TMI Blog2011 (2) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... . Shridhar, JJ. Present for the Applicant Mr. Percy Pardiwala, Sr. Advocate, Ms. Preeti, Advocate, Mr. Naveen Agarwal, CA, Mr. Jayesh Sanghni, CA, Ms. Divya Santhanan, CA Present for the Commissioner Mr. Gangadhar Panda, Addl. Director of Income-tax (Intl. Tax) RULING (By Mr. J. Khosla) 1. The applicant, Toshiba Plant Systems and Services Corporation, Japan, is a foreign company registered under the laws of Japan and is also its tax resident. This is a subsidiary company of M/s Toshiba Corporation, Japan which holds 61.61% of shares. It is an engineering, procurement and construction company. This company has been active in the development of power projects in the international scene for the last sixty six years and has executed projects in other industry sectors of Iron steel, paper, environment public facilities, transportation, airport, communication, cogeneration, building and office automations. 1.1 Costal Gujarat Power Limited (CGPL), a Tata power group company is an Indian company. The Ministry of Power, Government of India have awarded the Mundra UMP project to CGPL for commissioning a 4,000 MW Greenfield, coal fired plant. Mundra UM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n percent of the contract amount as and when received by the Applicant shall be deemed to be the profits and gains chargeable under the head Profit and gains of business of profession‟ of the Applicant in India? 2. Whether on the stated facts and in law, if the Applicant engages the services of a related party or third party for supply of labour for executing the work under the contract with the condition that the overall responsibility would remain with the Applicant, whether the Applicant would be eligible for presumptive rate of taxation under section 44BBB of the Act on the entire consideration receivable in terms of the contract? 3. Shri Pardiwala, learned Counsel for the applicant in his submissions reiterated the stand of the applicant given in the application and submitted that the applicant is neither hiding the income nor evading the tax but it is submitting to the tax the amount received from the CGPL in execution of the contract. In response to the question No.1, the learned counsel submits that it is a distinct and independent contract and the consideration received is also independent. While quoting section 44BBB, he submits that the applicant is a fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en together. In respect to this, the learned Counsel for the applicant argued that both are different contracts and are independent of each other. The considerations are also paid separately. Further the learned Counsel submits that as per the response of the Revenue dated 12.8.2010, it is mentioned therein that prima facie, the contract appears to be independent of each other. However, the Revenue does not dispute the application of section 44BBB of the IT Act so far as the question No.1 is concerned on the facts as now disclosed by the applicant. 4.2 The learned Departmental representative while submitting its response to question No.2 stated that the question has not provided the definite scenario about the engagement of the services of a related party or third party for supply of labour for executing the work under the contract. Even though, the overall responsibility is stated to remain with the applicant, what is material is who is the related party. If the supplier becomes the related party and its employees services are utilized by the applicant, it could obviously create a doubt on the turnkey project possibly being split into separate Contracts to disassociate Suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in Ishikawajima-Harima Heavy Industries Ltd., Vs DIT (2007) 288 ITR 408 case. Whereas the applicant submits the consideration to tax as erection of plant is chargeable to tax u/s 44BBB of the IT Act. 6. After hearing the learned Counsel for the applicant and the learned Departmental representative and on perusal of the records we find that the CGPL has executed 2 contracts, one with M/s Toshiba Corporation for off-shore supply of equipments and the other with the applicant for erection of plant in execution for turnkey Mundra UMP Project. Both the contracts are independent of each other. The consideration received by M/s Toshiba Corporation is not taxable in India for the off-shore supply, while the applicant submits the consideration for taxation u/s 44BBB. We quote below Section 44BBB of the IT Act: 44BBB. Special provision for computing profits and gains of foreign companies engaged in the business of civil construction, etc., in certain turnkey power projects. (1) Notwithstanding anything to the contrary contained in sections 28 to 44AA, in the case of an assessee, being a foreign company, engaged in the business of civil construction or the business of erection of pl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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