SIEMENS MOBILITY GMBH,GERMANY vs. ASSISTANT COMMISSIONER OF INCOME TAX(INTERNATIONAL TAX), 4(2)(1), MUMBAI

The AO/Dispute Resolution Panel ('DRP') erred in holding that the royalty and fees for technical service income are taxable on an accrual basis as opposed to the receipt basis adopted by the Appellant.

The AO/DRP erred in taxing receipts from supply of software as income from composite contract/royalty income in the hands of the Appellant.

The AO/DRP failed to appreciate that receipts from supply of software are from Siemens Limited and not from with CMRL, and therefore should not have been taxed as receipts from alleged composite contract.

The AO/DRP failed to appreciate that no copyright right has been parted with by the Appellant in the software supplied. They, therefore, erred in holding that consideration for supply of software will result in royalty income.

The AO/DRP erred in holding that the Appellant and Siemens Limited allegedly constituted an Association of Persons (AOP) in respect of contract with Chennai Metro Rail Corporation Limited (CMRL").

In the alternative and without prejudice to the above, the AO/DRP ought to have held that income in respect of contract with CMRL, to the extent it is taxable, should be assessed individually in the hands of the Appellant and Siemens Limited and not in the hands of an alleged AOP.

The AO erred in giving the findings that there exists an AOP relying on decisions which have been overruled by higher authorities.

The AO/DRP erred in taxing the income arising from offshore supply of equipment in relation to CMRL contract overlooking the provisions in the Act and the tax treaty between India and Germany.

Without prejudice to grounds 1 and 3 above, on the facts and circumstances of this case, and in law, the AO erred in not granting credit for tax deducted at source on accrual basis when the income has been assessed to tax on accrual basis thereby granting short credit of tax deducted at source amounting to Rs. 1,87,44,250. The credit of tax deducted at source has been granted of Rs. 6,05,73,450 in the Computation Sheet as against Rs. 7,93,17,700. Thus, the credit of tax deducted at source on accrual basis is consequential only in case it is upheld that the corresponding income is to be offered to tax on accrual basis.

Without prejudice, the AO erred in granting short credit of tax deducted at source of Rs. 84,51,790. The credit of tax deducted at source has been granted of Rs. 6,05,73,450 in the Computation Sheet as against Rs. 6,90,25,240 in the Assessment Order

On the facts and circumstances of the case, and in law, the AO erred in levying interest under Section 234A and 234B of the Act

The AO erred in initiating penalty proceedings under Section 270A of the Act.

The assessee is a company tax resident of Germany engaged in the business of research and development, production, sales and distribution as well as operation and maintenance of products, systems, installation and solution within the mobility sector. The assessee filed the return of income for AY 2021-22 on 10.03.2022 declaring a total income of Rs. 54,42,88,95/-. The return was selected for scrutiny and the statutory notices were duly served on the assessee. During the year under consideration the assessee has derived income by way of "Royalty, Fees for technical services" under various agreements / contracts entered into with different entities in India to the tune of Rs. 54,42,88,925/- which is offered to tax at 10% as per the DTAA between India and Germany. The assessee during the year under consideration has receipts from Chennai Metro Rail Corporation Ltd. (CMRL) towards contract for design, manufacture, supply, installation, test and commission of signally, platform screen doors and telecommunications. The contract was transferred to the assessee from Siemens AG w.e.f. 01.08.2018. The AO noticed that an amount of Rs. 27,85,63,237/- pertaining to the contract on has not been offered to tax on the ground that they pertain to offshore supplies of goods which are not taxable in India. The AO further noticed that an amount of Rs. 1,19,721/- received for offshore supply of software is also not offered to tax in India. The AO issued a show-cause notice to the assessee as to why these receipts are not taxable in India. The assessee submitted that the transfer of title of the equipments and material is passed on to CMRL at CIF Port of Shipment and accordingly the payments received by the assessee are not taxable in India. The assessee further submitted that the equipments have been supplied outside India and therefore, income arising there from is not taxable in India. The AO did not accept the submissions of the assessee and proceeded to treat 5% of the total receipts as taxable income in India @ 40%. The AO also added 5% of the software receipts as taxable in India. The AO further made an addition of Rs. 2,44,93,109/- towards supply of software treating the same as Royalty. The AO made an addition of Rs. 66,57,38,607/- as addition towards fees for technical services not offered to tax on accrual basis. The assessee filed objections before the DRP against the draft assessment order passed by the AO. The DRP vide directions dated 27.09.2023 confirmed the various additions made by the AO. The assessee is in appeal before the Tribunal against the final order of assessment passed by the AO pursuant to the directions of the DRP.

