TaxTMI 
TaxTMI 
2019 (10) TMI 1167
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ('CIT(A)' for short) dated 28.02.2017 & 29.11.2018 for assessment years 2010-2011 2011-12, 2012-13 & 2013-14. 2. Since, the identical facts and issues are involved in these appeals, we proceed to dispose the same vide this common order. 3. For the sake of convenience and clarity, the facts relevant to the appeal in ITA No.1008/Chny/2017 for assessment year 2010-2011 are stated herein. 4. The Assessee raised the following grounds of appeal: ''1. The order of The Commissioner of Income Tax (Appeals) 2, Chennai dated 28.02.2017 in l.T.A.No.66/2015-16 for the Assessment Year 2010-11 is contrary to law, facts, and in the circumstances of the case. 2. Reopening the Assessment u/s 147 is not valid. 2.1 The CIT ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....where the members of AOP having income taxable lower than the Maximum Marginal Rate or does not have taxable income. Hence the CIT (Appeals) ought to have accepted that sub section 2 of section 167B only will be applicable in the appellant's case. 3.4 The CIT (Appeals) has also failed to consider the submissions made by the Appellant with respect to the amounts transferred to the members of the AOP over the years, wherein also the determinate share of profits of the members of the AOP are clearly established. 4. The Appellant craves leave to file additional grounds/arguments at the time of hearing''. 5. The brief facts of the case are as under: The appellant namely Herve Pomerleau International CCL Joint Venture is a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hall be shared as mutually agreed upon and also taking note of profit sharing agreement dated 29.12.2008 entered between two parties had come to conclusion that profit were shared among the partners and foreign company will be paid guaranteed profit share of 2% of final contract price and therefore held that tax should be levied under sub section (1) of Section 167B of the Act and accordingly levied tax vide order dated 25.03.2015 u/s.143(3) r.w.s.147 of the Act. 6. Being aggrieved, an appeal was preferred before the Ld.CIT(A) challenging the very validity of the initiation of reassessment proceedings on the ground that reassessment proceedings are prompted by mere change of opinion and there was no reason to disbelieve that tax escaped ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t entered between the parties on 29.12.2008, it is clear as cumulative consideration of the clauses of agreements that the profit sharing ratios of the members of the MOU are determined and therefore tax should be levied under sub section (2) of Section 167B of the Act. 9. On the other hand, the ld. CIT- Departmental Representative had vehemently contended that having regard to the clause of agreement entered between the parties, it cannot be said that profit sharing ratios of the members of the AOP are determined and tax should be levied only under sub section (1) of Section 167B of the Act. 10. We heard the rival submissions and perused the material on record. 11. Admittedly, assessee before us was assessed in the status of AOP. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erminate or unknown, tax shall be charged on the total income of the association at the maximum marginal rate of tax. Proviso to Section 167B(1) of the Act further provides that where total income of any member of the AOP is chargeable to tax at the rate which is higher than the maximum marginal rate, tax shall be levied on the total income of the AOP at such higher rate applicable to such members. In the present case, one of the member of AOP is an Non Resident i.e. HPI, a company registered in Canada and the income of this member is taxable at 42.23%. In order to determine the applicability of Section 167B(1) of the Act, it is essential to decide whether the shares of the members of the AOP are indeterminate or unknown. This issue can be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o to show that it is not the AOP which is under obligation to pay 2% of contract price to HPL but it is CCCL. The term ''share of net profit'' implies a ''share in the net profits'' which is an interest in the profits as profits, and implies a participation in the profits and losses. But in the present case, the member of the AOP i.e. HPL is entitled to 2% of the profit cost regardless of the fact whether AOP made profits or losses. This is only a charge against the profits of the assessee, AOP but not share in profits. Therefore, it cannot be said that the shares of the profit in AO of members is determinate or known. Thus on cumulative consideration of all clause the three agreement entered into it is crystal clear that shares members of ....