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Income Tax Appellate Tribunal, DEHRADUN BENCH, DEHRADUN
Before: SHRI R.K. PANDA & SHRI V.P. RAO
assessment year 2012-13. Common grounds have been raised by the assessees in these appeals, which read as under : “Ground No. 1 The learned CIT(A) has erred on facts and in law in holding that appeal filed by Transocean Offshore Deepwater Drilling Inc (hereinafter referred to as ‘TODDI’ or the ‘Appellant’) is not maintainable since the impugned order is passed by Assessing Officer (‘AO’) on the alleged Association of Persons (‘AOP’) of SASL and Transocean Offshore Deepwater Drilling Inc.(TODDI’) and not against the Appellant (i.e. SASL). The learned CIT(A) has not appreciated that the Appellant is an aggrieved party as a result of the impugned order.
Ground No. 2 The learned CIT(A) has erred on facts and in law in dismissing the said appeal on the ground that it is covered by the order passed in case of appeal filed by the alleged AOP of SASL and TODDI issued on April 28, 2017. The learned CIT(A) has erred in not allowing the said appeal as relief has already been granted in the AOP order.
Ground No. 3 The learned CIT(A) failed to deal with any of the grounds of appeal raised in the Appeal memorandum which may kindly be considered as set out herein, the same are not being repeated herein for the sake of brevity, including grounds 1 to 5 therein.”
2. Since the issue involved in these two appeals is identical and arising from the common facts and transactions, therefore, for the sake of convenience, these two appeals are clubbed together for the purpose of hearing and are being disposed of by this composite order. These two assessees – one an Indian Entity and other non- resident company, formed a consortium for the purpose of participating in the tender issued by ONGC for the work of deepwater drilling rigs alongwith integrated services. The Assessing Officer passed assessment order u/s. 143(3) read with section 147 of the Income-tax Act by treating the consortium formed by these two assesssees as AOP, which was challenged by the assessees before the CIT(A). The CIT(A) dismissed the appeals of the assessee with identical reasoning and finding and by following the order of the CIT(A) for the assessment year 2011-12.
3. Before the Tribunal, ld. AR of the assessee submitted that the issue is now covered by the decision of this Tribunal in assessee’s own case for the assessment years 2011-12 vide order dated 12.11.2021 as well as the decision forthe assessment year 2010-11. He has filed the copy of the order of this Tribunal for the assessment year 2011-12 and submitted that the Tribunal has taken a consistent view by holding that the assessees have rightly offered the income to tax u/s. 44BB in the return of income. 4. On the other hand, learned DR has fairly accepted that the issue involved in these appeals is covered by the decision of the Tribunal in assessee’s own cases for the assessment year 2010-11 and 2011-12. 5. Having considered the rival submissions as well as relevant material on record, at the outset, we note that an identical issue has been considered by this Tribunal in assessee’s own cases for the assessment years 2010-11 and 2011-12. In the latest order of the Tribunal dated 12.11.2021 for the assessment year 2011-12, the Tribunal has reiterated its earlier view in para 3 & 4 as under : “3. At the outset, we find that the issue involved of treatment as a member of AOP stands adjudicated by the order of the Co- ordinate of Tribunal in & 4466 / Del/2014 for the assessment years 2007-08 and 2008-09 and in ITA Nos. 809 & 810/Del/2016 for the assessment year 2009-10 & 2010-11. For the sake of ready reference, the relevant portion of the order of the ITAT is reproduced as under : "4. The facts in brief are that the assessee is a non-resident company and has offered its revenue on account of one contract entered as Consortium of Transocean Offshore Deepwater Drilling Inc. (TODDI), USA; and Schlumberger Asia Services Ltd. (SALS), Hong Kong, with Oil & Natural Gas Corporation Ltd. During the year under consideration, it has offered its revenue to the extent of Rs.66,08,27,503/- on account of contract entered v/ith ONGC for the charter hire of Deep Water Drilling Unit Rig-Discoverer Seven Seas along with its consortium member, M/s. Schlumberger Asia Services Ltd. The income was offered to tax u/s. 44BB (1) of the Act at 10% deemed profit rate. The Assessing Officer noted that assessee has reimbursement received from ONGC has been reduced from the gross profit while working the profit u/s.44BB. However, the Assessing Officer held that such reimbursement aggregating to Rs. 53,54,61,447/- should be taken as part of gross revenue. However, the addition has been made on protective basis in the case of assessee and on substantive basis the addition has been made in the hands of AOP of Schlumberger Asia Services Ltd. and Transocean Offshore Deepwater Drilling Inc.
Ld. CIT (A) following the appellate order for the Assessment Year 2009- 10 held that since already issue has been decided in favour of the assessee in the case of AOP, therefore, this appeal of the assessee is allowed.
6. Similarly for the Assessment Years 2007-08 and 2008-09 also substantive assessment has been made in the case of AOP and protective in the case of present assessee. Ld. CIT (A) has held that since already appeal has been filed against AOP, therefore, the present appeal filed by the assessee have become infructuous.
