When a consortium joins hands to bid for a project in India and its members are jointly and severally responsible and liable for every aspect of it starting from design to commissioning, it would be taxed in India as an Association of Persons.

This would be so even if a member of the consortium designs and supplies the equipments for the project outside India and also receives payment for these outside India.

The Authority for Advance Ruling (AAR) opined, thus, in Alstom Transport SA. The consortium consisting of the French company together with its Indian subsidiary APIL, a Portuguese company Thales and a Japanese company Sumitomo joined hands and came out with a consortium agreement that was registered in Bangalore to participate in a composite work tender floated by the Bangalore Metro Rail Corporation.

The French company’s role was to design, manufacture and supply the signalling, train control and communication system, with its subsidiary company and others taking care of installing, testing and commissioning them. The AAR has opined that the French company’s role was not over as soon as it executed the supplies because in terms of the tender it stood jointly and severally liable for satisfactory commissioning of the project.

The income earned by the consortium, thus, cannot be divided into bits and pieces. Instead, its entire income must be assessed in the hands of the consortium in its capacity as an Association of Persons.

(The author is a New Delhi-based chartered accountant)

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