Business Profits earned by RGA International Reinsurance Company on Account of Reinsurance Business have No Tax Implications in India: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai held that the business profits earned by the RGA International Reinsurance Company on account of the reinsurance business have no tax implications in India.

The brief fact of the case is that the Assessee RGA International Reinsurance Company is an Ireland Company , they are engaged in the business of providing reinsurance services, amongst others, to its clients in India. They are entitled to the benefits of the India Ireland Double Taxation Avoidance Agreement .During the relevant previous year, the assessee has earned the reinsurance commission of Rupees Five Hundred crore from India.

The Assessing Officer has computed Fifty percent of the reinsurance revenue earned from India and treated its taxability at Ten percent of the gross reinsurance revenue. Against the order the assessor filed an appeal before the ITAT.

While considering the facts it is found that according to the provisions of Indo-Irish tax treaty since it did not have any permanent establishment in India their business profits, embedded in the reinsurance premium received from Indian entities are not taxable in India.

Sunil Umap counsel for the revenue contented that Assessee Company has a group entity in India by the name of RGA India Services Pvt Ltd and which is a subsidiary of the Reinsurance Group of America, RGA-India has provided a spectrum of vital and primary business functions, and they support Assessee Company for its all business functions and they have permanent place establishment.

Counsel for assesses P J Pardiwalla, along with Jasmin Amalsadvala and Anish Thakkar observed that assessee does not have any place of business operations in India and that the assessee did not have any premises at its disposal. RGA India is a separate legal entity having its own personnel It was also explained that the services rendered by the RGA India and the assessee company are distinct in nature while the former renders support services, the later provides reinsurance services.

After considering the contention of the both side, the ITAT bench comprising Pramod Kumar, Vice President and Anikesh Banerjee, Judicial Member allow the appeal file by the assessee and held that “assessee did not have a fixed place permanent establishment in India and business profits earned by the assessee on account of the reinsurance business have no tax implications in India”  

Moreover found that  the bench  the Dispute Resolution Panel upheld the decision of Assessing officer only consider the section 9(1) of the Indian Income Tax Act 1961.Incase Double Taxation Agreement , the provisions of the Income Tax Act cannot be pressed into service unless these provisions are more beneficial to the assessee.

To Read the full text of the Order CLICK HERE

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