We find that Tribunal in the case of the assessee as well as in the case of the AOP has decided the issues after observing and holding as under:- "We have perused the submissions advanced by both the parties in the light of the records placed before us. We refer to Circular No.7/2016 dated 07/03/16 issued by CBDT, wherein, clarification regarding taxability of consortium members has been provided, which reads as under – “A consortium of contractors is often formed to implement large infrastructure projects, particularly in Engineering, procurement and Construction (’EPC) contracts and Turnkey Projects. The tax authorities in many cases have taken a position that such a consortium constitutes an Association of Persons (AOPj i.e. a separate entity for charging tax. The claim of taxpayers, on the other hand, is contrary to this view. This has led to tax disputes particularly in those cases where each member of the consortium, although jointly and severally liable to the contractee, has a clear distinction and role in scope of work, responsibilities and liabilities of the consortium members.
The term AOP has not been specifically defined in the Income-tax Act, 1961 (Act'). The issue as to what would constitute an AOP was considered by the Apex Court in some cases. Although certain guidelines were prescribed in this regard, the Court opined that there is no formula of universal application so as to conclusively decide the existence of an AOP and it would rather depend upon the particular facts and circumstances of a case: In the specific context of the EPC contracts/Turnkey projects, there are several contrary ruling of various Courts on what constitutes an AOP. The matter has been examined. With a view to avoid tax-disputes and to have consistency in approach while handling these cases, the Board has decided that a consortium arrangement for executing EPC/ Turnkey contracts which has the following attributes may not be treated as an AOP:- a. each member is independently responsible for executing its part of work through its own resources and also bears the risk of its scope of work i.e. there is a clear demarcation in the work and costs between the consortium members and each member incurs expenditure only in its specified area of work: b. each member earns profit or incurs losses, based on performance of the contract falling strictly within its scope of work. However, consortium members may share contract price at gross level only to facilitate convenience in billing:
c. the men and materials used control of respective consortium members; 4.1. The control and management of the consortium is not unified and common management is only for the inter-se coordination between the consortium members for administrative convenience 4.1 On a detailed comparison of various Clauses of two agreements dated 04/05/03, 28/05/03, we are of the considered opinion that Consortium Agreement dated 04/05/03 is the basis on which the entire scope of work has been executed by consortium members. The entire relationship between the consortium members are governed by Consortium Agreement dated 04/05/03, whereas Moil dated 28/05/03 has been executed by consortium members solely for ONGC and is as per format of ONCG, therefore contained clauses relevant only for the sake of application of bid with ONGC. In our considered opinion in case of any differences between the consortium members the agreement dated 04/05/03 are enforceable independently. 4.2. Further from the agreement dated 06/11/0j entered into by Consortium with ONGC makes it clear that Consortium members being Slumberger Asia Services Ltd. and Transocean Offshore Deepwater Drilling Pvt. Ltd. had distinct and separate scope of work by virtue of their technical expertise and their respective spheres of work. Slumberger Asia Services Ltd was to provide various services like logging while drilling, cementing services, wire line togging services, mud logging services and mud services whereas Transocean Offshore Deepwater Drilling Pvt. Ltd. was to provide drilling unit which is major capital equipment provided on charter hire basis along with personnel to operate the said drilling unit.
4.3. In respect of the payments by ONGC it is further observed that each consortium member raised separate invoices, on which ONGC shall honour both the invoices independently. It is also observed that do both the members have agreed to maintain separate books of accounts which further emphasises their independent role of work with ONGC though work has to be performed jointly. Further it is also observed that no member had any role to play in respect of the scope of work allocated to the other members and neither of the consortium members shared any costs nor risk and had managed their own deliverables. 4.4. Ld. Counsel placed reliance upon decision of Hon'ble Delhi High Court in case of Linde AG Linde Engineering division vs. DDI reported in 365 ITR 1 wherein identical issue has been addressed by Hon 'bte Court. 4.5. Thus, respectfully following the decision of Hon'ble Delhi High Court in the case of Linde AG Linde Engineering Division vs. DDI (supra) we hold that Consortium Agreement dated 04/05/03 between Siumberger Asia Services Ltd and Transocean Offshore Deepwater Drilling Pvt. Ltd., do not constitute an AOP. 4.6. From the assessment order it is observed that Ld.AO has taxed the revenue under section 115 A at 10%. Section 115A presupposes the rendering of technical services by assessee and now with the decision of Hon'ble Supreme Court in the case of ONGC Ltd (supra) the issue stands settled as on date, regarding prospecting for or extraction or production of mineral oil is not to be treated as technical services for the purposes of Explanation 2 to section 9 (1) (vii) and would rather be covered by section 44 BB of the Act.
4.7. Thus in our considered opinion Transocean Offshore Deepwater "Drilling Inc, being consortium member has rightly offered to tax the receipts u/s 44BB in the return of income. 4.8. Accordingly, we allow Grounds 1-2 raised by assessee. In the absence of any material change in the facts and in judicial preposition, we hereby allow the appeals of the assessee as the consortium members have already offered the due taxes.
In the result, appeal of the assessee is allowed.”
To maintain the rule of consistency and in the absence of any contrary decision, we follow the earlier decision of this Tribunal and decide this issue in favour of the assessee.