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2019 (7) TMI 736 - ITAT AHMEDABADEstimating the income of the JV - formed to secure the work, and after that, there was no involvement in the execution of the work which was done by member - rejection of account of JV - taxable in hands of JV even if offered by the members - whether the assessee is liable to tax on the income of members of the joint-venture in their capacity? - CBDT circular No. 07/20016 - HELD THAT:- We note that the assessee as JV has prepared its financial statements, got it accounts audited and filed audit report under form 3CD, and produced the books of accounts during the assessment proceedings. As such the assessee has shown gross income and claimed the expenses of the equal amount against such gross income, leaving the income at NIL. Thus it is transpired that the assessee has offered its income to tax as evident from the financial statements, income tax return filed by it. AO feels dissatisfied with the income disclosed by the assessee as JV in its books of accounts; then he was supposed to disallow the expenses or disturb the income as per the provisions of law. As such it cannot be alleged that the assessee as AOP has not offered the income to tax in the given facts and circumstances. There was no resource available with the JV such as money, material, human resources, and machinery, etc. As all these resources were available with the members of the JV which were also used for the execution of the project. In other words, the assessee was acting merely as the trustee of its members in order to secure the work contracts. 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. 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. reported in [2015 (3) TMI 102 - DELHI HIGH COURT] wherein it was held the JV was not an association of persons and liable to be taxed on that basis. In present case also AOP was formed only to secure the work, and after that, there was no involvement of such AOP in the execution of the work. As such the entire work was executed by the members of the JV as agreed between them. Accordingly, the fees from the execution of the project work were shared between the members as per their understanding. Thus the Hon’ble Delhi High Court (supra) held that the income from such joint venture would not be subject to tax in the hands of AOP. It is also important to note 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 u/s 143(3). 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. 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. - It is revealed that the assessee has complied with all the conditions as specified by the CBDT circular No. 07/20016. Therefore, in our considered view no addition can be made in the hands of the assessee in the given facts and circumstances on the ground that income was offered to tax by its members and not by the JV. 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.
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