In an interim relief to TATA AIG, the Income Tax Appellate Tribunal (ITAT), Mumbai bench has remanded the matter to the Assessing Officer to verify the TDS liability on co-insurance fee paid by the Company to the lead insurer under section 194H of the Income Tax Act, 1961.
The assessee, TATA AIG General Insurance has paid co-insurance fees towards its liability to the lead insurer in the respective policies and its shares. The assessee has entered into an arrangement with co-insurer for sharing the risk premium as per the agreed ratio. As per the claim of the assessee, there is no requirement of tax deduction at source on the above sum because co-insurers were not the stands of the assessee and transactions between them were on principle-to-principle basis. The learned Assessing Officer rejected the contention of the assessee for the reason that in earlier year identical disallowance was made. The Assessing Officer further noted that co-ordinate Bench in assessee’s own case vide order dated 28th November 2015 has held that no disallowance is to be made with respect to the co-insurance fees.
The assessing officer, during the assessment proceedings held that as the issue involved is a substantial question of law the Department has filed appeal against that order and is pending. Therefore, he disallowed 30% of the above sum of Rs 1,38,33,000/- paid. Thus, ₹ 4,149,900 was disallowed.
After considering a catena of decisions on a similar issue, the Tribunal bench consists of Shri Vikas Awasthy (JM) And Shri Prashant Maharishi (AM) observed that it is pertinent to examine whether the provisions of Section 194H applies to it or not. Before us, the assessee has relied merely on the decisions.
“There are neither the copies of agreement of Reinsurance/coinsurance between the parties. Further in the order of the coordinate bench , we did not find any guidance that how the above payments were held to be on principal to principal basis and are not covered u/s 194 H of the Act , because para no 31 of the order merely says that it agrees with arguments of the assessee. Thus, these facts are not coming from the order of the lower authorities also. Therefore, in absence of any evidence placed before us, we are not in position to decide whether the above payments are covered u/s 194 H or not,” the Tribunal observed.
Remitting the matter back to the Assessing Officer, the Tribunal added that “Further, we also do not know whether the nature of payments and parties covered in earlier orders are also same. in the interest of justice we set-aside the whole issue back to the file of the learned assessing officer with a direction to assessee to produce the relevant agreements and arrangements before the assessing officer to show that the above payment does not fall within the purview of Section 194H of the act. The learned assessing officer may examine the same and then decide whether on such payment the provisions of Section 194H applies or not based on the various arguments raised before him by the assessee as well as the arguments raised by the assessee before the coordinate bench in earlier years as per para number 30 of that order.”
Advocate Shri J.D. Mistry & Madhur Agrawal appeared for the assessee.
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