issues are purely academic, the prayer for admission of these additional ground nos. 5 & 6 is rejected. Since we have allowed ground nos.1 to 3 in the appeal of the assessee, prayer for admission of additional ground no.7 is also not entertained.
10. No other plea or argument was made before us.
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11. In result, appeal is allowed.
Order pronounced in open Court
Sd/- Sd/-
(R.P. TOLANI) (A.N. PAHUJA)
(Judicial Member) (Accountant Member)
NS
Copy of the Order forwarded to:-
1. M/s Guy Carpenter & Co. Ltd., PW C, 11A, Gate No.2, Sucheta Bhawan, Vishnu Digambaer Marg, New Delhi-2
2. Asstt. Director of Income-tax, Circle 1(2), New Delhi
3. CIT concerned.
4. DR, ITAT,'C' Bench, New Delhi
5. Guard File.
BY ORDER, Deputy/Asstt.Registrar ITAT, Delhi