Careful structuring reduces tax on foreign companies

By Sumes Dewan and Shradha Puri, KR Chawla & Co
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The Authority for Advance Rulings (AAR), in the matter of Geoconsult ZT, recently passed a judgment stating that a joint venture consortium between a foreign company and Indian companies could be treated as an association of persons (AOP) in consonance with section 2(31) of the Income Tax Act, 1961, and taxed as a foreign company at a 41% net basis.

Sumes Dewan Partner KR Chawla & Co
Sumes Dewan
Partner
KR Chawla & Co

In the above-mentioned case, the applicant, Austria-based Geoconsult, formed a joint venture consortium (JV) with two Indian companies for the purpose of providing project consultancy services in India to Himachal Pradesh Road and Other Infrastructure Development Corporation (HPRIDC).

HPRIDC awarded a contract to the JV led by Geoconsult to provide consultancy services for the development of specific tunnels in Himachal Pradesh.

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Sumes Dewan is a partner and Shradha Puri is a senior associate at KR Chawla & Co Advocates & Legal Consultants. The firm is headquartered in New Delhi and has offices in Chennai and Bangalore as well as a representative office in Singapore.

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