AAR reiterates 'look at' approach for turnkey contracts

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Published on Thu, Jun 21,2012 | 16:00, Updated at Thu, Jun 21 at 16:07Source : Moneycontrol.com 

The Authority for Advance Rulings (“AAR”) in its ruling pronounced on June 7, 2012 has held that a contract for design, manufacture, supply, installation, testing and commissioning of signaling/ train control and communication systems is a composite contract, and income from offshore supply was taxable in India, even though property in such goods was transferred outside India.  The decision largely reiterated the recent ruling of the AAR in the case of Roxar.

AAR declined to follow the Apex Court’s ruling in the case of Ishikawajima Harima Heavy Industries Ltd  (“IHI”).  The AAR held that ‘the dissecting approach’ in IHI stood overruled, by the subsequent decision of the Apex Court in Vodafone’s case.

This BMR Alert summarizes the facts of the case and the ruling pronounced by the AAR.