No Sec. 194D TDS on exp. incurred in foreign travel of insurance agents if sum paid directly to services providers: HC

Case Details: CIT v. SBI Life Insurance Company Ltd. - [2021] 133 taxmann.com 367 (Bombay)

Judiciary and Counsel Details

• • K.R. Shriram and Amit B. Borkar, JJ.
  • Suresh Kumar for the Appellant. 
  • Atul K. Jasani and P.C Tripathi for the Respondent.

Facts of the Case

Assessee was engaged in underwriting life insurance policies, and its business comprises individual life & group business. During the survey, it was noticed by the Assessing Officer (AO) that the assessee had incurred foreign travel expenses for its agents who were working for soliciting or procuring insurance business for the assessee.

AO held that foreign travel expenses incurred on agents should be covered under the words “income by way of remuneration or reward whether by way of commission or otherwise” used in Section 194D. Since the assessee did not deduct TDS, AO treated the assessee as an assessee-in-default within section 201(1) provisions and worked out the TDS default.

On appeal, the CIT(A) upheld the order of AO. However, the Tribunal reversed the order of AO. Aggrieved-AO filed the instant appeal before the Bombay High Court.

High Court Held

The Bombay High Court held as per section 194D, TDS is required to be deducted if a person is responsible for paying to a resident any income by way of remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business (including business relating to the continuance, renewal or revival of policies of insurance).

Further, the deduction shall be made at the time of credit of such income to the payee’s account or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier. Thus, the obligation to deduct TDS is on the person who is paying and the deduction to be made at the time of making such payment.
Factually and admittedly, the assessee paid no amount to reimburse expenses incurred by the agent in the foreign travel. The assessee had made arrangements for foreign travel for all the agents and paid expenses directly to service providers. Therefore, as no amount was paid to the agents, the obligation to deduct income tax at source would not arise.

List of Cases Referred to

• • DCIT v. Reliance Life Insurance Co. Ltd. [IT Appeal Nos. 3009 to 3011 (M) of 2013, dated 25-5-2016] (para 10)
  • CIT v. Reliance Life Insurance Co. Ltd. [2019] 106 taxmann.com 400/264 Taxman 296/414 ITR 551 (Bom.) (para 10).