Tax Titbits

Abstract

Execution of a contract by a consortium of different enterprises is becoming more common in the case of large business contracts. An inference that such a consortium should ordinarily be treated as an Association of Persons (AOP) follows. But where such consortium is for a limited purpose of a particular contract with independent responsibility and without any risk sharing, there is no AOP as was decided by the Delhi High Court in Linde AG. Linde Engineering Division v. Dy.DIT [2014] 365 ITR 1 (Del) and CIT v. Mitsui Engineering and Ship Building Co. Ltd. [2003] 259 ITR 248 (Del). The Karnataka High Court in VDO Tachometer Werke, West Germany v. CIT [1979] 117 ITR 804 (Karn) and the Authority for Advance Ruling in Rotem Co. In re [2005] 279 ITR 165 (AAR) have also taken similar view. Where parties join to bid for a tender or to take a contract, and divide the contracted work among themselves, carrying out their respective divided shares at their own risk with no risk sharing, the inference of AOP does not necessarily follow.