TaxTMI 
TaxTMI 
2019 (7) TMI 736
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....d 2008-09, while Revenue is in appeal for the Asstt.Year 2009-10. These appeals are against the separate orders of the ld.CIT(A) for the respective assessment years mentioned hereinabove. Since issues raised in the grounds of appeals are common and/or interconnected, therefore, we have clubbed them together for the sake of convenience and adjudication by this consolidated order. We are taking the appeal bearing no. 2621/AHD/2011for the AY 2008- 09 filed by the assessee as the lead case for the adjudication. The assessee has raised the following grounds of appeal: "(1) That on facts and in law the learned CIT (Appeals) has grievously erred in holding that income is chargeable to tax in hands of assessee. (2) That on facts and in law, it ought to have been held that the assessee is not taxable and income really belongs to members of assessee JV. (3) That the facts and in law, the learned CIT (A) has grievously erred in confirming the rejection of books of accounts u/s. 145 of the Act. (4) That the learned CIT (A) has grievously erred in confirming the net profit rate at 11.59%. (5) That learned CIT (A) has grievously erred in not giv....
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.... the hands of its members in the assessment framed under section 143(3) of the Act. 3.3 Thus the further addition of the income in the hands of the joint venture as AOP will lead to the double addition of the same income. 3.4 However, the AO was dissatisfied with the submission of the assessee. As per the AO, the income has generated in the hands of the Association of persons. Therefore at the first instance, it should have been charged to tax in the hands of AOP as per the provisions of section 4 of the Act. 3.5 Once a JV has been incorporated comprising of different members, then members lose their identity. As such the JV being legal entity is liable to tax under the Act on the income generated by it. 3.6 The JV raised all the bills and the payment was received by the JV as well as TDS certificate was issued in the name of JV by the party. Therefore the income as discussed above belongs to the assessee, i.e. JV. Therefore the expenses incurred by the members of the JV should have been reimbursed by the JV to the members. 3.7 The AO further noted that the assessee failed to produce the necessary books of accounts. Accordingly, the assessee failed to justify the ....
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....ed AR before us filed two paper book, 1st paper book running from pages 1 to 96 and 2nd paper book is running from page no 1 to 168 and submitted that the income generated from the projects allotted in the name of the JV has already been assessed in the hands of the individual members in the assessment framed under section 143(3) of the Act. Therefore further addition in the hands of the JV for the same income will lead to the double addition which is not permissible under the provisions of law. 6.1. The learned AR in support of his contention drew our attention on page 21 of the 2nd paper book where the allocation of the receipt from the project was given. 6.2 The learned AR also filed the copies of the agreements between the members and the JV which were also filed along with the tender filed with the respective parties to secure the work. The copies of the agreement are placed on pages 92-115 of the IInd paper book. 7. On the other hand, the learned DR vehemently supported the order of the authorities below. 8. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the instant case relates whether the asses....
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....find to refer the important clause mention in the JV which reads as under: "3. AGREEMENT TO INCOME-TAX: Since the entire project will be entirely executed by the members of the JV either singly or jointly be agreed upon between the partners the JV will not have any income of its own and therefore the tax liability would be NIL in case of JV. Therefore the JV would apply to income tax department for obtaining the No Deduction tax at Source Certificate. In case there is tax deducted at source in the hands of JV it will file the return and claim the refund of the same and shall be transferred to the account of the Backbone Construction Pvt. Limited (BBC) as agreed upon between the partners." 8.5 A plain reading of the aforesaid clause reveals that both the members of the joint-venture originally agreed to incorporate the JV only to obtain the contracts. It was also agreed that whatever will be the income of the JV will be allocated to the members. 8.6 In such circumstances, the Hon'ble Delhi High Court has not even treated such arrangement, i.e. forming JV to secure the work as JV as AOP in the case of CIT Vs. Oriental Structural Engineers Pvt. Ltd. re....
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....her or not such person or body or authority or juridical person was formed or 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". ** ** **" 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 P....
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....ome together for a common purpose. (iii) the association must move by common action and there must be some scheme of common management. (iv) the cooperation and association amongst 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." ** ** **" 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....
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.... that members of the joint-venture have disclosed the entire income which was originally received by the assessee in their books of accounts and income tax returns. The returns of income of all these members have been subject to the assessment framed under section 143(3) of the Act. Thus it can be inferred that there was no loss to the Revenue on account of the income disclosed by the members of the JV even it is assumed that it belongs to the JV. Furthermore, both the JV and the members are chargeable to tax at the maximum marginal rate. 9. We further note that the CBDT in its circular has clarified that there will not be any tax liability on the income of the JV if the same income has been offered to tax by the members of the JV subject to certain conditions. The relevant extract of the circular 07/20016 is reproduced as under: "2. The term AOP has not been specifically defined in the Income-tax Act, 1961 (Áct'). The issue as to what would constitute an AOP was considered by the Apex Court in some cases. Although certain guidelines were prescribed in this regard, the Court opined that there is no formula of universal application so as to conclusively decide the....
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.... the income can be said to have accrued in the hands of AOP when the contract has been awarded to a consortium/joint-venture and whether such a consortium formed for the purposes of obtaining the contract constitutes an AOP or not. It is the case of the AO that consortium/joint-venture in the instant case constitutes an AOP and thus a separate entity for incidence of taxation. The assessee, on the other hand, claims that the joint-venture agreement has been merely entered for the purposes of bidding for the project for which the tender was invited by the principal i.e. Bhopal Municipal Corporation. It is the case of the assessee that by virtue of supplementary agreement dated 08.02.2008 between JMC and PPPL (other joint-venture member) their correct relationship has been defined. It was also pleaded that from supplementary deed between constituents, it can be clearly inferred that the main joint-venture agreement dated 27.04.2007 for bidding purposes is only a symbolic document and does not represent an AOP or partnership between assessee and PPPL. The main jointventure agreement is only a work sharing agreement to meet contractual agreement with a principal only. 9. In th....
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....ipts in the hands of AOP will cease to exist." 9.3 After considering the facts in totality as discussed above, we are of the view that there cannot be any addition in the hands of the assessee for the income as discussed above in the given facts and circumstances. Thus the ground of appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed. Coming to the ITA Nos. 1486/AHD/2013, and 2283/AHD/2016, the appeals filed by the Revenue 10. At the outset, we note that issue raised by the Revenue is identical to the issue raised by the assessee ITA No. 2621/AHD/2011 which has been decided in favor of the assessee and against the Revenue by us vide paragraph nos. 16 to 25 of this order. As such both the learned DR and the AR before us agreed that whatever will be the view in ITA No. 2621/AHD/2011 would also be applied for the years under consideration. As the issue is identical as discussed above and nothing contrary has been pointed out to the facts as discussed in ITA No. 2621/AHD/2011 by the learned DR, we decide the impugned issue in favor of the assessee and against the Revenue. Hence the grounds of appeal of the Revenue are dismissed. In the....