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2012 (6) TMI 687 - AT - Income TaxTurnkey contracts for offshore & onshore supply - assessee (China Company), filed its return of loss in respect of contracts entered for setting up of turnkey thermal power projects - Revenue contended that contracts for erection of power plants were inseparable, which were manipulated and divided into separate parts solely to suit the assessee’s purpose to understate onshore supply profits and correspondingly inflating the value of offshore supplies contract, so as to avoid tax liability in India - Held that:- Transactions are to be essentially looked at as a whole, and not on standalone basis, when the overall transaction is split in an unfair and unreasonable manner with a view to evade taxes. In order that such a situation can arise, it is sine qua non that while the assessee submits the bids for different segments (e.g. offshore and onshore in the present case) separately, these bids are considered together, as a single cohesive unit, by the other party, and this fact must be apparent from material on record. Core dispute before us is not of the ALP adjustment but of an adjustment to the value assigned to the contract for ‘onshore supplies and services’, which is alleged to have been kept for a lower amount with a view to avoid taxes in the India. Real issue is as to at what value the revenues for onshore supplies and services should be adopted so as to bring out the correct onshore profits. This in turn, proceeds on the assumption that there were profits on offshore supplies which have been outside the ambit of taxation in India. However, in view of the assessee’s claim that there are losses on overall project and that there cannot thus be any advantage by assigning lower value to onshore activities, what really needs to be examined in the first place is the working of overall losses given by the assessee. In case the Assessing Officer has no issues with this computation of overall losses, the very foundation of his action ceases to hold good in law. Hence, the matter is being remitted back to the file of the Assessing Officer for fresh adjudication.
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