ITAT provides interim relief to Tata AIG General Insurance

ITAT provides interim relief to Tata AIG General Insurance

The Company had claimed there was no prerequisite for TDS, as it had entered into an arrangement with a co-insurer

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has provided interim relief to Tata AIG General Insurance. The tribunal has instructed the assessing officer (AO) to verify the Tax Deducted at Source (TDS) liability on the co-insurance fee paid by the Company to the lead insurer under the Income Tax Act, 1961.

The assessee, TATA AIG had paid the co-insurance fees towards its liability to the lead insurer in the respective policies and its shares. The company entered into an arrangement with the co-insurer for sharing the risk premium as per the agreed ratio. Tata AIG claimed that there was no requirement of TDS, as transactions between them were on the basis of principle-to-principle.

But the AO rejected the contention of the assessee. He noted that in the assessee's own 2015 case, the co-ordinate bench had held that no disallowance was to be made with respect to the co-insurance fees. The AO maintained that as the issue involved a substantial question of law, the department had filed an appeal against that order, which was pending.

Relying on the decisions on similar issues, the ITAT bench comprising Vikas Awasthy (judicial member) and Prashant Maharishi (associate member), observed that it was pertinent to examine whether the provisions of the IT Act applied to it or not.

It stated, "There are no copies of the agreement of re-insurance/co-insurance between the parties. Further, in the order of the coordinate bench, we did not find any guidance on how the payments were held to be on a principal-to-principal basis and are not covered under the IT Act. The order merely says that it agrees with the arguments of the assessee. Therefore, we are not in a position to decide whether the payments were covered under the IT Act."

The tribunal added, "We do not know whether the nature of the payments and the parties covered in the earlier orders were also the same. So, we set aside the issue, sending it back to the AO. We direct the assessee to produce the relevant agreements and arrangements before the AO, who may examine it and decide whether the provisions of the IT Act were applicable."

The assessee was represented by advocates JD Mistry and Madhur Agrawal.