TaxTMI 
TaxTMI 
2015 (3) TMI 102
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....b-contract to that effect?" 2. The assessee in ITA No. 444/2014 is a joint venture (JV) between M/s Oriental Structural Engineers P. Ltd, New Delhi and M/s KMC Construction Ltd. Hyderabad, which was formed to undertake projects awarded by NHAI. The assessee reported NIL income for the relevant years and claimed refunds. The case was processed under Section 143(1) of the Income Tax Act, 1961 (hereafter "the Act") and later on selected for scrutiny under compulsory scrutiny norms. Therefore, statutory notices were issued to the assessee and served. From the Profit and Loss Account, it was noticed that the assessee received gross receipt of Rs. 92,31,33,229/-. Against this receipt, the assessee debited an amount of Rs. 90,46,70,560/- towards payment to subcontractors, i.e. the JV partners itself. Apart from this, the JV paid work contract tax of Rs. 1,84,62,669/- apart from other small expenses like bank charges, professional fees etc. The payment made to sub-contractors was 97.99% of the total receipts. The balance was utilized to make payment for work contract tax, professional fees, audit fees etc. 3. Similarly, the assessee in ITA No. 445/2014 is a joint venture (JV) between M/s....
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....ting the books of accounts of the appellant." 6. The ITAT dismissed the appeals of the revenue for AY 2009-10 by relying upon its own order in the case of the assessee for AYs 2006-07 to 2008-09. In that order, ITAT had held that the issue raised in the appeals was decided by this Court in the assessee's favour for the AYs 2004-05 & 2005-06 and the Supreme Court had dismissed the Special Leave Petition filed by the revenue. 7. It is argued on behalf of the revenue that a careful analysis of the agreement constituting the JV showed that it was meant to operate as a separate entity and not merely to facilitate the JV partners to successfully bid for the contract. It, therefore, results in a situation where a proportion of the project receipts, commensurate with the risks/performance obligations, should be attributed to the assessee to whom tender had been awarded for the project and undertook significant risks and responsibilities for the completion of the project and it is not allowable for the assessee JV to divert the entire receipts to its JV partners by designing a sub-contract to that effect. 8. Both the ITAT and the CIT (A) took note of the salient aspects of the JV agr....
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....payment by the JV from the Employer. 3. OPERATION OF THE CONTRACT WORK AWARDED TO JV Based on these conditions of the JV agreements and sub contract agreements all the works were executed by JV partners at the rate at which the work was awarded to JV and paid to JV Partners as sub-contractors by J.V. On account of this JV will not have any income as the contracts were being executed by JV partners as sub-contractors on behalf of JV. The Joint Venture does not have any staff, plant & machinery, financial resources or any other set up to execute the work; the partners have not invested any money in the Joint Venture. Joint Venture is basically an arrangement for participating in bidding process to take place for the work as one of the JV, partner OSE Pvt. Ltd. was having expertise in construction of Roads/ Highways and the other JV partner, KMC Constructions Ltd. was having expertise in construction of bridges, culverts and related works. The work was done by JV partners themselves & they billed to JV at the rates at which JV was awarded the contract by NHAI and JV acting as a conduit to raise the bill on NHAI for same amount and passes on to respective JV partners as soon as it wa....
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.... established or incorporated with the object of deriving income, profits or gains;" 27. Section 3(42) of the General Clauses Act, 1897 defines a 'person' to include "any company or association or body of individuals, whether incorporated or not". XXXXXX XXXXXX XXXXXX 29. The Supreme Court in the case of G. Murugesan and Brothers v. Commissioner of Income Tax, Madras: (1973) 4 SCC 211 made the following observations:- For forming an 'Association of Persons', the members of the association must join together for the purpose of producing an income. An 'Association of Persons' can be formed only when two or more individuals voluntarily combine together for a certain purpose. Hence volition on the part of the member of the association is an essential ingredient. It is true that even a minor can join an 'Association of Persons' if his lawful guardian gives his consent. In the case of receiving dividends from shares, where there is no question of any management, it is difficult to draw an inference that two more shareholders functioned as an 'Association of Persons' from the mere fact that they jointly own one or more shares, and jointly receive the dividends declared. Those circumstan....
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....gst the constituent members must not be perfunctory and/or merely in form. The association amongst members must be real and substantial which is sufficient to treat the association as a separate homogenous taxable entity." XXXXXX XXXXXX XXXXXX 47. It is material to note that even, as per the terms of the Contract, the scope of work to be executed by Linde and Samsung was separate and was accordingly specified in the annexures to the Contract. The payments to be made for separate items of work were also specified. The currency in which the payments were to be made was also separately indicated. Thus, insofar as execution of the work was concerned, even OPAL recognised that different items constituting the Contract would be performed independently by Linde and Samsung. The consideration for the work performed was to be made directly to the concerned member of the Consortium in accordance with the work performed by him. Annexure C of the Contract specified the payment schedule i.e. the amount to be paid for the supply of goods and services rendered by both the members of consortium. Linde and Samsung were to be paid on the basis of the separate invoices raised by them respectively. ....