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TMI Blog2012 (6) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmission of a joint tender to the employer for the project and if the tender is accepted, in the negotiation and performance of the ensuing contract". The employer referred to therein is BMRC. The contract therein is defined to mean the contract awarded to the party by the employer. The agreement specified that the parties were coming together to prepare and submit a tender and to negotiate for securing the award of the contract. Nothing in addition to the contract was to be taken up by any of the parties in respect of the work for which the tender was floated. The parties were to be jointly and severally bound by the terms of the tender and were to be jointly and severally liable to the employer for the performance of all obligations under the contract. The bid submitted by the Consortium was accepted by BMRC. The contract between BMRC and the Consortium of four, was entered into on 16.9.2009. The consortium was jointly and severally responsible for the work tendered. The contract was "to implement the design, manufacture, supply, installation, testing and commissioning of signaling/ train-control and communication system" for BMRC project. The contractor, namely, the Consortium, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia-France tax treaty')? 2. On the facts and circumstances of the case, whether the amounts received/receivable by ATSA under the BMRCL contract, for offshore services are chargeable to tax in India under the provisions of the Act and India-France tax treaty? 3. On behalf of the applicant, it was contended that the design and supply of equipment by the applicant took place outside India and being an offshore transaction, income therefrom is not chargeable to tax in India. Title to the goods passed outside and payment was received outside India and no part of the income either arose in India or can be deemed to arise in India. Therefore, the questions have to be ruled on in favour of the applicant. 4. On behalf of the Revenue, it was contended that the contract was one and indivisible and could not be split up as sought to be done by the applicant. There was no contract for offshore supply of any equipment. The contract was one for design, manufacture, supply, installation, testing & commissioning of a system in India and the contract cannot be split up since it was a composite contract for the commissioning of a project. There was no occasion to deal with offshore supply, so call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endent supply or sale of goods and for installation at the work site, leading to the commissioning and so on. In the case on hand, on a true construction of the contract between the parties, I am clearly of the view that this is a contract, the main purpose, if not the sole purpose of which is installation and commissioning of a signaling and communication system and its delivery to BMRC. In recent rulings in AAR/962/2010 and in AAR/979/2010, this Authority has discussed this aspect and has taken the view that such contracts should be read as a whole in the context of the object sought to be achieved and they cannot be split up into different parts for the purpose of taxation. 7. In this context, great reliance was placed by learned Senior counsel for the applicant on the decisions of the Supreme Court in 1Ishikawajima - Harima Heavy Industries Limited vs. DIT 288 ITR 408; CIT vs. Hyundai Heavy Industries Co. Limited 291 ITR 482, and on a Ruling of this Authority in Hyosung Corporation v. DIT [AAR/773/2008]. I must take note of the fact that the two decisions and the Ruling relied on were rendered prior to the pronouncement of Supreme Court decision in Vodafone International Holdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the applicant that a part of the transaction sould be treated as a contract for offshore supply not liable to be taxed in India. I find that for the purpose of taxation, the contract must be taken as one, for installation and commissioning of a project in India. 9. I also find considerable force in the argument on behalf of the Revenue that the applicant alongwith other members of the Consortium are liable to be taxed as an AOP. In the Ruling in AAR/962/2010, this aspect has been considered in detail. The relevant decisions starting from that of the Calcutta High Court in B.N. Elias & others, In re [3 ITR 408] have been considered. It is to be noted that what emerges from the decisions is that the question whether an AOP is formed, has to be decided on the facts of a given case. 10. I have already indicated that the applicant and the others came together for bidding for the work tendered, after jointly preparing the bid. They came together for executing the project if their tender were to be accepted. The contract was for performing the entire work at the joint responsibility of the four Members of the Consortium who came together to perform the contract. The Members of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m formed an Association of Persons, the Authority has to first consider that question and not the question whether the contract is indivisible and on finding that it is, approach the question on that basis. He submitted that because of that wrong approach what the Authority has done in its Ruling in AAR 962 of 2010 is to put the cart before the horse. With respect to the learned counsel, I am not able to agree. To understand whether the members of the Consortium formed an Association of Persons, one has to see first what actually they are involved in and its nature. That can be discerned only on understanding the terms of the contract and its effect. Without first understanding the effect of the contract, the nature of the activity undertaken, and the obligations incurred thereunder, the nature of the relationship between the parties cannot be understood. The question whether the members of the Consortium form as Association of Persons cannot be decided without understanding the obligations undertaken by them under the contract. That alone will lead to a proper adjudication of the question of the nature of the association among the members of the Consortium. 14. Learned counsel th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipt in this case, according to me, is the contract with BMRC and not the contract inter se or the understanding among the members of the Consortium. The receipt in rupees and Euros arise out of that transaction. I have, therefore, no hesitation in coming to the conclusion that what is relevant in this context is to consider the legal rights and obligations arising out of and undertaken under that transaction to determine the status of the Consortium as a person. 16. It was argued that the inter se relationship among the members of the Consortium and the splitting up of obligations by them among themselves and the undertaking of separate responsibilities for performance, receipt of income and for profit or loss, should tilt the scale against the Consortium members being considered as an Association of Persons. We are looking at a tender for a project. The members of the Consortium, may be with their independent expertise, come together with a common object of winning the contract and performing the obligations under the contract for the bid amount offered by the Consortium and accepted by the tenderer. The effect of their coming together with a common object to earn an income by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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