Sutherland Mortgage Services INC. Vs THE PRINCIPAL COMMISSIONER

The summary of the case presented in the Writ Petition (Civil) involves multiple parties: the petitioner, M/s. Sutherland Mortgage Services Inc., represented by Sri. Joseph Prabakar, the learned counsel; the respondents, represented by Smt. Preetha S. Nair, learned Central Government Counsel (CGC) for R-1 & R-3, and Dr. Thushara James, learned Government Pleader for R-2.

M/s. Sutherland Mortgage Services Inc. is described as a branch office situated in the Cochin Special Economic Zone, operating under its principal, M/s. Sutherland Mortgage Service Inc. USA. The petitioner’s business primarily revolves around providing information technology enabled services.

The case presented in this Writ Petition involves M/s. Sutherland Mortgage Services Inc., operating within the Cochin Special Economic Zone, as a branch office of its parent company, M/s. Sutherland Mortgage Service Inc. USA. The petitioner firm primarily engages in offering information technology enabled services including mortgage orientation, primary servicing, special servicing, cash management, and analytics & reporting.

According to the petitioner, the principal company, M/s. Sutherland Mortgage Service Inc. USA, is legally restricted from outsourcing its operations to any third party due to US laws governing mortgage businesses. Consequently, the parent company has entered into an intra-company agreement with its branch office, M/s. Sutherland Mortgage Services Inc., solely for the purpose of serving customers outside India. It’s emphasized that this agreement is primarily for adherence to transfer pricing regulations.

It’s clarified that the branch office, being part of the principal company, does not possess a separate legal identity and that the legal entity remains the principal company itself. The parent company has also engaged in agreements directly with customers outside India for services provided from both the USA and India branches.

The crux of the issue seems to revolve around the reimbursement process, where the principal company incorporated in the USA reimburses its Indian branch for its services.

The case at hand involves a Writ Petition (Civil) presented by M/s. Sutherland Mortgage Services Inc., represented by Sri. Joseph Prabakar, against the decision of the Advance Ruling Authority as per the impugned Ext.P-2 order. The petitioner, operating in the Cochin Special Economic Zone, is a branch office of its principal company, M/s. Sutherland Mortgage Service Inc. USA. Engaged in providing information technology enabled services such as mortgage orientation, primary servicing, special servicing, cash management, and analytics & reporting, the petitioner operates under an intra-company agreement with its principal company due to US laws prohibiting outsourcing.

The petitioner, considered a branch without separate legal existence, provides services directly to customers outside India and not to the head office in the USA. It seeks to classify these services as ‘Exporter services’ under Sec. 16 of the Integrated Goods & Services Tax Act, 2017 (IGST Act), making them zero-rated supplies. To clarify this classification, the petitioner filed an application for an advanced ruling under Sec. 97 of the Central Goods & Services Tax, 2017 (CGST Act) and related regulations.

However, the Advance Ruling Authority, through Ext.P-2 order, declined the ruling, citing that the issue of “determination of place of supply” falls outside the permissible issues under Sec. 97(2) of the CGST Act, 2017, thus lacking jurisdiction. The petitioner challenges this decision, arguing that Sec. 100 of the CGST Act permits such rulings. Sri. Joseph Prabakar represents the petitioner, while Smt. Preetha S. Nair serves as the Central Government Counsel (CGC) for respondents R-1 & R-3, and Dr. Thushara James acts as the Government Pleader for respondent R-2. The dispute centers on the jurisdiction of the Advance Ruling Authority and the classification of the petitioner’s services for tax purposes under Indian law.

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