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TMI Blog2019 (10) TMI 1167X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was assessed in the status of AOP. The provisions of Section 167B of the Act provides that where the individual shares of the members of the AOP in the whole or any part of the income of the AOP or indeterminate or unknown, tax shall be charged on the total income of the association at the maximum marginal rate of tax. Proviso to Section 167B(1) of the Act further provides that where total income of any member of the AOP is chargeable to tax at the rate which is higher than the maximum marginal rate, tax shall be levied on the total income of the AOP at such higher rate applicable to such members. In the present case, one of the member of AOP is an Non Resident i.e. HPI, a company registered in Canada and the income of this member is taxable at 42.23%. In order to determine the applicability of Section 167B(1) of the Act, it is essential to decide whether the shares of the members of the AOP are indeterminate or unknown. Clause 2 of the profit sharing agreement further provides for the mode of payment 2% guaranteed profit. Having regard to the above clauses of the three agreements, it is clear that as cumulative consideration of the terms of the three agreements, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010-2011 are stated herein. 4. The Assessee raised the following grounds of appeal: 1. The order of The Commissioner of Income Tax (Appeals) 2, Chennai dated 28.02.2017 in l.T.A.No.66/2015-16 for the Assessment Year 2010-11 is contrary to law, facts, and in the circumstances of the case. 2. Reopening the Assessment u/s 147 is not valid. 2.1 The CIT (A) is not justified in concluding that the re-opening of assessment by issue of notice u/s 148 is valid 2.2 The CIT (Appeals) erred in considering the argument of Addl.CIT that merely because the Assessee makes submission to Assessing Officer does not automatically imply that an opinion is formed on the said issue, when the Learned Assessing Officer in his order u/s 143(3) has himself stated that all the details submitted by the Assessee were examined. 3. Shares of members of AOP are determinate only and not indeterminate as confirmed by The CIT (Appeals). 3.1 The CIT (Appeals) wrongly interpreted the submissions made by the Appellant and thereby concluded that there is an unguaranteed portion of final con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead of rate applicable to foreign companies at 42.23%. Therefore, the Assessing Officer issued notice u/s.148 of the Act. In response to the notice issued u/s.148 of the Act, assessee submitted that original return of income filed on 30.09.2010 be treated as return in response to notice issued u/s.148 of the Act. The Assessee also sought reason for reopening the assessment and filed objections which were disposed of by the Assessing Officer on 18.03.2015. The Assessing Officer taking notice of Article-5 of Consortium Agreement dated 30.11.2007 entered between two partners, wherein it is mentioned that net profits, assets and liabilities arising out of joint performance of contract shall be shared as mutually agreed upon and also taking note of profit sharing agreement dated 29.12.2008 entered between two parties had come to conclusion that profit were shared among the partners and foreign company will be paid guaranteed profit share of 2% of final contract price and therefore held that tax should be levied under sub section (1) of Section 167B of the Act and accordingly levied tax vide order dated 25.03.2015 u/s.143(3) r.w.s.147 of the Act. 6. Bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax should be levied only under sub section (1) of Section 167B of the Act. 10. We heard the rival submissions and perused the material on record. 11. Admittedly, assessee before us was assessed in the status of AOP. Provisions of Section 167 of the Act provides that in case where individual shares of the members of AOP is indeterminate tax should be charged on such AOP at maximum marginal rate. 12. Grounds of appeal No.1 4 are general in nature therefore, does not require any adjudication. 13. Ground No. 2, challenges the validity of the reassessment proceedings. The contention of the assessee that reassessment proceedings are prompted by mere change of opinion cannot be accepted for reasons that in the original assessment proceedings, there is nothing to show that Assessing Officer had examined the issue, whether the shares of members of AOP are determined or not. Therefore, it cannot be said that reassessment proceedings are promoted by mere change of opinion. Hence the ratio of the decision of Hon ble Supreme Court in the case of Kelvinator India Ltd (supra) cannot be applied to the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumulative consideration of the terms of the three agreements, the parties have not agreed as to the shares of the profits of the AOP. More importantly, Consortium Agreement entered into between the parties is totally silent as to the shares of the profits of the AOP. In terms of MOU in clause VII entered between parties on 30.11.2007, there is clear obligation on the part of CCCL to pay a sum equivalent to 2% of the project cost to HPL, which would go to show that it is not the AOP which is under obligation to pay 2% of contract price to HPL but it is CCCL. The term share of net profit implies a share in the net profits which is an interest in the profits as profits, and implies a participation in the profits and losses. But in the present case, the member of the AOP i.e. HPL is entitled to 2% of the profit cost regardless of the fact whether AOP made profits or losses. This is only a charge against the profits of the assessee, AOP but not share in profits. Therefore, it cannot be said that the shares of the profit in AO of members is determinate or known. Thus on cumulative consideration of all clause the three agreement entered into it is crystal clear t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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