ITAT disallows deduction to
Indian Insurance company (assessee) for reinsurance premium paid to
non-resident citing non-deduction of TDS, also holds that pre-2014, any
re-insurance arrangement involving a direct payment of reinsurance premium to a
foreign insurer, is in violation of and contrary to Insurance Act, thus hit by
Expl 1 to Sec 37(1); Tribunal gives primacy to opening words of Sec. 101A which
read " Every insurer shall re-insure with Indian re-insurers such
percentage of the sum assured on each policy...." ; As regards sub-section
7 of Sec 101A that allows an insurer to insure with an Indian insurer or
"other insurer" , an amount over and above the percentage prescribed
by Insurance regulator IRDA, ITAT firmly rejects the argument that the words
"other insurer" could be interpreted to mean a foreign re-insurer;
ITAT carefully peruses Sec. 2(9) of Insurance Act, that according to the Tribunal,
emphasised two conditions, namely "i) The insurer or reinsurer shall be in
India ii) such person shall have standing contract with underwriters who are
members of the Society of Lloyd’s...."; ITAT rejects assessee's contention
that provision of Sec 2(9) prior to amendment in 2014 was not applicable to
assessee, highlights amendment in 2014, that changed the definition of an
"Indian insurer" to include a " foreign company engaged in
reinsurance business through a branch established in India" post which
assessee started deducting TDS on reinsurance premium; ITAT, therefore, holds
that "the profit of non-resident reinsurance company or the person in
India who has standing contract with underwriters, who are members of the
Lloyds, is taxable in India. Hence, the assessee has to necessarily deduct tax
on the premium paid to non-resident re-insurance company for
reinsurance."; Tribunal further goes on to hold that even otherwise if the
assessee claims that there was no person in India, who has standing contract
with underwriters who are members of the Lloyds and premium was paid directly
to non-resident re-insurance company, then the transaction of the assessee
violates the Insurance Act regulations; Overturns CIT(A) ruling restricting the
disallowance to 15% of reinsurance premium, upholds AO's order disallowing the
entire amount; Rejects reliance on Apex Court ruling in Vodafone International
Holdings, refuses reliance on favourable rulings of Mumbai & Pune benches
of the Tribunal since the provisions of Sec. 2(9) of Insurance Act were not
brought to the notice of the respective benches; Separately, reverses CIT(A)
order deleting disallowance u/s 14A, granting exemption to profit on sale of
investment, but accepts assessee’s claim that provision of Sec 115JB are
inapplicable to insurance companies:ITAT
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