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TMI Blog2019 (7) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 giving directions for adjustment of taxes paid by members of appellant JV against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 correctness and completeness of the expenses and the income in its books of accounts. Thus the AO rejected the books of accounts of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee is liable to tax on the income as disucussed above or the members of the joint-venture in their capacity. 8.1 From the preceding discussion, we note that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. reported in 374 ITR 35 wherein it was held as under: 9. In the assessee's case for assessment year 2004-05, this court had the occasion to consider the issue in ITA No. 146/2010 decided on 11.02.2010. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividuals, 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 Persons' from the mere fact that they jointly own one or more shares, and jointly receive the dividends declared. Those circumstances do not by themselves go to show that they acted as an 'Association of Persons'." (Emphasis Supplied) ** ** **" 34. . . . It is, thus, essential that an Association of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociation 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 to be paid for the supply of goods and services rendered by both the members of consortium. Linde and Samsung were to be paid on the basis of the separate invoices raised by them respectively. There was no arrangement for sharing of profits and losses between Linde and Samsung. And, each of them would make profits or incur losses based on the price as agreed by them and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. The matter has been examined. With a view to avoid tax-disputes and to have consistency in approach while handling these cases, the Board has decided that a cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely 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 the light of aforesaid plea of the assessee, we observe that various clauses of the SA (supplementary agreement) are suggestive of the fact that is it the constituent-JMC indeed who is solely responsible for execution of the entire project. It is the JMC who is under obligation to bring in all resources, finances and all other services required for the execution of the project in exclusion to the other socalled partner of the joint venture. Noticeably, it is also spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 result, both the appeals of the Revenue are dismissed. Now coming to the ITA numbers 608/AHD/2011, 1485/AHD/2013, and 2518/AHD/2011 11. At the outset, we note that issues raised by the assessee and the Revenue are identical to the issue raised by the assessee ITA No. 2621/AHD/2011 except the amount involved in the dispute which has been decided in favor of the assessee and against the Revenue by us vide paragraph No. 16 to 25 of this order. As such both the learned DR and the AR before us agreed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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