TMI Blog2019 (7) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... ome 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 Engine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: This is two sets of appeals containing total six appeals. In one set of appeals, assessee viz. M/s.Backnbone Projects Ltd., is in appeal for the Asstt.Year 2008-09 whereas Revenue is in appeal for the Asstt.Years years 2009-10 and 2010-11. In the second set of appeals, the assessee viz. M/s.KNR BPL Joint Venture is appeal for the Asstt.Years 2007-08 and 2008-09, while Revenue is in appeal for 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made its submission as detailed under: i. The members of the joint-venture have furnished the requisite bank guarantee to carry out the project. ii. All the resources such as money, materials, human resources, and machinery were provided by the members of the joint-venture to execute the project. iii. There was no role of the joint-venture in the execution of the project except the allotment of the project in its name. The role of the jointventure was of the trustee on behalf of the members of the joint venture. iv. The income of the joint venture has already been taxed in the hands of its members in the assessment framed under section 143(3) of the Act. 3.3 Thus the further addition of the income in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As such all the receipts were allocated to BPL only whereas the profit sharing ratio declared in form 3CD is 50% for each member. The assessee has also shown unsecured loan in its balance sheet as on 31st March 2008 amounting to ₹ 2,05,72,454.00, but there was no detail furnished to justify such an unsecured loan. The assessee has also admitted in its submission that the income from the project of the JV is for ₹ 7,56,35,505.00 being 8.61% of the total gross receipts of ₹ 87,82,34,036.00 only. Thus income from the project of the JV should have been taxed in the hands of the assessee. Accordingly, the learned CIT (A) rejected the submission of the assessee and confirmed the order of the AO. 6. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. The learned AR before us filed two paper book, 1st paper book running from pages 1 to 96 and 2nd paper book is running from page no 1 to 168 and submitted that the income 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 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of infrastructure project. During the year the assessee has shown total receipts of ₹ 87,82,34,036/- on which 0 (ZERO) net profit has been declared. The assessee had got his accounts audited as per the provisions of Sec. 44AB of the Act and filed the Tax Audit Report during the course of assessment proceedings. During the course of assessment proceedings the assessee was required to produce his books of accounts along with bills and vouchers and same where verified on test check basis. The assessment is finalized subject to the following discussion. 8.3 We further note that 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. 8.4 At this juncture, we also find to refer the important clause mention in the JV which reads as under: 3. AGREEMENT TO INCOME-TAX: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be remunerated. 10. At the outset, this court notices that the issue sought to be argued on behalf of the revenue stands covered by a decision of a Division Bench, which made references to several other judgments, including those of the Supreme Court when a person is said to exist as an association of persons. In that decision, i.e. Linde AG, Linde Engg. Division v. Dy. DIT [2014] 365 ITR 1/224 Taxman 43 (Mag.)/44 taxmann.com 244 (Delhi), first, the Court considered the definition of Association of Persons (Section 2 (31)) and then analyzed it in the following terms: (31) 'person' includes - (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding subclauses; Explanation. - For the purposes of this clause, an association of persons or a body of ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te taxable entity would depend on the facts of each case including the nature and the extent of collaboration between them. The Supreme Court in Indira Balkrishna (supra) had also clarified that:- there is no formula of universal application as to what facts, how many of them and of what nature are necessary to come to a conclusion that there is an association of persons within the meaning of Section 3. 35. It is obvious that unless the facts lead to a conclusion that there is sufficient joint participation for a common enterprise, it would not be appropriate to treat two or more persons as an Association of Persons for the purposes of assessing them as a separate taxable entity. A mere cooperation of one person with another in serving one's business objective would not be sufficient to constitute an Association of Persons merely because the business interests are common. A common enterprise, which is managed through some degree of joint participation, is an essential condition for constituting an Association of Persons. 36. It follows from the above discussions that before an association can be considered as a separate taxable entity (i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Samsung were independent of each other and were responsible for their own deliverables under the Contract, without reference to each other. 11. In the present case too, the Court is of opinion that the consistent and concurring opinions of CIT (A) and ITAT were that the JV was formed only to secure the contract, in terms of which the scope of each JV partner's task was distinctly outlined. Further, the entire work was split between the two JV partners; they completed the task, through sub-contracts and were responsible for the satisfaction of the NHAI. Therefore, applying the principles of the law declared in Linde AG, Linde Engg Division (supra), it is held that the ITAT did not fall into error of law, in holding that the JV was not an association of persons and liable to be taxed on that basis. The question of law framed is accordingly answered in favour of the assessee and against revenue. 8.7 In the case on hand, the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h member incurs expenditure only in its specified area of work; b. 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. c. the men and materials used for any area of work are under the risk and control of respective consortium members; d. the control and management of the consortium is not unified and common management is only for the inter-se coordination between the consortium members for administrative convenience; 4. There may be other additional factors also which may justify that consortium is not an AOP and the same shall depend upon the specific facts and circumstances of a particular case, which need to be taken into consideration while taking a view in the matter. 9.1 On perusal of the above circular, it is revealed that the assessee has complied with all the conditions as specified by the CBDT. Therefore, in our considered view no addition can be made in the hands of the assessee in the giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial rewards and risks associated to the JV. The other partner of JV stands identified of all contractual obligations by virtue of this SA. The bank guarantee is to be provided by JMC along. The SA further provides that the joint bank account shall be operated by JMC alone and all decisions pertaining to the joint-venture shall be taken by one constituent, i.e. JMC only. JMC shall be further responsible for compliance of all statutory requirements without any overlapping of responsibility. Under these circumstances, we find that it is one of the members, namely, JMC Project (India) Ltd. which essentially bears the risk of scope of work and enjoys control over the project. This being so, in view of the recent CBDT Circular No. 7/2016 dated 07.03.2016, the assessee herein has rightly not been treated as an AOP for taxation purposes. We find that the CIT(A) has rightly held that income from the contract awarded by the principal cannot be said to have been accrued in the hands of the appellant AOP notwithstanding JV document executed for bidding and thus the appellant herein is not liable for income estimated on the contract awarded. We find no infirmity in the conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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