Joint ventures with a foreign entity could be treated as Association of Persons (AOP) and attract a higher rate of income tax applicable to Indian residents. The Authority for Advance Rulings (AAR) in a case related to a JV between Austria’s Geoconsult and Rites and Secon ruled it would be treated as an AOP. Under the income-tax laws, an association of person is considered legally to be a resident of India and is taxed at similar rates at which an individual is taxed. The ruling came in response to Geoconsult’s query about taxability of the earnings made by its joint venture company with Indian construction groups Rites and Secon. The present case dealt with the earnings made by the joint venture as part of its contract with Himachal Pradesh Road and Other Infrastructure Development Corporation (HPRIDC), for project consultancy to develop seven tunnels across the state of Himachal
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