Permanent establishment for foreign reinsurer denied where Indian support functions were ancillary and lacked contract authority or risk assumption.

A foreign reinsurer carried on underwriting outside India and the Indian support entity performed only ancillary communication, claims and data functions on an arm's length basis, so no fixed place PE, dependent agent PE or taxable business connection arose in India. The absence of premises at the assessee's disposal, core risk-bearing activity in India, authority to conclude contracts, or assumption of risk by the Indian entity was decisive. The Multilateral Instrument was held inapplicable to the year under consideration because its relevant Indian effect began only from 1 April 2020. Additional TDS credit was allowed as claimed in the return, subject to verification in the prescribed manner.

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Issues: (i) Whether the assessee had a business connection, fixed place permanent establishment, or dependent agent permanent establishment in India so as to permit taxation of its reinsurance profits in India. (ii) Whether the assessee was entitled to relief on account of applicability of the Multilateral Instrument for the year under consideration. (iii) Whether the assessee was entitled to additional TDS credit.

Issue (i): Whether the assessee had a business connection, fixed place permanent establishment, or dependent agent permanent establishment in India so as to permit taxation of its reinsurance profits in India.

Analysis: The assessee carried on reinsurance underwriting outside India, with contracts negotiated and concluded abroad. The Indian support entity performed only communication, claims support, data synopsis, and ancillary functions, for which it was separately remunerated on an arm's length basis. The record did not show that any premises in India were at the disposal of the assessee, that the core risk-bearing function was carried on in India, or that the Indian entity had authority to conclude contracts, secure orders, or assume risk on behalf of the assessee. In the absence of assets, risk assumption, or authority to bind the assessee, the conditions for fixed place PE and dependent agent PE were not met.

Conclusion: The assessee had no taxable business connection, no fixed place PE, and no dependent agent PE in India; the issue is decided in favour of the assessee.

Issue (ii): Whether the assessee was entitled to relief on account of applicability of the Multilateral Instrument for the year under consideration.

Analysis: The Multilateral Instrument provisions, as relied upon in the order, were stated to take effect only from 1 April 2020 for India in respect of the relevant taxes, whereas the assessment year under consideration preceded that operative date.

Conclusion: The Multilateral Instrument did not apply to the year under consideration; the issue is decided in favour of the Revenue.

Issue (iii): Whether the assessee was entitled to additional TDS credit.

Analysis: The appellate order directed the Assessing Officer to allow TDS credit as claimed in the return, subject to verification in the prescribed manner.

Conclusion: The assessee was held entitled to the TDS credit claimed, subject to verification; the issue is decided in favour of the assessee.

Final Conclusion: The core addition based on alleged Indian permanent establishment did not survive, while limited ancillary relief was granted on TDS credit and the appeal was otherwise not accepted to the extent of the Multilateral Instrument contention.

Ratio Decidendi: For a foreign enterprise, a fixed place permanent establishment requires premises at its disposal and performance of core business functions through that place, while a dependent agent permanent establishment requires more than ancillary support services and cannot be inferred where the Indian entity lacks authority to conclude contracts, assumes no risk, and holds no relevant assets.

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