TaxTMI 
TaxTMI 
2024 (5) TMI 439
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....tands covered by the decision of the Tribunal in assessee's own case for the A.Y.2018-19 and 2019-20 which has followed earlier three Tribunal orders. 3. The brief facts are that assessee, M/s. RGA International Reinsurance Company Designated Activity company is a company incorporated in Ireland on 23/06/2003 and is a tax resident of Ireland. The assessee is eligible to claim the benefits of the India-Ireland Double Taxation Avoidance Agreement (India-Ireland Treaty). The assessee has the Tax Residency Certificate for the period from 01/04/2019 to 31/03/2020 The assessee is a global re-insurance company and has been operating in France, Spain, Germany, etc 4. With respect to India, the assessee has entered into life reinsurance contracts with Indian Cedents (i.e Indian insurance companies) from outside India Such business has been undertaken from the year 2003. 5. The key function in re-insurance is the acceptance of the risk that an insurance company transfers (cedes) to a re-insurer. Once RGA IRELAND has decided that it will underwrite the risk assumed by the Indian Cedents, it will enter into a contract with the Indian Cedents. In doing so, RGA IRELAND will enter into n....
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....of RGA IRELAND in India. He has also alleged that unrelated three parties i.e. Indian Cedents constitutes DAPE of RGI IRELAND in India. Accordingly, he proposed addition of Rs. 14,46,73,768/-by applying Rule 10 of Income Tax Rules and attributing 10% as gross profit and considering 50% of such profits from Indian operations. Further, the learned AO determined the tax liability on the said additions by applying a tax rate of 40 percent (plus applicable surcharge and cess). The learned AO assessed a total income of Rs 14,46,73,768 and reduced the refund from INR 13,11,67,860/-. 10. The ld. DRP has rejected the objections except for objections not to treat Indian cedents as DAPE of assessee in India and the receipts to be considered for attribution should be only actual receipts and not the amount appeared in Form 26AS. 11. We have heard both the parties and also perused the observation and finding of the ld. AO and ld. DRP as well as Tribunal orders for earlier years. First of all the reason as to why there is no business connection in terms of Secion 9(1)(1) of the Act is that- • RGA Services performs its activities in an independent manner RGA Services render ser....
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....aties) to obtain and provide clarifications requested by the Indian Cedents from time to time Third party Indian Cedents may approach RGA Ireland for claims settlement (with respect to their existing arrangements) RGA Ireland in turn approaches RGA Services for its assistance with respect to evaluation of the claim settlement request of its clients. RGA Services evaluates the proposal from a medical and a financial perspective. The personnel of RGA Services reviews the documents regarding the medical history of the life reinsured, death records and other claim documents. If required, they could also request for additional documents. b. Data Synopsis and ancillary support services The data collected by RGA Services are synopsized for claims request and for facultative underwriting request. Such synopsis is shared with RGA Ireland who in turn takes the final decision to settle claims. Further, the function also includes monitoring of premiums received with respect to various re-insurance policies, amount of premium received during a particular period etc. • Additionally, it may be noted that the core business activities of RGA Ireland are not undertaken....
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....ndent agent of RGA Ireland • RGA Services acts only as a communication channel between the Indian Cedents and RGA Ireland RGA Services only inputs the data into the system and final decisions of acceptance/ rejections is taken by the assessee. RGA Services does not procure any orders on behalf of RGA Ireland in India. The assessee does not give any detailed instructions or exercise any control on RGA Services with respect to RGA Service's business, and all the contracts are signed by the assessee outside India and by its employees In no circumstances are the contracts signed in India, and RGA Services does not have any authority to conclude any contracts on behalf of the assessee nor does it secure any orders for the assessee. 14. This contention of the assessee has been accepted by the Tribunal and adjudicated in assessee's own case in the following manner:- • AY 2018-19 and 2019-20 in ITA No. 803 and 2330/Mum./2022 dated 6 September 2023 (enclosed at page nos. 56 to 109) wherein it has been held as under 25. This is not the first time revenue has raised this issue. However, in the previous Assessment Years also the similar issues were rai....
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....ce of the DAPE is wholly tax neutral in India. Accordingly, the business profits eamed by the assessee on account of the reinsurance business have no tax implications in India. In view of these findings, all other issues raised in the appeal are academic and call for no adjudication as of now" 26. In the above decision, the Coordinate Bench have considered the issue of existence of business connection u/s. 9(1) of the Act and addressed the issue of Fixed Place Permanent Establishment and held that unless a particular place is at the disposal of the assessee that place cannot be said to constitute Permanent Establishment of the assessee. Further, they observed that the core reinsurance activity is assumption of risk and that assumption of risk has been done outside India hence there is no occasion to attribute reinsurance profit attribution to RGA Services. Whatever activities are carried out by RGA Services have been duly paid for by the assessee, and the transfer pricing assessment has accepted that position. Once that position is accepted, there cannot be any further profit attribution for services rendered by the RGA Services and they held that there was no fixed place ....
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....nctions of reinsurance activities which has standalone services offered by the RGA Services which was already compensated. However, as per the OECD commentary on Article 7(2) which requires a total factual analysis on the basis of functions performed, assets used and risk assumed. He submitted that OECD emphasis that profit attributable to the DAPE are separate from the profits attributable to the dependent agent itself 29. Further, he relied on the decision of DIT (International Taxation) v Morgan Stanley & Co. Inc. (supra) to submit that associated enterprise (also constitutes a PE) is remunerated on arm's length basis taking into account all the risk-taking functions of the multinational enterprise. In the risks assumed by the enterprise, in such a case, there would be need to attribute profits to the PE for those functions/hisks that have not been considered. 30. From the above submissions, we observe that Ld DR harping on the functions performed by the RGA Servers which may be integral part of the reinsurance business wherein the reinsurer may analyse various functions before or after taking reinsurance business which may include claim support, actuarial ....