Decided on March 23,2010

Hyundai Rotem Co. and Mitsubishi Co. Appellant
DIT (International Taxation) Respondents


P.V. Reddi, J. (Chairman) - (1.) THESE applications are filed by two members of a Consortium which was formed to bid and execute a project for Delhi Metro Rail Corporation (for short 'DMRC'). DMRC issued tender inviting bids under the International Competitive Bidding for Mass Rapid Transport System -Phase II Contract/Tender RS3 for design, manufacture, supply, testing, commissioning, training and transfer of technology of 156 Standard Gauge Electrical Multiple Units ('EMUs'). 1.2. For the purpose of bidding for the Contract RS3, Mitsubishi Corporation, Japan (MC), Hyundai Rotem Company Formerly known as Rotem Company, Korea ('Rotem'), Mitsubishi Electric Corporation, Japan ('MELCO') and BEML Limited, India ('BEML') entered into a Consortium Agreement (members collectively referred to as 'MRMB Consortium') on 26th April, 2007. As per the terms of the Consortium Agreement, MC was appointed as the 'consortium leader'. MRMB -Consortium thereafter submitted the bid to DMRC on 30th April, 2007.. 1.3. For execution of the project, the Consortium Agreement provides for constitution of project board comprising of project directors from each member for the overall planning, organizing and directing the complete execution of the project in an efficient manner. Under the Agreement, each member's responsibility is that (1) Rotem would be responsible for the Mechanical works; (2) MELCO would be responsible for the Electrical works; and (3) BEML would be responsible for the Localization works. Further, MC as consortium leader would be responsible for project coordination, commercial management, contract administration, legal administration, providing bank guarantees and collecting payments from DMRC. 1.4. DMRC accepted the price proposal submitted by MRMB Consortium in relation to the Contract RS3 and awarded the same to the MRMB Consortium vide its Letter of Acceptance dated 30th August, 2007. The contract RS3 was signed between DMRC and the MRMB Consortium on 19th October, 2007 for design, manufacture, supply, testing, commissioning, training and transfer of technology of 156 Standard Gauge EMUs (the number 156 subsequently increased to 192). Lump sum consideration for the supply of 192 EMUs was stipulated to be JPY 23,156,536,549 and INR 5,021,742,872 which is apportioned among various cost centers, and further apportioned amongst various milestones. 1.5. The Consortium members entered into a Supplementary Consortium Agreement ('SCA') on 6th June, 2008. The role and the participation percentage of each member is separately defined in the SCA. As per the SCA, the participation percentage among the consortium members for Contract RS3 is: MC - 3.40%; Rotem -57.00%; Melco -21.90%; and BEML - 17.70%. The original ratio was: 3.40%, 35.10%, 21.50% and 17.70% respectively. The SCA was approved by DMRC on 1st August, 2008. As per the modalities agreed to between the consortium members, BEML is the supplier of EMUs to DMRC while Rotem /MELCO/ MC are responsible for supplying equipments/materials to BEML. Accordingly, BEML would raise invoice on DMRC for supply of EMUs while MC/Rotem/ MELCO would raise invoices on BEML for supplies made to it. For collecting payments from DMRC on behalf of BEML, MC is responsible and the amount so collected is distributed among the consortium members in the pre -agreed ratio. Further, Rotem has established a Project Office ('PO') at New Delhi to execute the contract RS3.
(2.) ON the basis of the above facts, the following question is raised for seeking advance ruling: On the facts and in the circumstances of the case, whether the consortium of Mitsubishi Corporation, Japan (MC), Hyundai Rotem Company, Korea (Rotem), Mitsubishi Electric Corporation, Japan (MELCO) and BEML Limited, India ('BEML') [referred to as 'MRMB Consortium'], for the purpose of bidding and executing the contract RS3 of Delhi Metro Rail Corporation ('DMRC'), could be assessed as independent companies under Section 2(31)(iii) of the Income -tax Act, 1961 ('the Act') in India or as an Association of Persons ('AOP') under Section 2(31)(v) of the Act. According to the applicant, the Consortium of MC, Rotem, MELCO and BEML formed for the purpose of bidding and executing the Contract RS3 awarded by DMRC does not constitute an AOP for the purposes of the Act especially for the reason that there is no agreement to share profits and losses or to jointly incur any expenditure. The Revenue has contested the stand taken by the applicant and contended that the Consortium has all the attributes of AOP as clarified in the ruling of this Authority in GeoConsult GHBH.
(3.) AS noted earlier, the two applicants, namely MC and Rotem together with MELCO and BEML (an Indian company) have formed a consortium and agreed to jointly participate in the global tender invited by DMRC for the aforesaid contract. A Consortium agreement was entered into on 26th April, 2007 broadly agreeing to the terms and conditions under which the parties shall pursue and execute the project. MC was appointed as the Consortium's Leader. MC looks after commercial management and project coordination work. It has the authority to negotiate, finalize and submit all the documents required to be submitted by the consortium and to act as the Official Liaison Officer for the consortium. MC as the Consortium Leader has also been authorized to "incur liabilities and receive any instructions, payments for and on behalf of any or all member firms of the Consortium in regard to all matters related to this project and the bidding therefor". Rotem is designated as the technical leader of the project. It is responsible for the detailed design development, manufacture, supply, testing and commissioning of mechanical portions (rolling stock). MELCO (Mitsubishi Electric Corporation, Japan) is responsible for design, manufacture, supply, testing and commissioning of the propulsion and other electrical equipments of the rolling stock. BEML (Bharat Earth Movers Ltd.) is responsible for local manufacturing and supply of rolling stock except those entrusted to MELCO. The percentage of participation among the parties has been agreed upon as noted earlier. A Supplementary Consortium Agreement was entered into varying the percentage. Both these Consortium Agreements have been placed before DMRC and the letter of approval for the latter is also on record.;

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