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ADIT, Circle-2 (1) , New Delhi Versus Persys Punj Lloyd JV, New Delhi

Assessment as AOP - whether the consortium is to be taxed as an AOP or Individual members are to be taxed separately? - Held that:- We have examined the Joint venture agreement dated 17th December 2002. On reading of clause no .4 5,8,10,11,16 especially and on conjoint reading of other clauses of the agreement its is apparent that each of the members is responsible for its own part of the contract execution, will take away gross receipt and incurred expenditure for the execution of project relat .....

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her by the circular stated above revenue has also reiterated salient features of what would constitute and AOP and held that if the above four conditions are satisfied than the consortium arrangement shall not be treated as an AOP but individual members will be taxed separately.

Thus considering the terms and conditions between the parties are squarely falling within the conditions specified in para no 3 of the above circular. Therefore, we confirm the finding of the ld. CIT (A) that .....

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ted 21.11.2011 of the ld CIT(A)-XXIX, New Delhi for the Assessment Year 2004-05 to 2008-09. 2. The revenue has raised identical grounds in all the assessment years, the grounds raised by the revenue for Assessment Year 2004-05 are as under:- (i) Whether on the facts and circumstances of the case, the CIT(A) has erred in holding that the assessee was not liable to be assessed as AOP in respect of its contractual receipts from DMRC for "construction for rail corridor contract 3C21/22/23 and c .....

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, Malaysia and Punj Llyod Ltd for common purpose, common action and joint and several responsibility for successful completion of the contract as borne out by clauses D of the preamble, para 4.1, and para 11.2 of pre bid JV agreement dated 17-12-2002. (iii) Whether on the facts and circumstances of the case the CIT (A) has erred in holding that there was no sharing of profit and loss, ignoring • para 11.2 of the pre-bid JV agreement dated 17-12-2002 which clearly mentions that all the loss .....

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none of the partners of the JV were individually eligible and competent for executing the project on their own and bid was submitted by them as an AOP for execution of a single contract based on pre-bid agreement dated 17-12-2002, and awarded on that basis and any subsequent agreement between the partners could not override the said pre-bid agreement on which basis the contract had been awarded. (v) Whether on the facts and circumstances of the case the CIT (A) has erred in holding that there w .....

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d gains from the execution of contract awarded by DMRC on the basis of a pre-bid agreement between M/s Persys SON BHD, Malaysia and Punj Llyod Ltd for common purpose, common action and joint and several responsibility for successful completion of the contract as borne out by clause D of the preamble, para 4, and para 11.2 of pre bid JV agreement dated 17-12-2002. (vii) Whether on the facts and circumstances of the case, the CIT(A) has erred in reversing the finding of the AO that the assessee wa .....

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einafter referred to as 'Persys') and M/s Punj Lloyd Ltd. (hereinafter referred to as 'PLL'). Persys and PLL approached each other to enter into an Pre-Bid Agreement with the purpose of making a joint bid for the tender of Delhi Metro Rail Corporation Limited (DMRC) for the construction for Rail Corridor Contract 3 C 22-Construction of Elevated Viaduct for Line no. 3 (the contract). Persys was a designated as lead member of the JV. The Pre-Bid Agreement was executed in pursuance .....

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e Pre-Bid Agreement executed earlier. Based on the above arrangement assessee was of the view that it is not an AOP and it filed its return of income at Nil and accompanied by only balance sheet without any profit and loss account. It also attached various TDS certificates with the return of income and claimed the credit for the same. Therefore, the issue before ld. AO was whether the appellant was to be assessed in the capacity of an Association of Person (AOP) or the members of the AOP were as .....

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intention between the parties to create a partnership hence the sharing of profit of the partnership firm as risk and reward of the business of partnership is missing in this agreement. Each party of the Joint venture agreement are responsible for carrying out the work in respect of its specified area bearing its own expenses for carrying on that work and receive consideration for that and resultant profit accruing on that. Hence it is apparent that there is no sharing of profit or loss of the .....

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016 dated 7th March 2016 by which these appeal are now covered in favor of the assessee. 6. We have perused the circular issued by CBDT which is as under CIRCULAR NO.7/2016 [F.NO.225/2/2016/ITA.II], DATED 7-3-2016 A consortium of contractors is often formed to implement large infrastructure projects, particularly in Engineering Procurement and Construction ('EPC') contracts and Turnkey Projects. The tax authorities, in many cases have taken a position that such a consortium constitutes a .....

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') 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 to conclusively decide the existence of an AOP and it would rather depend upon the particular facts and circumstances of a case. In the specific context of the EPC contracts/Turnkey projects, there are several contrary ruling of various Courts on what constitutes an AOP. 3 .....

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sortium members and each member incurs expenditure only in its specified area of work. ii. each member earns profit or incurs losses, based on performance of the contract falling strictly within its scope of work. However, consortium members may share contract price at gross level only to facilitate convenience in billing. iii. the men and materials used for any area of work are under the risk and control of respective consortium members; iv. the control and management of the consortium is not u .....

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ers of the consortium are Associated Enterprises within the meaning of section 92A of the Act in such cases, the Assessing Officer will decide whether an AOP is formed or not keeping in view the relevant provisions of the Act and judicial jurisprudence on this issue. 6. The above may be brought to the notice of all for necessary compliance. 7. We have noted that ld. CIT (A) has also passed the order considering all the above material issues determining whether the consortium is to be taxed as an .....

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