Ground No.1 is general not warranting any separate adjudication. Ground No.2 pertains to the arithmetical error in the computation annexed to the final order of assessment where the gross total income is mentioned as Rs. 71,67,05,874/- whereas as per the assessment order, the assessed income is computed at Rs. 70,41,65,874/-. In this regard we direct the AO to verify and re- compute the correct income taking into consideration our decision in the ensuing paragraphs with regard to the additions made in the final assessment order. 4. Ground No.3 is with regard to the addition made towards fees for technical services to be offered to tax on accrual basis. In this regard the ld. AR submitted that the issue is covered by the decision of the Co-ordinate Bench in the case of Siemens AG vs. DDIT (IT) (ITA No. 2153 & 2179/Mum/2014 dated 07.06.2024). The ld. AR submitted that it is an undisputed fact that the contract with CMRL has been taken over by the assessee from Siemens AG and therefore, the impugned receipts are identical to the receipts in the hands of Siemens AG. Accordingly, the ld. AR argued that the decision of the Co-ordinate Bench in the case of Siemens AG with regard to the impugned receipts being taxable on accrual basis is applicable to assessee's case also.

The ld. DR on the other hand relied on the order of the AO.

We heard the parties and perused the material on record. We notice that the Co-ordinate Bench while considering the issue of taxability of FTS on receipt basis as per the DTAA between India and Germany in the case of Siemens AG (supra) has held that “78. The assessee is a non-resident Company, incorporated in Germany, having taxable income in India. With regard to FTS and royalty is has shown income on receipt basis as per the India Germany DTAA. The issue before us is, whether the income of the assessee is to be taxed on receipt basis as against accrual basis. The ld. AO has relied upon the judgment of Hon'ble Madras High Court in the case of Standard Triumph Motors Ltd.(119 ITR 573) which has held that in case of non- resident, Section 5(2)(a) of the Income tax Act i.e., will have no application and taxability will be determined only under Section5(2)(b) of the Income Tax Act, i.e., by accrual. Subsequently, the Supreme Court in the case of Standard Triumph Motor Co Ltd. v. CIT[1993] 201 ITR 391 (SC) held that in the particular case, the credit entry to the account of the assessee non-resident in the books of Indian company amounted to receipt by the non-resident. Further, in the case of the assessee this issue has been settled by the Tribunal right from A.Yrs.1990-91,1991-92,1994-95,1996-97,1997- 98,2001-02,2002-03 and 2003-04. The ld. AO has not accepted the decision of the Tribunal stating that Revenue has preferred an appeal before the Hon’ble Bombay High Court. 79. The ld. DRP held that Hon’ble Bombay High Court in assessee’s own case has accepted the contentions of the assessee in A.Y.1986-87 to 1992-93, 1996-97, 1997- 98 and2001-02 wherein the Hon'ble Bombay High Court has considered the various ITAT decisions in assessee's own case and the stand of the assessee has been upheld that the receipt is to be taxed on actual receipts. Therefore, the AO is directed not to bring tax the income on account of royalty and FTS on accrual basis but to tax the same on receipt basis. After considering the submissions and decisions of the Tribunal and the Hon’ble Bombay High Court in the case of the Tribunal, this issue is decided in favour of the assessee that income on account of Royalty and FTS can be taxed only on receipt basis.

