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TMI Blog2016 (6) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as an AOP, contract was awarded to AOP, payments were in the name of AOP and risks and costs by reasons of defect and damage were also cast on AOP and a Joint Venture Board was constituted to ensure smooth execution of the project. (vi) 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 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 cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r respective work packages. Based on the joint bid, the contract was awarded by DMRC vide letter dated 14.05.2003. Subsequently, Persys and PLL executed a Joint Venture Agreement (JV Agreement) on 10.10.2003, which superseded the Pre-Bid Agreement executed earlier.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 assessable to tax sepa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 an Association of Persons ('AOP') i.e. a separate entity for charging tax. The claim of taxpayers, on the other hand, is contrary to this view. This has led to tax disputes particularly in those cases where each member of the consortium, although join ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 unified and common management is only for the inter-se co-ordination 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. 5. It is further clarified that this Circular shall not be applicable in cases where all or some of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 9. In view of above facts, we are of the view that 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 income arising from the DMRC contract was not assessable to tax in the hands of AOP but each member of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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