Pico Deepali Overlays Consortium, Haryana V. DCIT Central Circle 17, Delhi

ITA 412/DEL/2022

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 4525 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 07-12-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 27-02-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAGHVENDRA SINGH
• Keywords: General deduction; Transfer pricing; Maximum Marginal Rate; Prejudicial to interest
• Section: 37; 144C; 69A; 264

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : I : NEW DELHI BEFORE SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITAs No.518/Del/2022 Assessment Year: 2011-12 Pico Deepali Overlays Consortium (By Deepali Designs Exhibits (P) Ltd.), GN-6, Shivaji Marg, Rajouri Garden, New Delhi. PAN : AABAP1880F Vs DCIT, Central Circle-17, New Delhi. Assessee by : Shri Raghvendra Singh, Shri Salil Kapoor & Shri Tarun Chanana, Advocates Revenue by : Shri Rajesh Kumar, CIT, DR ITAs No.412/Del/2022 Assessment Year: 2011-12 Pico Deepali Overlays Consortium C/o MNA & Co., Chartered Accountants, Suite 444, Tower-B, Spazedge, Sector 47, Sohna Road, Gurgaon (Haryana) – 122 018. PAN : AABAP1880F Vs DCIT, Central Circle-17, New Delhi. (Appellants) (Respondents) Assessee by : Shri Ajay Vohra, Sr. Advocate, Shri Niraj Sharma, CA & Shri Manpreet Bagga, CA Revenue by : Shri Rajesh Kumar, CIT, DR ITAs No.518 & 412/Del/2022 2 Date of Hearing : 08.12.2023 Date of Pronouncement : 22.12.2023 ORDER PER ANUBHAV SHARMA, JM: These appeals are preferred against the order dated 27.01.2022 passed u/s 254/153A/143(3) r.w.s. 144C of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) DCIT, Central Circle-17, New Delhi (hereinafter referred to as ‘the Ld. AO’). The appellants before us are two parties who both claim to be the ‘assessee’ for the purpose of section 2(7) r.w.s. 253(1) of the Act having right to file appeal against this impugned final assessment order. Thus for further convenient reference, the appellant in ITA No.518/Del/2022 shall be referred to as Appellant No.1 or ‘Deepali Design’ and the appellant in ITA No.412/Del/2022 shall be referred to as Appellant No.2 or ‘Pico Deepali’. 2. A brief background of litigation so far as picked from the records and submission made is that earlier the Appellant No.1 had filed ITA No.5161/Del/2017 on behalf of itself as alleged member of consortium and also filed another appeal ITA No.4929/Del/2018 in the name of consortium and claiming itself to be an alleged member of AOP. The Tribunal vide order dated 19.02.2018 dismissed ITA No.5161/Del/2017 and allowed the appeal in ITA No.4929/Del/2018 with a direction to the AO to first decide whether Deepali Designs Exhibits (P) Ltd., i.e., Appellant No.1 is a member of AOP or not. The ITAs No.518 & 412/Del/2022 3 Tribunal had also directed that if it is held that it is a member, then, Deepali be given proper opportunity of hearing on the merits of the various additions made. This order was upheld by the Hon’ble High Court vide order dated 30.07.2019 in ITA No.327 of 2019. Thereafter, a Miscellaneous Application No.792/Del/2019 in ITA No.4929/Del/2018 was filed by the Appellant seeking clarification and modification of the order dated 19.02.2018 which was disposed of by order dated 11.01.2021 and, at this stage, the consortium now appearing as Appellant No.2, filed a Miscellaneous Application No.792/Del/2019 and it was also allowed directing the AO to give opportunity of hearing to Pico Hong Kong Ltd., also in the remand proceedings. Thereafter, the ld. AO has passed the assessment order holding Appellant No.1 to be a member of the consortium which has been upheld by the DRP and, therefore, the two factions: one Deepali Designs and Exhibits (P) Ltd. (hereinafter referred to as Deepali Designs) which is before us as Appellant No.1 and other is M/s Pico Deepali Overlays Consortium which is before us as Appellant No.2. 3. At the time of hearing on 30.11.2023 a conflict of interest among the two appellants came up and it was pointed out by Ld. AR of the appellant no 1, ‘Deepali Design’ that Hon’ble Delhi High Court has directed for expeditious disposal of the issue as to if appellant no 1 is member of the AOP, assessee Pico Deepali Overlays Consortium. On this the Shri Ajay Vohra, Sr. Advocate for appellant no 2, Pico Deepali Overlays Consortium, Shri Raghvendra Singh, Ld. ITAs No.518 & 412/Del/2022 4 Counsel of ‘Deepali Design’, Appellant no 2 and Ld. DR were heard and there upon this Bench has decided to first adjudicate on following two preliminary issues and pass orders accordingly for further adjudication on merits of grounds raised in both the appeals; (1.) Whether the two appeals are maintainable against one assessment order; (2) Whether the appellant No.1 is a member of Association of Persons (AOP) i.e Pico Deepali Overlays Consortium and the consortium has been rightly assessed as an Association of Persons. 