Even otherwise Article-12 of India-German tax treaty used the word “paid, payments of any kind received and payments of any amount”. The Article 12 of India-Germany Tax Treaty which has been reproduced below:-

Thus, as per the tax treaty, Royalty and fees for technical services income should be taxable only upon payment i.e. on receipt basis. If this position has been accepted by the Tribunal in assessee’s own case for the earlier years and also by the Hon’ble Bombay High Court, the details of which are as under:-

From the perusal of the above findings of the Co-ordinate Bench, it is clear that the impugned issue is a recurring one and that the Hon'ble Bombay High Court and the Co-ordinate Bench have been consistently holding that the income is not taxable on accrual basis but on receipt basis. Therefore, respectfully following the decision of the Hon'ble High Court and the Co-ordinate Bench, we hold that the FTS receipts of the assessee are taxable on receipt basis and not on accrual basis. The ground raised by the assessee in this regard is allowed.

Grounds No.4 to 6 raised by the assessee pertain to amount received towards supply of software by the assessee being treated as Royalty. The ld. AR submitted that this issue also stands covered by the decision of the Co-ordinate Bench in the case of Siemens AG and this fact is substantiated by the findings of the DRP where the DRP has relied on its own decision in the case of Siemens AG for AY 2018-19 to uphold the addition made by the AO.

We heard the parties and perused the material on record. We notice that the assessee claimed that the receipt towards supply of software is not taxable in India for the reason that the income from sale of software is not arising out of the contract agreement with the CMRL and also that it is standard software where no copyright is parted by the assessee by placing reliance on the decision of the Hon'ble Supreme Court in the case of Engineering Analysis, Centre of Excellence Pvt. Ltd. vs. CIT [2021] 125 taxmann.com 42 (SC). We further noticed that the DRP while upholding the addition made by the AO in this regard has placed reliance on its own decision in the case of Siemens AG for AY 2018-19 (refer para 5.3 of DRP order). Therefore, we see merit in the submission of the ld. AR that the issue is covered by the decision of the Co-ordinate Bench in the case of Siemens AG where it has been held that –

The Tribunal in A.Y.2001-02 has held that supply of software is not taxed as ‘royalty’ which has been followed in the subsequent Tribunal orders from A.Y.2002-03 to 2006-07. The relevant extracts are as under:-

Furthermore, in AY 2005-06, the Tribunal has examined the scenario wherein software was provided separately from any hardware, and it has adhered to the precedent established in assessee’s own case for A.Y.2001-02. The relevant extract of the observations made by the Tribunal is as under:- "6. During the year under consideration, the assessee had supplied equipment to the various parties in India. The software required for the said equipment was also supplied by the assessee to its Indian customers. During the course of assessment proceedings, the A.O. verified the relevant invoices and found on such verification that the software in some cases was supplied by the assessee independently without any reference to the supply of corresponding equipment. He therefore treated the income earned by the assessee from the supply of software as in the nature of royalty and the same was brought 10 tax in the hands of the assessee as income from royalty. On appeal, the Ld. CIT(A) held that the value of software could not be taxed as royalty in the hands of the assessee following the decision of the Tribunal in assessee's own case on similar issue for the earlier yearsie.2001-02 & 2002-03. He also took note of the fact that a similar issue was decided by his predecessor in favour of the assessee in assessment years 2003-04 & 2004-05."

Now, this issue of taxation of royalty under the DTAA has been decided by the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence PrivateLimitedvs.CIT reported in (2021) 432 ITR 471(SC). The Hon'ble Supreme Court vide its order grouped various appeals before it into following four categories: -

The Hon'ble Supreme Court held that the amounts paid by resident Indian end-users / distributors to non-resident computer software manufacturers / suppliers, as consideration for the resale/use of the computer software, is not of transactions mentioned above.

