TaxTMI 
TaxTMI 
2015 (5) TMI 1247
X X X X Extracts X X X X
X X X X Extracts X X X X
....a Ltd., in terms of conditions of joint venture agreement forming part and parcel of contract agreement between the appellant and the principal binding the venturors with joint and several liability and obligation for performance of the contract including statutory compliance to the extent of their share of participation. 3. For that, the orders of the forum below equally is without any authority and sanction of Income Tax Act 1961, as the condition precedent for applicability of section 194 (C) of the Act in the form of "contract" or "sub-contract" agreement binding the appellant with the co-venturors with "contractor -contractee" "Principal -Contractor" or "main-contractor- Sub-contractor" relations do not exist between the appellant and the co-venturors, nor the same was made out by the forums below. 4. For that for the reasons stated in the ground no 2 and 3 above the actions of the forums below in applying the rigors of Section 194 (C) & 201 of the IT is purely as surmises and conjecture which makes their order illegal and arbitrary. 5 For that the Forums below have violated the settled position of law, where it has been enunciated in Associated Ceme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pellate tribunals unanimously disapproving the relationship between Joint Venture and it's Co-venturors as the relationship of "Contractor- Contractee" "Contractor- Sub-Contractor" and held that any transaction between them would not attract the rigors of Section 194C and consequential provision of section 201 of the Act. As such the order violates the basic cannons of law of honouring the precedence. 8. For that the principal having deducted tax from the appellant and venturor having admitted Income and paid tax thereon, covering tax effect of the project, the interest of revenue is well protected. The learned CIT (A) failed to appreciate this fact and held that as the event of tax being admitted by the venturor, the interest U/s. 201 (IA) would be charged till the date of filling the return by venturor, treating the transaction between appellant and the venturor being covered Uis.1 94C. 9. For that, any other grounds incidental to the grounds of this case may kindly be permitted to urge at the time of hearing of the case." 2. Though various grounds are raised in these appeals, but the controversy involved therein is with regard to liability of deduction o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Act on account of nondeduction of tax as per provisions of Section 194C of the Act. The AO has also charged the interest u/s.201(1A) of the Act. 4. Aggrieved thereby, appeals were preferred before the CIT(A) but the assessee did not find favour with him. Now, the assessee is in further appeals before the Tribunal and reiterated its submissions. In support of his contention, ld. AR of the assessee has placed reliance upon the orders of the Visakhapatnam bench of the Tribunal in case of ITO Vs. UAN Raju Constructions, ITA Nos.344/Vizag/2009 & ITA No.77/Vizag/2010, dated 13-5-2010, in which the Tribunal has taken a view that there was no subletting of contract once the contract was executed by the constituent of JV. It was further contended that this order of the Tribunal was followed by the Hyderabad Bench in case of M/s Hindustan Ratna JV Vs. ITO, reported in (2014) 49 ITD 443 (Hyd). 5. Ld. Counsel for the assessee further invited our attention that the deductee has already paid the taxes on the receipts, therefore, the assessee cannot be held to be in default u/s.201(1) of the Act. In support of this contention, he also placed reliance on the order of the Agra bench of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sability of income, if any, in the hands of the assessee-AOP. The case of the AO is that the "Joint Venture" and its members should be treated as separate persons and hence the contract allocated to the members should be treated as "Sub-contracting". However, the case of the assessee is that the Joint Venture has come into existence only to procure and win the contracts and since the contracts were allocated between the members and further they were executed separately by each of the members, no income can be said to have arisen in the hands of the assessee-AOP. 7. In our country, the implementation of infrastructure projects is taking place in a massive scale. In this connection, global tenders are invited. Hence two or more business enterprises are joining hands by forming a consortium of Joint Venture in order to get qualified for participating in tender process. They regulate themselves, by entering into an agreement, the methodology to be adopted for executing the contract obtained. Before going into the main issues, we feel that it is imperative to discuss about the status and legal position of "Joint Venture" vis-a-vis Income tax Act. The Joint Ventures are not be g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r property, money, effects, skill, and knowledge, without creating a partnership, a corporation or other business entity, pursuant to an agreement that there shall be a community of interest among the parties as to the purpose of the undertaking, and that each joint venture must stand in the relation of principal, as well as agent, as to each of the other covertures within the general scope of the enterprise. Joint ventures are, in general, governed by the same rules as partnerships. The relations of the parties to a joint venture and the nature of their association are so similar and closely akin to a partnership that their rights, duties, and liabilities are generally tested by rules which are closely analogous to and substantially the same, if not exactly the same as those which govern partnerships. Since the legal consequences of a joint venture are equivalent to those of a partnership, the courts freely apply partnership law to joint ventures when appropriate. In fact, it has been said that the trend in the law has been to blur the distinctions between a partnership and a joint venture, very little law being found applicable to one that does not apply to the other. Thus, the l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt Venture". a) It connotes a legal entity in the nature of a partnership engaged in the joint undertaking of a particular transaction for mutual profit. (or) b) it is in association of persons with intent, by way of contract, express or implied, to engage in and carry out a single business venture for joint profit, for which purpose such persons combine their property, money, effects, skill, and knowledge, without creating a partnership. (or) c) a special combination of two or more persons wherein some specific venture for profit is jointly sought without any actual partnership or corporate designation, or as an association of two or more persons to carry out a single business enterprise for profit. d) that each joint venturer must stand in the relation of principal, as well as agent, as to each of the other covertures within the general scope of the enterprise. e) Among the acts or conduct which are indicative of a joint venture, no single one of which is controlling in determining whether a joint venture exists, are: (1) joint ownership and control of property; (2) sharing of expenses, profits and losses, and having ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pan (AAR Nos. 798-799 of 2008 dt. 23-03-2010. In this case, the AAR has held that the Consortium formed by four members is not assessable as AOP, since the AAR has felt that the facts of the case are similar to the facts relating to Van Oord ACZ BV, supra. Section 2(31) of the Act defines the term "Person", which interalia, includes "an association of persons or a body of individuals, whether incorporated or not. Since the term "Association of Persons" (AOP) was not defined in the Act, the Courts have interpreted to mean that it is an association established to produce income. Hence the Finance Act 2002 has inserted an "Explanation" to section 2(31), according to which, an AOP shall be deemed to be a person, whether or not such AOP was formed or established with the object of deriving income, profits or gains. However, in the instant case, there is no dispute with regard to the assessability of the "Joint Venture" per se. Both the assessee and the department have taken the stand that the "Joint Venture" is assessable in the status of "Association of Person". However, the issue is whether the AO is right in treating the Joint Venture-AOP as the main contractor and its....
X X X X Extracts X X X X
X X X X Extracts X X X X
....turer shall stand in the relation of a principal as well as an agent of the other. However clause 4(c) of the agreement specifically states that the members do not constitute the agent of each other. The said clause also states that the "Joint venture" should not be taken as the agent of the members also. Thus, according to the agreement, each member stands in its own right and no specific relationship is created between the Joint Venture and its members. 12. Thus, on an understanding of the concept of the "Joint Venture" and the terms of agreement between the members of the present case, we are of the view that in the instant case, the consortium of Joint Venture has been formed only to procure the contract works. By way of the agreement, the parties have only regulated the relationship inter se with respect to their joint responsibility that existed in relation to the Principal, viz., M/s Konkan Railway. In reality, both the parties have divided the contract works between themselves and they have executed their share of work on their own risks. It is pertinent to note here that the AO has not given any finding on the issues like that each member had authority to interfer....