Services rendered to Indian Insurance Company in the process of re-insurance of risk cannot be treated as ‘Fees for Technical Services’ under India-UK tax treaty

Guy Carpenter & Co. Ltd., Vs. ADIT (ITAT Delhi) – In the present case, the New India Insurance Co. or other Insurance Company in India, who avails the services of the assessee as a broker in the process of the re-insurance of the risk is left with no technical knowledge, experience, skill, know-how or processes so as to bring the services rendered by the assessee within the ambit of Article 13(4)(c) of the Treaty.

As already observed above, the nature of services rendered by the assessee are also not in the nature of any technical or consultancy services which make available technical knowledge, experience, skill, know-how or processes to the user. We, therefore, hold that the payment received by the assessee in consideration for rendering intermediary or advisory services in the process of selecting re-insurer, cannot be qualified to be in the nature of fees for technical services as contemplated under Article 13(4)(c) of the DTAA between India & UK. Since the DTAA between India & UK applies to the present case and the benefit of the provisions contained in DTAA with UK are available to the assessee as so well settled, and since the payment received by the assessee is not qualified to be in the nature of fees for technical services within the meaning of Article 13(4)(c ) of the treaty, we hold that the payment received by the assessee from the Insurance Company in India, cannot be brought to tax in India as fees for technical services.It is not the case of the revenue that the assessee has a PE in India so that the amount received by the assessee is otherwise taxable in India under any other Articles of DTAA between India and U.K.

In the light of the discussion made above, we, therefore, hold that the payment received by the assessee from Indian Insurance Co. in the process of reinsurance risk placed by Indian Insurance Co. with International reinsurance companies is not taxable in India as “fees for technical services”. We, therefore, delete the addition confirmed by the CIT(A) by setting aside the orders of the authorities below and allow this appeal filed by the assessee.

INCOME TAX APPELLATE TRIBUNAL, DELHI

ITA No. 2443/Del/2011

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