4. The relevant facts in brief are that assessee Pico Deepali Overlays Consortium is an unincorporated consortium of three entities, i.e., PICO Hong Kong Limited (PHK), Deepali Design and Exhibits Private Limited (“Deepali Designs”) and PICO Event Marketing (India) Private Limited. The consortium was formed by an agreement date 19.12.2009 (hereinafter also referred as ‘original agreement’) in order to take certain contracts in relation with the Common Wealth Games held in Delhi in the year 2010. The agreement dated 19.12.2009 governs the inter se relationship between the members of the consortium, inter alia. The consortium of three members had successfully bid for the overlays contract and was awarded the contract. Common Wealth Games Organizing Committee (referred further as ‘CWGOC’) vide its Request for Proposal invited bids for the Appointment of Overlays Providers on Turnkey Rental basis for supply, installation, testing, commissioning, operation, ITAs No.518 & 412/Del/2022 5 maintenance, de-commissioning & removal of Games Overlays for Delhi 2010 Common Wealth Games to be held in Delhi. The Consortium submitted its Bid for the aforesaid RFP for Cluster I & VI whereby the consortium represented that it had the required experience and resources. Turnkey Agreement dated 2 June 2010 was entered between the CWGOC and the M/s Pico Deepali Overlays Consortium. The consortium through PHK, drew up accounts for the contract. The audited accounts were signed by Mr. Chung Chec Keong. The consortium through PHK, filed return in the status of AOP through appellant no.2. The assessment for the assessment year 2011-12 was concluded by the assessing officer vide order dated 27 January 2022 in the status of AOP. 5. The case of Pico Deepali appellant no 2 through PHK is that the consortium was the contracting party vis-a-vis CWGOC for the overlays contract and appellant no 1 is also part of consortium and the AOP. Ld. Sr. Counsel has relied the following facts to support this contention;  In terms of the agreement dated 19.12.2009, Performance Security had to be provided by the Consortium in the form of Performance Bank Guarantee;  In consideration of the execution and completion of the works, CWGOC had to pay the contract value to the Consortium; ITAs No.518 & 412/Del/2022 6  Technical specifications and scope of work along with the rates and total quantities were specified in the said contract to the Consortium;  On behalf of the Consortium the said agreement was signed by Mr. Ang Swee Meng, Director and Mr. Vinay Mittal, Managing Director of M/s Deepali Designs & Exhibits (P) Ltd.  In consideration of the payment by the CWGOC to the Overlays Provider in accordance with the terms and conditions of the Agreement, each member was jointly and severally liable for execution of the contract.  Goods were supplied by the consortium against invoices raised by the consortium;  Payment was released by CWGOC in favour of the consortium;  Tax was deducted at source by CWGOC in the name of the consortium;  Members of the consortium were jointly and severally liable for execution of the contract. 5.1 Further to support the contention that consortium was a valid AOP the Appellant No 2 claims that in order to execute the contract with CWGOC, material was received from suppliers/ vendors against invoices raised in the name of the consortium; goods were imported by the consortium and custom ITAs No.518 & 412/Del/2022 7 duty paid in the name of the consortium; bank account was opened by the consortium with HSBC to receive payment from CWGOC and to make payments to vendors / suppliers / employees, etc.; payments were made by the consortium to the suppliers / vendors after deduction of tax at source, wherever applicable; consortium obtained Tax Deduction Account Number (TAN) and Permanent Account Number (PAN); the consortium had taken out insurance policy in the capacity of JV as required in the terms of the contract with CWGOC, with the insurance premium paid by JV in respect of Deepali scope of work being contributed by Deepali Design. 5.2 Appellant no 2 has also claimed that the consortium had office at A27/15, Khanpur Extension, New Delhi, Delhi - 110062. Also, the accounting books and records of the consortium were maintained at the head office of the consortium under the care of JV / consortium manager. The consortium had employed following personnel: a. Mr. Rajeev Aggarwal (Accountant) & b. Mr. Niranjan Sethi (Executive Accountant) 5.3 Appellant no 2 claims that CWGOC had withheld payments due to the consortium for execution of the overlays contract. The consortium had accordingly invoked the arbitration clause in the contract and had filed its statement of claim before the Arbitral Tribunal. Deepali Design had filed an application before the Arbitral Tribunal for impleadment as co-claimant. The ITAs No.518 & 412/Del/2022 8 Arbitral Tribunal had vide order dated 3 December 2015 directed CWGOC, inter alia, to release payments to the consortium. 