TaxTMI 
TaxTMI 
2015 (4) TMI 905
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....e of any Permanent Establishment (PE) in India the entire business income is not taxable in India. 2.1 During the course of assessment proceedings, the assessee filed necessary details and information in support of its claim. After carefully going through the information/details furnished by the assessee the AO observed that the business of the assessee is to provide reinsurance services to the clients in India. The AO further observed that in the course of such business Swiss Re-Services India Pvt. Ltd. (SRSIPL), which is an Indian Company and wholly owned subsidiary of the assessee is a PE of the assessee in India. The AO further noticed that the assessee through its Singapore Branch has entered into service agreement since 01/04/2009 with SRSIPL for obtaining risk assessment services, market insurance and administrative support in India and in turn remunerate/compensate SRSIPL on a cost + 12% margin. The AO was of the opinion that since the assessee has remunerated SRSIPL and all its employees on a cost + basis, it is clear that the personnel and staff have rendered services to the assessee as de-facto employees. The AO was of the firm belief that the Indian subsidiary SRSIPL p....
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.... agency PE in India, therefore, no income can be attributed to India on account of PE in India. 2.4 The AO considered the detailed submissions and the contentions made by the assessee. However, the submissions made by the assessee did not find favour with the AO who at para 9.3.2 of his order observed as under: 9.3.2. From perusal of the facts and circumstances of the case, it emerges that the arguments of the assessee are not tenable on account of the following reasons: i, The re-insurance contract is an agreement between the insurer and the reinsurer, whereby a part of the risk gets transferred from one party to another. The party accepting the risk is termed as the reinsurer and the party transferring the risk is termed as the reinsured/reassured or cedant. ii. The income of the assessee is being earned from India on a regular and continuous basis. In view of this, the income of the assessee is taxable in India in terms of Sec. 9(1)(i) of the Indian income Tax Act, 1961 i.e. the Domestic Income Tax Act. iii. The assessee is having regular flow of income emanating from India under the domestic Act; hence the assessee has a clear-cut business connection in India. The argument....
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....2 ITR 416(SC) and Hon'ble Delhi High Court in the case of Centrica India Offshore P. Ltd. Vs. CIT, 44 taxamann.com 300 and Hon'ble Karnataka High Court in the case of Jebon Corporation India vs. CIT, 245 CTR 300(Kar). 5. Having heard the rival submissions, we have carefully perused the orders of the authorities below and the relevant documentary evidences brought to our notice in the light of judicial decisions relied upon by both sides. To begin with, let us first consider the relevant clauses of the service agreement between Singapore Branch of the assessee and Swiss Re-services India Pvt. Ltd. i.e. SRSIPL. "1.1.3 Forwarding routine communication from the Branch of SRZ to the Clients (other than contracts of re-insurance and confirmation of liability) after translating in local language, where required. 1.6 The Company hereby acknowledges and confirms that it is not the agent, broker or legal representative of the Branch of SRZ for any purposes whatsoever, and agrees that at no time shall it represent itself to be the agent or broker of the Branch of SRZ in India. The Company agrees to indemnify and hold the Branch of SRZ harmless with respect to any breach of this Section by ....
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....ugh a broker, general commission agent or any other agent having an independent status, if such broker, general commission agent or any other agent having an independent status is acting in the ordinary course of his business : Provided further that where such broker, general commission agent or any other agent works mainly or wholly on behalf of a non-resident (hereafter in this proviso referred to as the principal non-resident) or on behalf of such non-resident and other nonresidents which are controlled by the principal non-resident or have a controlling interest in the principal non-resident or are subject to the same common control as the principal non-resident, he shall not be deemed to be a broker, general commission agent or an agent of an independent status." 5.2 A perusal of the facts of the case in hand go to show that none of the conditions specified in clause (a)(b) & (c) above are satisfied. Therefore, it cannot be said that the assessee is having any business connection in India. Now let us see whether the assessee has any PE within the purview of Article-5 of India Swiss Treaty, wherein is provided as under: "(l) the furnishing of technical services, other than s....
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....apply. 42.31 Also, the provision only applies to services that are performed in a State by a foreign enterprise. Whether or not the relevant services are furnished to a resident of the State does not matter; what matters is that the services are performed in the State through an individual present in that State." 5.5 Considering the services rendered by SRSIPL in the light of the OECD commentary, SRSIPL cannot be considered as PE of the assessee. The decision relied upon by Ld. DR do not support the Revenue on the facts of the present case, like in the case of Delhi Bench of the Tribunal in the case of Motorola Inc. (supra, the facts were that the employees of the assessee had worked both for the assessee as well as its Indian subsidiary. The employees also had the right to enter the office of the Indian subsidiary either for the purpose of working for Indian subsidiary or for the purpose of working for the assessee and the Indian subsidiary provided perquisite to the employees of the assessee and the assessee paid salaries to the employees, on these facts the Indian subsidiary was considered as place of business. However, facts of the case in hand clearly show that the employees....