| Case ID |
22edaa48-bddb-4441-933b-bfb57f5a697a |
| Body |
View case body. Login to View |
| Case Number |
AAR No. 752 OF 2007 |
| Decision Date |
Jan 29, 2009 |
| Hearing Date |
Jan 29, 2009 |
| Decision |
The Authority for Advance Rulings held that the applicant, Cholamandalam MS General Insurance Co. Ltd., is not liable to deduct tax at source on the payments made or to be made to Hyundai Marine & Fire Insurance Co. Ltd., Korea under the terms of the Secondment Agreement. The ruling clarified that the payments constituted a part reimbursement of the salary and benefits of the seconded employee, Mr. Shin Bong In, rather than fees for technical services. As such, the payments do not fall within the definition of income accruing to HMFICL under Section 9(1)(vii) of the Income-tax Act, 1961, read with Article 13.4 of the Double Taxation Avoidance Agreement. The Authority concluded that the arrangement was mutually beneficial and did not generate income for HMFICL that would require withholding tax by the applicant. |
| Summary |
In the case of Cholamandalam MS General Insurance Co. Ltd. versus Hyundai Marine & Fire Insurance Co. Ltd., Korea, the Authority for Advance Rulings in New Delhi analyzed the tax implications of a Secondment Agreement under the Income-tax Act, 1961 and the Double Taxation Avoidance Agreement (DTAA) between India and Korea. The agreement involved the secondment of an employee from HMFICL to Cholamandalam MS General Insurance for two years, during which the applicant reimbursed part of the secondee’s salary and benefits. The central issue was whether these payments constituted 'Fees for Technical Services' (FTS) subject to withholding tax under Section 195 of the Income-tax Act, 1961. The Authority examined the definitions under Section 9(1)(vii) and Article 13.4 of the DTAA, determining that the payments were part reimbursements of the secondee's compensation rather than fees for technical services. The mutual benefits and specific terms of the agreement, such as non-compete clauses and the provision for skill-related business expansions, reinforced the conclusion that no income was generated for HMFICL warranting tax deductions at source. The decision underscores the importance of the substance over form in cross-border secondment arrangements and highlights key considerations under Indian tax law and DTAA provisions, making it a pivotal reference for similar international business collaborations and tax compliance strategies. |
| Court |
Authority for Advance Rulings
|
| Entities Involved |
Cholamandalam MS General Insurance Co. Ltd.,
Hyundai Marine & Fire Insurance Co. Ltd., Korea,
Mr. Shin Bong In
|
| Judges |
P.V. Reddi, Chairman,
A. Sinha,
Rao Ranvijay Singh
|
| Lawyers |
S.D. Kapila for the Department,
Dr. Anita Sumanth for the Applicant.
|
| Petitioners |
Cholamandalam MS General Insurance Co. Ltd.
|
| Respondents |
Hyundai Marine & Fire Insurance Co. Ltd., Korea
|
| Citations |
2009 SLD 2330,
(2009) 309 ITR 356
|
| Other Citations |
Intertek Testing Services India (P.) Ltd. [2008] 175 Taxman 375 (AAR - New Delhi),
G.V.K. Industries Ltd. v. ITO [1997] 228 ITR 564 /[1998] 96 Taxman 179 (AP),
CIT v. Dunlop Rubber Co. Ltd. [1983] 142 ITR 493 /[1982] 10 Taxman 179 (Cal.),
CIT v. Industrial Engg. Projects (P.) Ltd. [1993] 202 ITR 1014 (Delhi),
CIT v. Tejaji Farasram Kharawalla Ltd. [1968]67 ITR 95 (SC),
AT&S India (P.) Ltd., In re [2006] 287 ITR 421 /157 Taxman 198 (AAR - New Delhi),
Danfoss Industries (P.) Ltd., In re [2004] 268 ITR 1 /138 Taxman 287 (AAR - New Delhi)
|
| Laws Involved |
Income-tax Act, 1961,
Double Taxation Avoidance Agreement between India and Korea
|
| Sections |
9(1)(vii),
Article 13.4
|