Association of persons status upheld for a joint venture where common purpose, coordination, and shared contractual liability were established.

A joint venture formed by three entities for a common consultancy project was treated as an association of persons because the contract was entered into with the venture as a unit, the members were jointly and severally liable to the client, and the work was organised under a coordinated scheme of cooperation. The AAR found common purpose, common action, and unified management directed towards earning income from the project. Separate billing, separate bank accounts, and internal allocation of remuneration did not negate AOP status, and the authorities cited by the applicant were distinguished. The venture was therefore assessed as an association of persons.

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Issues: Whether the joint venture constituted an association of persons and was liable to be assessed as such under the Income-tax Act, 1961.

Analysis: The arrangement showed a voluntary combination of three entities for execution of a common consultancy project. The contract was entered into with the joint venture as a unit, the members were jointly and severally liable to the client, the work was allocated among them under a planned scheme of cooperation, and the lead member coordinated the consolidated invoicing and contractual administration. The agreements and surrounding facts established a common purpose, common action, and unified management directed towards earning income from the project. Separate billing, separate bank accounts, and internal allocation of remuneration did not negate the existence of the association, and the authorities and reasoning relied upon by the applicant were found distinguishable.

Conclusion: The joint venture was correctly treated as an association of persons and assessed as such. The answer was against the applicant and in favour of the Revenue.

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