Before us comparison between facts of the case and the terms and conditions which have been submitted to the ld. AO during the assessment proceedings for later assessment years vis-à-vis the conclusions outlined by Supreme Court in the case of Engineering Analysis Centre of Excellence (P) Ltd. has been given in the following manner:-

During the course of hearing, the ld. DR had strongly relied upon the observation made in the assessment order and submitted that a review petition had also been filed before the Hon'ble Supreme Court in the matter of Engineering Analysis Centre of Excellence Pvt. Ltd., However, the same is not entertained because judgment of the Hon’ble Supreme Court as on to dfay is binding on us. Moreover, there are various other decisions of the Hon’ble High Courts on this issue which has been highlighted before us, the same is not being reproduced. Accordingly, we hold that this issue is covered in favour of the assessee not only in its own case as well as by the judgment of the Hon’ble Supreme Court and therefore, we hold that income derived by the assessee from supply of software cannot be subject to taxation as royalty either under Income Tax Act or under the treaty. Thus, ground Nos. 2-5 raised by theassesseeare allowed.”

It is also relevant to mention here that the assessee is the demerged entity of Siemens AG and the contract with CMRL is passed on to the assessee w.e.f. 01.08.2018 and this fact is not disputed by the revenue. Accordingly the facts identical to assessee's case and therefore respectfully following the above decision of the Co-ordinate Bench, we hold that the income derived by the assessee from supply of software cannot be taxed as Royalty either under the Act or under the DTAA between India and Germany. The grounds raised by the assessee in this regard are allowed.

Grounds No. 7 to 9 pertain to the addition made towards offshore supply of goods as taxable in India on protective basis. The AO during the course of assessment noticed that the assessee has received a sum of Rs. 27,85,63,237/- towards offshore supply of goods and treated the same as not taxable in India. The assessee submitted that the transfer of goods happened outside India and hence the receipts are not liable to tax in India. The AO however, did not accept the submissions of the assessee and proceeded to make an addition by applying 5% of total receipts on a protective basis in the hands of the assessee. The AO held that the parties to the agreement namely the assessee and Siemens India Ltd. are to be treated as Association of Person (AOP) in whose hands the income arising towards supply of equipments is to be taxed on substantive basis. The relevant findings of the AO in this regard are extracted as below:

The actual taxable entity in this case is an AOP comprising of Siemens Mobility Gmbh (successor to Siemens AG) and Siemens Limited (India) and is a resident of India. Accordingly, no benefit of India- Germany DTAA could be afforded to the association.

The off-shore supplies have been made by the applicant on CIF on Indian port of disembarkation basis. for onshore activities (viz. onshore supplies and onshore services). The term 'Cost, Insurance, Freight, implies that the responsibility that it has to procure marine insurance against the PGCIL' risk of loss or of damage to the goods during the carriage. In such cases, the delivery of the goods are to be taken as having been made in India. Therefore, the profit on offshore supplies made by the AOP are liable to be taxed in India on the ground that the sale is completed in India.

A single, indivisible, composite contract for transmission line project has been artificially segregated, solely with a purpose of avoiding taxed in India. The following facts of the case buttress such assertion:

7. In light of the above discussion, the contentions of the assessee are not acceptable. Therefore, it is hereby held that the revenues stated to be emanating from the off-shore supply contract are liable to tax in India in the hands of the Association of Persons (AOP) formed by the assessee Siemens Mobility Gmbh and Siemens (India) Limited

8 During the course of assessment proceedings no India-specific account has been furnished by the assessee so that its income from operations in India can be determined and proper allocation may be made to profits attributable to Indian operations in respect equipment supplies. In such a situation, there is no aption but to perforce resort to estimation of the taxable profits of the assessee as per Rule 10 of the Income Tax Rules. In this case, Rule 10(ii) will not be applicable been computed in accordance with the provisions of the Indian Income Tax Act. The income of the assessee is, therefore, liable to be computed as per Rule 10(i) read with Rule 10(iii) of the Income Tax Rules, which provides that income of the assessee may be determined at a reasonable percentage of the turnover.

