ADIT Vs Persys Punj Lloyd JV (ITAT Delhi)
The issue under consideration is whether the appellant was to be assessed in the capacity of an Association of Person (AOP) or the members of the AOP were assessable to tax separately in their individual capacity?
ITAT have examined the Joint venture agreement. On reading of some 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 relating to his part and earn profit or loss accordingly. The control and management of consortium rests with individual consortium members with respect to their work. Therefore, it satisfies all the four conditions mentioned in circular no. 7/2016 dated 07 March, 2016. Ld. DR could not point out any clause of the agreement, which does not satisfy any of the above four conditions of the circular. Further 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.
FULL TEXT OF THE ITAT JUDGEMENT
1. These five appeals are filed by the revenue against the order dated 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 construction for elevated viaduct for line no. 3”, ignoring clause D of the preamble of pre bid JV agreement dated 17-12-2002.
(ii) Whether on the facts and circumstances of the case, the CIT(A) has erred in reversing the finding of the AO that the assessee was an AOP which was formed with the object of associating for the common purpose of deriving profits and gains from the execution of contract awarded by DMRC on the basis of a pre-bid agreement dated 17-12-2002 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 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
