2016 (10) TMI 1356 - AT - Income Tax

Tribunal Upholds Assessee's Position on TDS Exemption for Foreign Payments

DCIT-10 (1), Mumbai Versus M/s ICICI Lombard General Insurance Co Pvt Ltd.

The Tribunal dismissed both appeals by the Revenue, upholding the assessee's position. It was held that no TDS was required on payments to the foreign ... Eligible for claim of exemption u/s 10(38) with respect to gain/loss on sale of investments - HELD THAT:- It is pointed out that in Assessment Year 2004-05 also the Tribunal vide its order [2013 (10) TMI 1130 - ITAT MUMBAI] followed its earlier decision [2012 (11) TMI 587 - ITAT MUMBAI] and allowed the claim of the assessee. Similarly, in Assessment Years 2005-06 and 2006-07, the Tribunal has upheld its earlier order - It has also been pointed out that in Assessment Year 2007-08 also, the Tribunal vide [2015 (2) TMI 1372 - ITAT MUMBAI] has decided the issue in favour of the assessee. Apart therefrom, the learned representative for the assessee pointed out that the view of the Tribunal is also in consonance with the clarification issued by CBDT vide Circular dated 21.02.2006, which has indeed been referred by the CIT(A) in the impugned order. Eligible for claiming exemption u/s 10(15) - HELD THAT:- It is seen that the CIT(A) allowed the plea of assessee by referring to the clarification issued by CBDT dated 21.02.2006 whereby it is clarified that exemption available to any other assessee under any of the clauses of Sec. 10 of the Act shall also be made available to a person carrying on non-life insurance business. Apart therefrom, at the time of hearing the learned representative for the assessee has referred to the decision of Tribunal in the case of assessee for Assessment Year 2007-08 2015 (2) TMI 1372 - ITAT MUMBAI] wherein similar issue has been decided in favour of the assessee following precedents in the case of ICICI Prudential Insurance Co. Ltd. [2012 (11) TMI 13 - ITAT MUMBAI] and New India Assurance Co. Ltd. [1967 (10) TMI 16 - BOMBAY HIGH COURT] - Decided in favour of assessee. Issues Involved:1. Deduction of TDS on payments made to a foreign entity.2. Exemption claims under sections 10(15), 10(34), and 10(38) of the Income Tax Act.Issue-wise Detailed Analysis:1. Deduction of TDS on Payments Made to a Foreign Entity (Assessment Year 2005-06):The primary issue in ITA No. 6837/Mum/2014 for the assessment year 2005-06 was whether the assessee needed to deduct TDS on payments amounting to Rs. 16,85,47,839/- made to M/s Odyssey America Reinsurance Corporation, Singapore. The Assessing Officer disallowed the deduction under section 40(a)(ia) of the Income Tax Act, 1961, as the assessee did not deduct TDS on these payments.The tribunal noted that the proceedings under section 263 of the Act were quashed by the Tribunal in the assessee’s own case for the assessment year 2004-05, where it was held that the payment to the Singapore company was not taxable in India as the company did not have a Permanent Establishment (PE) in India. The Tribunal observed:> 'The payment could only be considered as business income in the hands of the Singapore Company which could be taxed in India only if the said company had PE in India.'The Tribunal concluded that the invocation of revisional jurisdiction by the Commissioner was not valid. Consequently, the appeal of the Revenue was dismissed as infructuous.2. Exemption Claims Under Sections 10(15), 10(34), and 10(38) of the Income Tax Act (Assessment Year 2009-10):In ITA No. 6832/Mum/2014 for the assessment year 2009-10, the issue pertained to the exemptions claimed by the assessee under sections 10(15), 10(34), and 10(38) of the Act. The Revenue contended that these exemptions were not applicable to the assessee, which is engaged in the insurance business.The Tribunal referred to its earlier decision for the assessment year 2008-09, where it had allowed similar claims of the assessee. It was noted:> 'The income of assessee from the business of Insurance was required to be determined in terms of Sec. 44 of the Act read with First Schedule of the Act and accordingly, the exemptions under Sec. 10(38) or Sec. 10(15) or Sec. 10(34) of the Act were not applicable.'The Tribunal reiterated that the assessee was eligible for these exemptions, following precedents set in earlier years. Specifically, it was held that:> 'The Tribunal has taken note of the fact that in the corollary, it has been provided in the circular no.528 dated 16.12.1988 that the loss incurred by the general insurance companies on realization of investment shall not be allowed as deduction in computing the profit chargeable to tax.'The Tribunal affirmed the decision of the Commissioner of Income Tax (Appeal) and dismissed the Revenue's appeal, stating:> 'In the absence of any contrary decision brought to our notice, the action of CIT(A) is hereby affirmed.'Conclusion:Both appeals by the Revenue were dismissed. The Tribunal upheld the assessee's position on both issues, confirming that no TDS was required on payments to the foreign entity and that the exemptions under sections 10(15), 10(34), and 10(38) were applicable to the assessee.