9. However, it has been held in the above discussion that the income from Offshore supplies have accrued to the A.O.P. comprising of assessee Siemens Mobility Gmbh and Siemens (India) Limited. Obviously, the relevant A.O.P. would be a resident of India for tax purposes. Therefore, the tax liability arising to the A.O.P. is liable to be determined and levied by the Assessing Officer concerned exercising juri iction over the resident A.O.P. The substantive determination and assessment of income of the A.O.P. is to be referred to Assessing Officer having juri iction over the relevant case. Hence, the demand arising from off-shore supplies in case of the assessee are only protectively assessed by this Order. However, in any eventuality, if it is held in any proceedings that taxability do not arise in the case of the referred A.O.P. as above or, in any proceedings the taxability of the A.O.P. gets quashed/deleted, in such circumstances, the above-referred income is liable to be treated as substantially assessed in hands of the assessee foreign company and accordingly, the tax demand will fall due in case of the assessee.

We heard the parties and perused the material on record. From the perusal of the findings of the AO as extracted herein above, we notice that the AO has held that the assessee and Siemens India Ltd. are to be treated as AOP in whose hands the income arising towards supply of equipments is to be taxed on substantive basis. However we notice that the no substantive assessment is done in the hands of AOP and the revenue did not bring anything on record to substantiate that there has been a substantive assessment. It is a settled legal position that when there is no substantive assessment, the protective assessment does not survive. We notice that the coordinate bench in the case of Pegasus Properties (P.) Ltd. vs DCIT [2022] 135 taxmann.com 294 (Mumbai - Trib.) has considered the issue of protective assessment without substantive assessment and held that –

We find that assessee has raised ground No. 12 for A.Y. 2018-19 challenging the addition of Rs. 13,86,600/- made u/s. 69A of the Act on account of alleged unaccounted cash.

1 We have heard rival submissions and perused the materials available on record. The search and survey action initiated on ABIL group on 21-7-2017. In the search and survey action, the address of the assessee was covered and the case of the assessee was also centralized u/s. 127(2) of the Act. During the course of search proceedings, the cash of Rs. 13,86,600/- was found and it was explained that the said cash belongs to M/s. Fisher Health Resorts (P.) Ltd., having address at 2413, Kumar Capital, East Street, Pune-411001. M/s. Fisher Health Resorts (P.) Ltd., is engaged into the business of running health and fitness club having PAN AAACF2830J. A statement of oath of Shri Manoj Shah, GM (Finance) was recorded by the search party on 22-7-2017 wherein he had stated that total cash-in-hand of entity and all individuals is Rs. 13,98,728/-. However, during the search conducted u/s.132 of the Act at the registered office of the assessee, cash of Rs. 27,85,300/- was found in the cabin of Shri Keval Jain. It was submitted to the search party that an amount of Rs. 13,98,728/- belong to various group entities of the assessee and certain individuals which was also reconciled with their books of account. With regard to query raised by the search party for the excess cash of Rs. 13,86,600/-, Shri Manoj Shah stated that the said excess cash belongs to Fisher Health Resorts (P.) Ltd. It was also submitted that the assessee and Fisher Health Resorts (P.) Ltd., had common Director and hence, the cash belonging to Fisher Health Resorts (P.) Ltd., was kept in the premises of the assessee. It was also submitted that the source of such cash for Fisher Health Resorts (P.) Ltd., was from subscription from members for health club facilities. The ld. AO however, disregarded these contentions of the assessee and proceeded to tax the aforesaid excess cash of Rs. 13,86,600/- in the hands of the assessee on protective basis u/s. 69A of the Act. The ld. AO does not make any mention as to whether any substantive addition was indeed made for the same excess cash of Rs. 13,86,600/- in the hands of Fisher Health Resorts (P.) Ltd. or any other person. The ld. CIT(A) observed that there is no evidence that Fisher Health Resorts (P.) Ltd., had owned up this cash and no confirmation from the company has been filed regarding cash belonging to them and not to the assessee. He also observed that no explanation has been given by the assessee that this cash has been considered in the hands of Fisher Health Resorts (P.) Ltd., Accordingly, he upheld the action of the ld. AO.

