V.K. Shridhar JUDGMENT
Justice P.K. Balasubramanyan
1. On 19.4.2007, a company 'X" floated a Tender Notice inviting tender inquiries for carrying on the work of all activities and services required for the design, engineering, procurement, construction, installation, commissioning and handing over of the plant on a lump sum turnkey basis for the 'y" and Associated Units of 'Z" Complex. The work was to be done in accordance with the Bidding Documents. ABC the applicant before us and a Company 'E' decided to come together to take up the work as a Consortium. With that in view, on 3.3.2008, the applicant and "E' entered into a Memorandum of Understanding for the purpose of bidding for and taking up the work. This was followed up by an "Internal Consortium Agreement" dated 14.3.2008 between the applicant and E. On 20.3.2008, the Consortium submitted its response to the tender notice. It also submitted its price bid on 28.7.2008. The tender submitted by the Consortium was accepted and on 23.12.2008, the work was awarded to the Consortium. The issuance of notification of Award was on 23.12.2008. 23.12.2008 was to be the effective date. On 10.2.2009, X and the Consortium consisting of the applicant and E entered into a formal agreement. The agreement reiterated that X, described as the company, was desirous of "carrying work of all activities and services required for the design, engineering, procurement, construction, installation, commissioning and handing over of the plant on a lump sum turnkey basis in accordance with the Bidding Documents" and that the contractor, meaning the Consortium, had represented that it had expertise and technical know-how in respect of the said work and had submitted its offer for the work and the work had been awarded to it on 23.12.2008, treating that date as the effective date. It records that the contractor, the Consortium, has covenanted with the company (X) to perform the work in conformity with the provisions of the contract which is said to constitute the entire agreement between the company and the contractor. The Consortium has taken up the project work pursuant to the contract.
2. The applicant filed an application under section 197 of the Income-tax Act taking up the position that no portion of the amount payable was liable to be withheld under section 195 of the Act, since what it performed under the contract was all off-shore and payments were received off-shore and hence not chargeable to tax in India. The Income-tax Officer did not accept the plea of the applicant and directed "X' to withhold tax on amounts paid to the applicant in terms of the contract in question. It is in that situation that the applicant approached this Authority with its application under section 245Q of the Act.
3. The agreement dated 10.2.2009 is one between X and the Consortium of ABC and E Whereas "X" has been described as the company, the Consortium consisting of the two members is described as the contractor. It is recited that the company is desirous of carrying on the work of all activities and services required for the design, engineering, procurement, construction, installation, commissioning and handing over of the plant on a lump sum turnkey basis in accordance with the bidding documents. After referring to the tender enquiries issued by the company dated 19.4.2007, it is recited that the contractor represented that it has expertise and technical know-how in respect of the work tendered and had submitted its offer and its adjustment price bid. The tender having been accepted after discussion with the contractor, the contract was being awarded to the contractor. After referring to the various documents annexed to the contract as forming part of the contract, it is also recited that the contractor had covenanted with the company to perform the work inconformity in all respects with the provisions of the contract and in consideration of the carrying out and completion of the works by the contractor, the company covenanted to pay the amounts at the times and in the manner described in the agreement. It is recited that the advance payment will be received by the Consortium and the right t........