6. Ld. Sr. Counsel has submitted that notwithstanding changes in the arrangement between the parties inter se vide the addendum dated 01.06.2010 (here in after refered as ‘addendum’) Deepali Designs was and continued to be member of the consortium and thus has to be regarded as member of the AOP for the following reasons: 1. The three parties had formed the consortium as an unincorporated JV to jointly bid and execute (if awarded) the overlays contract for the GWG; 2. The bid was submitted in the name of the consortium; 3. The contract was awarded to the consortium; 4. The consortium was liable for due and timely execution of the contract with each member being jointly and severally liable to the contractee; 5. In the event of any loss caused to the consortium on account of negligence / unsatisfactory performance of the scope of work assigned to a particular member, the defaulting member was obliged to indemnify other members of the consortium for the loss occasioned to the consortium on account of default / unsatisfactory performance of the defaulting member. ITAs No.518 & 412/Del/2022 9 7. It is submitted for appellant no 1 that that there was no change in the overall contractual arrangement of the consortium with CWGOC or between the members of the consortium, inter se. It was not that Deepali Designs was relieved from its obligations under the original agreement. In that view of the matter, Deepali Designs continued to be a member of the AOP, despite the changes brought about in the inter se financial arrangement between the members of the consortium. 8. Ld. Sr Counsel also submitted that in so far as the conduct of the affairs of the consortium is concerned, the same was conducted by the board of the JV, constituted as per Article 9.1(b)(a) of the agreement. He pointed out that Mr. Vinay Mittal, Director of Deepali Designs, was on the board of the JV and was not removed through the Addendum. Para 9.1(b)(a) of the agreement specifically stated that Deepali's representatives would not be removed from the board without Deepali's consent as outlined in Para 3.7 of the Addendum. 9. Ld. Sr. Counsel further submitted that the affairs of the consortium were conducted with joint involvement of all the members. PHK was authorised by the members of the consortium to be the lead partner on the behalf of the members in relation to performance / obligations under the Agreement for which he relied Para 2.4 of the Addendum and which being relevant is reproduced as under: ITAs No.518 & 412/Del/2022 10 “PHK shall have full and sole authority to: (1) Manage all aspects of the JV, including but not limited to negotiations with CWGOC Delhi 2010. Deepali hereby agrees to give exclusive right to the Common Representative to deal with the CWGOC Delhi 2010 in all matters relating to the entire project and to sign all papers, documents, etc under its own signatures on its behalf. PHK agrees to indemnify and hold good Deepali against all losses, actions, damages etc. that may arise through any gross negligence or willful misconduct by PHK. The Common Representative shall share with Deepali all details including all communications, discussions etc held with CWGOC Delhi or anybody else in relation to the work assigned to Deepali under this agreement. (2) Manage all financial matters of the JV, including opening, operating and closing of JV's bank account. Deepali shall procure to expedite the opening of the bank accounts for the JV but without prejudice to PHK or PEMTs right to do the same. Deepali hereby gives exclusive rights to PHK to operate the bank accounts of the Consortium under the signatures of its authorized representatives. PHK, however, agrees to indemnify and hold good Deepali against all losses, actions, damages etc. that may arise due to willful misconduct in relation to the said bank accounts of the Consortium by PHK. (3) It is agreed that all the statutory tax obligations of the JV in relation to the Project, including but not limited to deduction of taxes, maintenance of records, effecting payment of taxes, filing of returns, etc. shall be sole responsibility of PHK and PEMI, subject to Deepali providing any and all tax receipts, records, returns and the like requested by PHK and PEMI, relating to the works assigned to Deepali. (4) All amendments and deletions to the Earlier Agreement shall follow the above spirit and intent.” 