Friday, 8 June 2012

Composite contract cannot be split to exempt profits from offshore supply of goods. A joint contract constitutes an AOP despite separate responsibility of parties

Alstom Transport SA vs. DIT (AAR)


The Applicant, a foreign company, entered into a consortium agreement with three other cpmpanies for the submission of a joint bid in response to the Bangalore Metro Rail Corporation Ltd’s (BMRC) tender for “design, manufacture, supply, installation, testing & commissioning of signaling/ train control and communication systems”. The consortium parties agreed to be jointly and severally liable to BMRC for the performance of all obligations under the contract. However, the respective obligations of the parties was split up & each was separately responsible for its own profit/loss. The bid was accepted by BMRC and a contract between BMRC and the Consortium was entered into. The applicant filed an applicant for advance ruling and claimed, relying on Ishikawajima–Harima 288 ITR 408 (SC), Hyundai Heavy Industries 291 ITR 482 (SC) & Hyosung Corp 341 ITR 18 (AAR) that the income derived by it from offshore supply of plant and materials was not taxable in India as the title to the goods had passed, and payment was received, outside India. It was also claimed that as each consortium member had separate responsibility and was accountable for its own profit/ loss, the fact that the contract with BMRC was joint, did not make the consortium an “AOP”. HELD by the AAR rejecting the plea:

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