India Tax Weekly - June 8, 2012

Profession:JSA Advocates & Solicitors

Alstom Transport SA – Authority for Advance Rulings (AAR) Applicant, a tax resident of France, along with three other companies, entered into a consortium agreement (CA) to execute design, manufacture, supply, installation, testing and commissioning of signaling/ train control and communication systems tendered by Bangalore Metro Rail Corporation Limited (BMRC). In terms of the CA, the consortium members were jointly and severally responsible for the work tendered by BMRC. Applicant approached the AAR for a ruling on whether payments received for the offshore supply of plant and materials, including spare parts, offshore designing and training of operating and maintenance personnel, and offshore services were taxable in India either under the Income-tax Act, 1961 (IT Act) or the India-France DTAA. AAR ruled that the consortium members constitute an AOP and are liable to be taxed as such. Income arising from offshore supply of equipment is subject to Income-tax in India in the hands of non-resident taxpayer. AAR noted that the consortium members jointly prepared the bid and came together for executing the project. Consortium members were jointly responsible for performing the entire work. Their common object was to perform the contract and earn income there from. Accordingly, AAR ruled that the consortium members had a common object in coming together and there was a common purpose in the concerted action. AAR further ruled that the contract was a composite one and could not be dissected into different parts. AAR also ruled that a contract has to be read as a whole and cannot be split up into separate parts as consisting of independent supply or sale of goods and for installation at the work site and so on. AAR placed reliance on the three judge bench Vodafone judgment [341 ITR 1] and followed it in preference to the dissecting approach approved by the earlier two judge bench shikawajima judgment [288 ITR 408]. AAR relied upon the 'look at' principle postulated by the Supreme Court in the Vodafone judgment and ruled that the legal nature of the transaction has to be ascertained by looking at it as a whole, without adopting a dissecting approach. AAR has followed its recent ruling in Linde AG Germany case. AAR No. 958 of 2010. Ruling delivered on June 7, 2012 Aramex International Logistics – AAR Applicant, a tax resident of Singapore, is an entity belonging to the Aramex group. Aramex group is engaged in the business of door-to-door express shipments...

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