10. On behalf of appellant no 2 it is also submitted that with regard to invoking arbitration proceedings against CWGOC for non-payment of amounts withheld, M/s Deepali Designs had also filed a reply on behalf of the appellant ITAs No.518 & 412/Del/2022 11 during the course of Arbitration proceedings and Mr Vinay Mittal, director of Deepali Designs had written a letter dated 11th July 2011 to the executives of PICO Hong Kong Limited, and PICO Event Marketing (India) Private Limited, stating that arbitration cannot be initiated by the appellant and would necessarily have to involve Deepali Designs as a party. Further, during the course of arbitral proceedings, Deepali Designs had filed an application for impleadment as co- claimant along with permission to file statement of claim pertaining to the claims of Deepali Designs. Mr Vinay Mittal, director of Deepali Designs, had also furnished an affidavit confirming that the contents of the application are true and correct. Thus it is submitted that it is evident that Deepali Designs has actively sought to participate in the arbitral proceedings as a co-claimant and has not denied being a member of the AOP in the arbitral proceedings. 11. On the other hand the case of Deepali Designs as Appellant not 1 is that Deepali Designs is unrelated and unaffiliated to Pico Hong Kong and Pico India. There are (or was) no commonality in the ownership or the directorship of Deepali Designs with these companies. Further, other than bidding for the contracts, Deepali Designs has never worked with Pico Hong Kong and Pico India or their affiliates. Appellant no 1 admits that CWGOC decided to adopt a cluster-wise procurement on turnkey basis and accordingly invited expression of interest publically on 05.12.2009 for appointment of overlays providers on turnkey rental basis for supply, installation, testing, commissioning, operation, ITAs No.518 & 412/Del/2022 12 maintenance, de-commission and removal of overlays for seven clusters. At this stage, Deepali Designs, Pico Hong Kong and Pico India entered into an agreement dated 19.12.2009 and formed a consortium with the trade name ‘Pico Deepali Overlays Consortium’ to bid for the overlays tender. 12. Deepali Designs admits that the salient features of the agreement are: (a) Parties shall incorporate a company and the company shall enter into the final contract with CWGOC; (b) The company will fulfill the contract by means of subcontracting the work under the contract to the parties or third parties as appropriate; (c) After all the contracts have been fulfilled, the company will be liquidated and its remaining assets, if any, will be distributed to the parties in proportion to their shareholding; (d) The participation percentage of the party were the following: Pico Hong Kong (lead party) 60%; Pico India 20%; and DEEPALI DESIGNS 20%. (e) Parties agreed to a commonality of control and management in the management of the company. 13. Ld. Counsel of Deepali Designs has submitted that Consortium’s bid was accepted only for cluster I & VI on the basis of the revised prices and at this stage at the end of March 2010, disputes and differences arose between Deepali ITAs No.518 & 412/Del/2022 13 Designs on the one side, and Pico Hong Kong and Pico India on the other side. The differences pertained to, among other things, furnishing of corporate guarantee, performance bank guarantee, and management of and capital contribution for the consortium. Accordingly in the first week of May 2010, Deepali Designs, Pico Hong Kong and Pico India modified the legal relationship that was agreed to be created vide the agreement dated 19.12.2009. The parties then began negotiating the terms and conditions of their new legal relationship which would be acted upon by the parties to execute the works and services for CWGOC. On account of the above, Deepali Designs, Pico Hong Kong and Pico India entered into an agreement dated 01.06.2010 by way of an addendum to the agreement dated 19.12.2009. 14. The case of appellant no 1 is that the parties thus modified the legal relationship that was agreed to be created vide the agreement dated 19.12.2009 and created a new legal relationship. It was this new legal relationship that was acted upon by Deepali Designs, Pico Hong Kong and Pico India in executing the works and services for CWGOC. Further, it is this agreement dated 01.06.2010 that constituted the income-generating activity for the respective parties. 