2 From the aforesaid narration of facts, it could be seen that only protective addition has been made in the excess cash of Rs. 13,86,600/- in the hands of the assessee company. We find that assessee right from the date of search had given an explanation that the excess cash of Rs. 13,86,600/- belongs to Fisher Health Resorts (P.) Ltd., The assessee had also given an explanation that in view of the common Directors, assessee company and Fisher Health Resorts (P.) Ltd., the said cash of Rs. 13,86,600/- was found in the premises of the assessee. Normally protective assessment is made only if the revenue entertains doubt as to in whose hands a particular income is to be assessed. This is primarily done to protect the interests of the revenue. Hence, either in the hands of the assessee, addition u/s. 69A should have been made on substantive basis and in the hands of the Fishers Health Resorts (P.) Ltd., it should have been made on protective basis or vice versa. Very strangely, addition has been made u/s. 69A of the Act in the hands of the assessee company on protective basis. The ld. AR made a statement made from Bar that no substantive addition at all were made for this excess cash in the hands of any other party including Fisher Health Resorts (P.) Ltd. We also find that these deficiencies was not sought to be corrected by the ld. CIT(A), despite the fact that the ld. CIT(A) having co-terminus powers with that of the ld. AO and the statute had conferred on him the power of enhancement of income by converting the protective addition into a substantive addition in the hands of the assessee company. Now, the short point that arises for our consideration is that whether any protective addition could at all survive when no substantive addition at all were made in the hands of any other person. We find that this issue has been addressed by the Co-ordinate Bench of Kolkata Tribunal in detail in the case of Vikash Iron & Steel (P.) Ltd. v. ITO [IT Appeal Nos. 332-334 (Kol.) of 2012, and ITO v. Vikash Iron & Steel (P.) Ltd. [IT Appeal Nos. 473 to 475 (Kol.) of 2011, dated 1-7-2015]. For the sake of convenience, the entire order is reproduced hereunder:—

On this issue the ld. Counsel for the assessee relied upon the decision of Mumbai 'E' Bench in the case of Suresh K. Jajoo v. ACIT, Circle-4(2), Mumbai [2010] 39 SOT 514 (Mum.) and argued that the Co-ordinate Bench of this Tribunal relying on another decision of ITAT in the case of M.P. Ramachandran v. Dy. CIT [IT Appeal No. 587 (Mum) of 2005] has laid down the following principles :—

The Tribunal firstly explained the concept of Protective assessment, which was judicially recognized in the case of Lalji Haridas v. ITO [1961] 43 ITR 387. The Hon'ble Supreme Court held that where it appears to the income-tax authorities that certain income has been received doing the relevant assessment year; but it is not clear who has received that income and prima facie, it appears that income may have been received either by the A or B or by both together, it would be open to the relevant income-tax authority to determine the said question by taking appropriate proceedings both against A and B. The Supreme Court, however, observed that in the proceedings taken against the one or the other, an exhaustive no assessment order should be passed. A final determination had, therefore, to be made in one of the proceedings.

The Tribunal thereafter opined that a Protective assessment is not confined to making assessment of same income in the hands of two different persons; but can also be made in the case of income of one person where the Assessing Officer is uncertain as to the year in which the income had been earned. The Tribunal thereafter held that protective assessment cannot be independent of substantive assessment but always has to be later in pint of time to the substantive assessment." Further he drew our attention to the findings of ITAT Mumbai Bench of this Tribunal in the case of M.P. Ramachandran v. DCIT [2009] 32 SOT 592 wherein it has held as under :—

We have heard the rival contentions and gone through the facts and circumstances of the case. We find that the issue raised by the ld. Sr. Advocate has been answered by the Hon'ble Supreme Court in the case of Lalji Haridas v. ITO [1961] 43 ITR 387 which reads as under :—

In view of the factual position that the revenue has not initiated any substantive assessment or no addition has been made on substantive basis in any other hand, there is no question of any protective assessment in the present case from the reasons recorded by the AO as reproduced hereinabove. We are of the view that the AO has initiated reassessment proceedings u/s 147/148 of the Act on the basis of the statement of one of the directors of the assessee company that the transactions in the hands of the other parties are not accounted for and this may be the income of the assessee. The revenue could not bring on record anything against the other parties or who are the other parties against whom substantive addition is to be made. There is no substantive addition made in any of the hand till date as conceded by the ld. Sr. DR before us now. In view of the above we are very clear that the reassessment proceedings initiated u/s 147/148 of the Act is invalid and hence quashed. The protective additions made by the A.O. are also quashed accordingly.

No other ground on merits was argued by either of the sides and hence we need not adjudicate those issues on merits. Accordingly these appeals of the assessee are allowed and that of the revenue's appeals are dismissed. 8. In the result the appeals of the assessee are allowed and the appeals of the revenue are dismissed.'

3 In the instant case before us, admittedly, no substantive addition of Rs. 13,86,600/- was made by the revenue either in the hands of M/s. Fisher Health Resorts (P.) Ltd or in the hands of any other person. In Respectfully following the aforesaid decision, since no substantive addition was made, the protective addition made in the hands of the assessee company does not survive. Hence, we have no hesitation in directing the ld. AO to delete the addition made in the sum of Rs. 13,86,600/- on protective basis u/s. 69A of the Act for A.Y. 2018-19. Accordingly, the ground No. 12 raised by the assessee is allowed. 14. The ratio laid down in the judicial precedence is that when no substantive assessment is made then the addition made on a protective basis does not survive. In assessee's case as already stated, it is an admitted position that there has not been any substantive addition in the hands of AOP. Therefore respectfully placing reliance on the above decision, we hold that there can be no addition made in the hands of the assessee towards income arising from offshore supply of equipment in relation to CMRL contract on protective basis.

In this regard it is also relevant to notice that the coordinate bench in the case of Siemens AG (supra) has considered the issue of whether Siemens AG and Siemens Limited constitute an AOP and held that –

Once there are separate obligations to be performed and there is no over lapping of work and both the parties have received monies payable under the contract independent of each other and Indian party is entitled to raise the bill separately for the work carried out by it and assessee had received consideration separately for the supply carried out by it through off-shore, it cannot be inferred that both the parties acted in consort to perform the contract together for the project. The nature of work undertaken is being executed by each member separately which has been clearly defined in Clause 5 and 6 of MOU. Once there is a separate invoicing and payments in respect of separate claim of work, then where is the question of treating them as AOP, because each member does not act as an agent of the other. In so far reliance placed on the joint and several liability' towards the DMRC as referred in Clause 9.1 has been imposed by DMRC, this was only to safeguard itself by having a better hold over the parties for timely and successful completion of the project which provides between the members of the consortium, each Party shall indemnify and hold harmless the other Party to its MOU from all costs, claims, actions, expenses or liabilities incurred by or imposed upon the other Party as a result of or in connection with its failure, breach, delay or other default in the performance of its respective obligations.

Lastly, Clause 1.3 of the MoU is very clear that nothing in the contract agreement shall be deemed to constitute, create, give effect to or otherwise recognize a corporation, association, partnership, joint venture or formal or informal business entity of any kind and the insurance qua the contract has been taken by each member separately and not by the consortium. Thus, we agree with the Ld. Sr. Counsel for the assessee that on these facts it cannot be held that there constitutes of AOP between Siemens AG and Siemens Ltd. Thus, this issue is decided in favour of the assessee and against department.”

It is an undisputed fact that the contract of the assessee is a continuation of the contract of Siemens AG w.e.f. 01.08.2008 and therefore in our considered view, the above decision of the coordinate bench is applicable to assessee's case also. Accordingly we hold that the assessee and Siemens Limited do not constitute AOP.

Ground No.11 is with regard to the without prejudice claim of the assessee that if the income towards FTS is held to be offered to tax on accrual basis, the corresponding credit for TDS should be allowed to the assessee. In view of our decision on the taxability of income towards FTS, this ground has become infructuous and dismissed accordingly. 18. Ground No.12 pertains to the short credit of TDS and in this regard we direct the AO to examine the claim and allow the same in accordance with law.

Ground No. 13 and 14 pertaining to interest and penalty are consequential not warranting any separate adjudication.

The assessee also raised additional ground on the legal issue of the final order of the AO being barred by limitation as per the provisions of section 153(1) of the Act. The said ground is left open in view of our decision on merits as decided here-in-above.

In result, the appeal of the assessee is partly allowed.