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2012 (3) TMI 281 - AAR - Income TaxTurnkey project – taxability of amount receivable under project - DTAA between India and Germany - consortium formed by applicant (German company) and Samsung (Korean company) to undertake the project of carrying work of all activities and services required for the design, engineering, procurement, construction, installation, commissioning and handing over of the plant on a lump sum turnkey basis – project awarded by OPAL – assessee contended it to be divisible, off shore contract of sale and services, and consideration of obligations of the applicant independent of the obligations of Samsung - Held that:- It is supply and erection contract, and risk is retained not merely until delivery but until acceptance of the works by OPAL, which is after trial and commissioning of the project. Moreover, contract does not specify that title to the machinery shall pass on to OPAL on high seas or in the country of origin. There was no mention of off-shore or on-shore supply of services in contract. Therefore, situs of the contract is in India. Contract was awarded to the Consortium and not to the two members individually. Also, price schedule and payment also deals with the entire gamut of works to be performed under the contract. Therefore, this is a case of the applicant and Samsung forming an AOP in respect of the work undertaken by the Consortium. Since contract is indivisible, hence if a part of the design and engineering work prepared solely for manufacture, procurement of equipment outside India, is done outside the country, even if it constitutes a significant part, the same cannot be viewed in isolation and apart from the contract as a whole and amount received/receivable against the aforesaid are liable to tax in India. Since the assessment is to be as an AOP and taxable in India, the question of existence or non-existence of a PE does not arise.
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