15. As per the appellant no. 1 the principal features of the new and altered legal relationship were as follows: ITAs No.518 & 412/Del/2022 14 (a) The scope of work (approximately Rs.209 crores) awarded by CWGOC by way of a letter of intent was divided between Deepali Designs on the one hand, and the Pico Hong Kong and Pico India on the other hand. The scope of work of Deepali Designs was specified in Appendix 2 of the agreement, and the scope of work of Pico Hong Kong and Pico India was specified in Appendix 3 of the agreement as per Clause 2.1 of addendum. (b) The scope of work of Deepali Designs specified in Appendix 2 of the agreement consisted of items and services 14.01 to 14.42 from the scope of work and quantities under the bid documents. These mechanical and electrical items and services pertained solely and exclusively to the Opening Ceremony and Closing Ceremony of the Commonwealth Games 2010, Delhi falling under Cluster I, which required local supervision and expertise and could only be done by Deepali Designs as opposed to Pico Hong Kong or Pico India. All other works and services under Cluster I & VI fell within the scope of work of Pico Hong Kong and Pico India. (c) Deepali Designs was responsible for independently executing its scope of work. Accordingly, Deepali Designs was to earn profit (or loss) based on the performance of the contract falling within its scope of work. Men and materials used for any area of work were under the risk and control of the respective members. There was no ITAs No.518 & 412/Del/2022 15 commonality of control and management. Deepali Designs was divested of control and management. Ld. Counsel of appellant no. 1 relied Clause 2.1 and 2.2 (3) of the addendum for the same. (d) As per Clause 2.2 (2), Pico Hong Kong shall provide CWGOC with the requisite guarantees. On the other hand, Deepali Designs shall deliver in favour of Pico Hong Kong a corporate guarantee and personal guarantee guaranteeing its separate scope of work. (e) Deepali Designs was under an obligation to pay 23% of its receivable from its scope of work to Pico Hong Kong on account of the fact that Deepali had walked out of the earlier agreement. Ld. Counsel of appellant no. 1 relied Clause 2.1 (3) of the addendum for the same. (f) The unincorporated consortium with a trade name, was under the complete control and management of Pico Hong Kong and same had full and sole authority over the consortium in all respects. Ld. Counsel for appellant no. 1 relied Clause 2.4 of the addendum for the same. (g) CWGOC was to make payments in the bank account in the name of consortium for administrative convenience. Pico Hong Kong controlled the bank account and was under the following obligation as per Clause 2.3 and 3.3: ITAs No.518 & 412/Del/2022 16 “The invoiced amount shall be paid to the relevant JV member by the JV after each respective payment by Delhi 2010 and within ten (10) days after the aforementioned payment is effected by Delhi 2010 and deposited into the JV Bank Account.” (h) All statutory tax obligations of the consortium in relation to the project including but not limited to deduction of taxes, maintenance of records, effecting payment of taxes, filing of returns, tax registrations etc. was the sole responsibility Pico Hong Kong and Pico India, subject to Deepali Designs providing any and all tax receipts, records, returns and the like requested by Pico Hong Kong and Pico India, relating to the works assigned to Deepali Designs. Thus Deepali Designs had no role or involvement in obtaining tax registrations in the name of Consortium. Deepali Designs never provided its consent to Pico Hong Kong and Pico India to obtaining any tax registration in its name. (i) As per the Clause 4.1, the addendum agreement was to prevail over the earlier agreement dated 19.12.2009. (j) The work was required to be performed and payment was required to be made item-wise as stated in the bill of quantities (BOQ) which had been already divided between Deepali Designs on the one hand, and Pico Hong Kong and Pico India on the other hand. ITAs No.518 & 412/Del/2022 17 16. Further, giving background to right to file the appeal independently it is submitted for Deepali Designs that it became aware of the assessment for AY 2011-12 on ‘PICO Deepali Overlays Consortium’ through pleadings that were filed by CWGOC in the Delhi High Court under Section 37 of the Arbitration and Conciliation Act, 1996. On becoming aware, Deepali Designs inspected the records and came to know that the matter is pending before the CIT(A). On coming to know of the CIT(A) order dated 23.12.2016 for AY 2011-12, Deepali Designs earlier filed an appeal before the this Tribunal by taking a specific ground of appeal that Deepali Designs is not a member of the alleged AOP. In Form No. 36, Deepali Designs described itself as an alleged member of the AOP M/s Pico Deepali Overlays Consortium. A specific ground of appeal was taken that “That on the facts and circumstances of the case and in the Law the assessment as framed under the status of an Association of Persons (AOP) with Deepali Designs & Exhibits Pvt, Ltd. as an alleged member of AOP is bad in law since Deepali Designs & Exhibits Pvt. Ltd was functioning in the capacity of an independent contractor and not as an alleged member of AOP.” Accordingly, the order dated 03.01,2018 by the Tribunal was passed and a remand has now been made by the AO. 17. