ACIT Vs Aditya Birla Sun Life Insurance Co (ITAT Mumbai)
Summary: The appeal was filed by the Revenue against the order dated 25.06.2025 passed by the Commissioner of Income Tax (Appeals), Mumbai for Assessment Year 2014-15. The dispute concerned whether Aditya Birla Sun Life Insurance Co. was required to deduct tax at source on reinsurance premiums remitted to two overseas entities and could consequently be treated as an assessee in default under Section 201 of the Income-tax Act, 1961.
The assessee, a resident corporate entity engaged in providing life insurance services, had entered into Risk Premium Reinsurance Agreements with RGA International Reinsurance Company Limited, Ireland and Munich Reinsurance, Germany. During the relevant year, it remitted Rs.53,31,41,051/- to RGA International Reinsurance Company Limited and Rs.7,03,19,188/- to Munich-Re towards reinsurance premium. The Assessing Officer issued a notice under Section 133(6) of the Act seeking details regarding the payments and tax deducted thereon.
The assessee explained that the overseas entities did not have any business connection or Permanent Establishment (PE) in India and that the reinsurance premium, being business income in their hands, was not taxable in India. The Assessing Officer did not accept the explanation. In relation to RGA International Reinsurance Company Limited, he considered its wholly owned Indian subsidiary, RGA Services India Private Limited, to constitute its PE, relying upon the decision in the case of Bharti Axa Life Insurance Co. Ltd. for Assessment Years 2011-12 to 2014-15. In relation to Munich Re, the Assessing Officer relied upon its Indian subsidiary and concluded that the services provided by the Indian subsidiaries were connected with the reinsurance business of their parent companies. He further considered the payments attributable to Indian PEs and liable as Fees for Technical Services (FTS).
On that basis, the Assessing Officer treated the assessee as an assessee in default under Section 201(1) and raised a demand of Rs.6,03,46,024/- together with interest of Rs.48,54,475/- under Section 201(1A), resulting in an aggregate demand of Rs.6,88,69,536/-.
The First Appellate Authority, however, found that the ITAT, while deciding the appeal of Bharti Axa Life Insurance Co. Ltd. for Assessment Years 2011-12 to 2014-15 by order dated 05.07.2017, had held that RGA India Services Limited could not be considered the PE of RGA International Reinsurance Company Ltd. in India. Accordingly, the assessee was not required to deduct tax at source on the reinsurance premium paid to the Irish company. The First Appellate Authority also relied upon the ITAT decision in the case of RGA International Reinsurance Company Limited for Assessment Year 2015-16, by order dated 31.10.2022 in ITA No. 6935/MUM/2018, wherein RGA Services India Pvt. Ltd. was held not to constitute either a fixed place PE or dependent agent PE in India.
As regards Munich Re, the First Appellate Authority referred to the order dated 18.12.2006 passed by the Director of Income Tax (International Taxation), Mumbai under Section 264, wherein Munich Re was held not to have any PE in India. The First Appellate Authority further held that the assessee had not received any services from the alleged PEs or overseas entities and that the reinsurance premium did not qualify as consultancy and technical services, FTS or royalty.
The Tribunal considered the rival submissions and the material on record. It held that, insofar as RGA International Reinsurance Company Limited was concerned, the coordinate Bench decisions in Bharti Axa Life Insurance Co. Ltd. and RGA International Reinsurance Company Limited had clearly and categorically held that the Indian subsidiaries could not be treated as PEs of the payee because the subsidiaries did not provide reinsurance services to the assessee.
In relation to Munich Re, the Tribunal found no substance in the allegation that the payment constituted FTS or royalty. The factual position showed that the payments were purely and simply towards reinsurance premium. There was nothing on record to suggest that the overseas entities were providing services which could characterize the payments as FTS or royalty. The Department had also not brought any material on record to controvert the factual findings of the First Appellate Authority.
Accordingly, the Tribunal upheld the decision of the First Appellate Authority and dismissed the Revenue’s appeal.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Captioned appeal by the Revenue arises out of order dated 25-6-2025 of learned Commissioner of Income Tax (Appeals) [in short ‘CIT(A)], Mumbai for the Assessment Year 2014-15.
2. Basically, the grievance of the Department is against the decision of learned First Appellate Authority holding that there is no obligation upon the assessee to deduct tax on the remittances to two overseas entities towards reinsurance premium. Hence, the assessee cannot be treated as an assessee in default under Section 201 of the Income Tax Act, 1961 (in short, ‘the Act’).
