TaxTMI 
TaxTMI 
Taxability of income arising to non-residents.
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.... The concept of the turnkey execution of the project involves total and complete responsibilities of the persons undertaking the contracts for commissioning the project and they are accordingly required to furnish performance guarantees for timely completion. 4. Some of these hydroelectric power projects are likely to be undertaken by a consortium of foreign companies. The public sector companies in India will be entering into separate agreements with one or more of these foreign companies for the following purposes:- a. for supply of equipment and materials FOB at ports outside India: b. for planning, design and engineering services. These services would include preparation of designs, technical specification and drawings for the projec....
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.... to create a joint venture or partnership or association of persons between the contracting parties. The Indian concern will not be making any payments whatsoever to any foreign under this overall agreement. 7. On the basis of these broad facts the issues which arise for consideration and the taxability of the various items of income have been discussed below; a) THE STATUS OF THE CONSORTIUM FOR TAX PURPOSES: As mentioned above there will be an overall agreement between the public sector company on the one hand and the various foreign companies referred to in para 4 on the other. This will be only for ensuring the guaranteed performance of all the contracts in a co-ordinated manner within the agreed time and for ensuring acceptance of li....
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.... If the foreign company is a resident of a country with which india has a double taxation avoidance agreement then such Agreement will govern the taxation of the fees for technical services. D) PROFITS IN RESPECT OF CIVIL WORK CONTRACTS EXECUTED IN INDIA AND CONTRACTS FOR ERECTION TESTING OR COMMISSIONING OF PLANT OR MACHINERY. In this connection, attention is invited to the provisions of sec.44BB inserted by the Finance Act with effect from 1-4-90. Under the provisions of this section, a sum equal to 10% of the gross amounts paid or payable to the foreign company on account of such civil construction, erection, testing or commissioning will be treated as the profits and gains of such business chargeable to tax in India provided other con....