The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) ruled that there shall be no tax implications on the profits of the businesses which is earned on the basis of the reinsurance business in the lack of the fixed place permanent establishment (PE) in India.
The two-member bench, Pramod Kumar (Vice President) and Anikesh Banerjee (Judicial Member) have seen that the presence of the dependent agent permanent establishment (DAPE) has a neutral tax in India. The business profits that the taxpayer made on the basis of the reinsurance business poses no tax importance in India.
The taxpayer has a company financially domiciled in Ireland and would be admitted as qualified for the advantages of the India-Ireland Double Taxation Avoidance Agreement (DTAA). The taxpayer is engaged in the business of giving reinsurance services among others to its clients in India. The taxpayer has made a reinsurance commission of Rs 504,37,83,613 from India.
For insurance companies reinsurance is called insurance, it consists of the insurance of the risk liability that the insurer would perform beneath a contract of insurance. Beneath the reinsurance arrangement, the reinsurer accepts, of course, for concern(i.e., reinsurance premium), the risk, as a complete portion that has been covered beneath the policy provided via the insurance company.
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As the assessee would not secure any permanent establishment in India and hence for the provisions of the Indo-Irish tax treaty its business profits are within the reinsurance premium obtained from the Indian entities and would not get subjected to be taxed in India. There is no favour seen with the council below in the claim.
The assessing officer with the view would have been authorized by the Dispute Resolution Panel, which mentioned that the subsidiary comprises DAPE along with the fixed place permanent establishment (FP-PE) of the taxpayer in India. The authorities see that the taxpayer was obligated to pay the tax for the business profits that come from the reinsurance premium obtained from the Indian insurance companies in India.
The assessing officer would calculate 50% of the reinsurance revenue made as per the functioning in India and treat its taxability with a 10% rate of the gross reinsurance revenue. DRP confirms the action that the assessing officer has taken. As per that the assessing officer would move to draw the reinsurance revenues to the tax in India as a business income.
ITAT said the major reinsurance activity would be the assumption of risk along with the assumptions of the risk that would be performed overseas. There is no occasion to attribute reinsurance profit attribution to RGA India. If the activities performed via RGA India would be duly paid via taxpayer then the transfer cost assessment would be considered that position. There shall not be any profit attribution for the services directed via RGA after the acceptance of the position.
ITAT has not approved the stand of the authorities below and ruled that there was no set place or permanent establishment.
| Case Title | RGA International Reinsurance Company Ltd Versus Assistant Commissioner of Income Tax International Taxation |
| Citation | ITA No. 6935/Mum/2018 |
| Date | 31.10.2022 |
| Counsel For Appellant | P J Pardiwalla |
| Counsel For Respondent | Sunil Umap |
| Mumbai ITAT | Read Order |