3. Briefly the facts are, as stated, the assessee is a resident corporate entity, being a joint venture between Aditya Birla Nuvo Limited and Sun Life Financial (India) Insurance Investment Inc., subsidiary of Sun Life Assurance Company of Canada. The assessee is engaged in the business of providing life Insurance Services to protect itself from the risk under the insurance contracts as per market practice. The assessee has entered into the ‘Risk Premium Reinsurance Agreements’ with two overseas entities, namely, RGA International Reinsurance company Limited, located in Ireland and Munich Reinsurance (Munich Re) a company incorporated in Germany. Based on information available in the system of the Department, the Assessing Officer noticed that in the year under consideration, the assessee had remitted an amount of Rs.53,3141,051/- to RGA International Reinsurance Company Limited and an amount of Rs.7,03,19,188/- to Munich-Re on account of reinsurance premium. In order to verify the TDS compliance on the aforesaid remittances, the Assessing Officer issued notice under Section 133(6) of the Act to the assessee seeking details on payments made and tax deducted thereon. In response, the assessee furnished its reply explaining the reason for not deducting tax on the remittances. Not being satisfied with the explanation of the assessee, the Assessing Officer issued a show cause notice under Sections 201(1)/(1A) of the Act requiring the assessee to explain why it should not be declared as a “assessee in default” for not deducting tax on the amounts remitted to overseas entities towards reinsurance premium, as according to Assessing Officer, such remittances constituted income in India. In response to the show cause notice, the assessee submitted that since the overseas entities to whom the remittances were made do not have any business connection or Permanent Establishment (‘PE’) in India, the reinsurance premium paid to them, which is in the nature of business income at the hands of the overseas entities, is not taxable in India. The Assessing Officer, however, was not convinced with the submissions of the assessee. He observed that RGA International Reinsurance company Limited had a wholly owned subsidiary in India, namely, RGA Services India Private Limited (RGA Services India), which constitutes its PE. In this context, the Assessing Officer referred to the case of M/s. Bharti Axa Life Insurance Co. Ltd. for Assessment Years 2011-12 to 2014-15, wherein it was held that RJ Services India is the PE of RGA International Reinsurance company Limited in India.
4. Insofar as Munich Re is concerned, the Assessing Officer observed that it has a subsidiary in India in the form of Munich RE India. He observed, the services provided by RGA Services India and Munich RE India are in relation to the reinsurance business of their parent companies and parent companies are highly dependent on the functions and services of Indian subsidiaries. He further observed that the nature of services provided by the Indian subsidiaries would qualify as technical services, hence, the remittances are attributable to PE’s in India and are liable to be treated as FTS. Thus, on the basis of the aforesaid reasoning, the AO ultimately concluded that the remittances made on account of reinsurance premium are taxable at the hands of the overseas entities. Therefore, the assessee was obliged to deduct tax at source. Accordingly, he treated the assessee as an assessee in default under Section 201(1) of the Act and proceeded to pass an order raising demand of Rs. 6,03,46,024/- and interest thereon in terms with Section 201(1A) of an amount of Rs.48,54,475/-. In aggregate, he raised demand of Rs. 6,88,69,536/-. Against the order passed under Section 201(1)/(1A) of the Act, the assessee preferred an appeal before learned First Appellate Authority.
5. After considering the submissions of the assessee, in the context of the facts and materials on record, learned First Appellate Authority found that while deciding the appeal of Bharti Axa Life Insurance Co. Ltd. in Assessment Years 2011-12 to 2014-15, the Income Tax Appellate Tribunal (‘ITAT’) in order dated 5-7-2017 has held that RGA India Services Limited cannot be considered as the PE of RGA International Reinsurance Company Ltd. in India. Thus, it was held that Bharti Axa Life Insurance Co. Ltd. was not obliged to deduct tax at source on the reinsurance premium paid to the Irish company. Thus, relying upon the said decision of the ITAT, learned First Appellate Authority held that the assessee cannot be treated as an assessee in default under Section 201(1)/(1A) of the Act so as to be visited with demand under Section 201(1)/(1A) of the Act. He further referred to the decision of the ITAT in case of RGA International Reinsurance company Limited in Assessment Year 2015-16, wherein the ITAT in order dated 31-10-2022 in ITA No. 6935/MUM/2018 has held that RGA Services India Pvt. Ltd. does not constitute either fixed place PE or dependent agent PE of the assessee in India. Hence, the amount received towards reinsurance premium is not taxable in India.
6. Insofar as remittances made to Munich Re ld. First appellate authority referred to order dated 18.12.2006 passed by Director of Income Tax, (International Taxation), Mumbai under Section 264 of the Act, wherein it was held that Munich Re does not have any PE in India. Since there was no change in the business model or the structure of Munich Re, the assessee did not deduct tax at source on reinsurance premium paid to Munich Re. Thus, he held that since there is no obligation for deduction of tax at source, assessee cannot be treated as an “assessee in default” with reference to payment made to Munich Re. As far as the observations of the Assessing Officer that the payments made to Munich Re would qualify as Fees for Technical Services (‘FTS’)/royalty, learned First Appellate Authority noted that the assessee had not received any kind of service either from the alleged PEs or from the overseas entities to whom payments were made. It was held that the reinsurance premium paid will not qualify as consultancy and technical services. Further, referring to the decisions of the ITAT, he observed that the ITAT has held that the payments made towards reinsurance premium could not qualify as FTS or royalty. Accordingly, he decided the issue in favor of the assessee.
7. Having considered rival submissions and perused the materials on record, we are of the view that insofar as the allegation of the Assessing Officer that the RGA International Reinsurance Company Limited and has PE in India in the form of wholly owned subsidiaries are concerned, the coordinate bench in case of ‘Bharti Axa Life Insurance Co.’ Ltd. and in case of ‘RGA International Reinsurance company Limited’ has clearly and categorically held that the Indian subsidiaries cannot be treated as PEs of the payee as the subsidiary did not provided any reinsurance services to the assessee.
8. Insofar as the allegation of the Assessing Officer that the payment made to Munich Re would qualify as FTS/ royalty, we do not find much substance in such allegations for the reason that the factual aspect relating to the issue squarely reveals that the payments were made purely and simply towards reinsurance premium. There is nothing on record to suggest that the entities to whom such payments were made were providing any services which can lead us to characterized the payments as FTS/Royalty. No material has been brought on record by the Department to controvert the factual findings of learned First Appellate Authority. Accordingly, we uphold the decision of learned First Appellate Authority by dismissing the grounds.
9. In the result, appeal is dismissed.
(Order pronounced in the open court on 17.06.2026)
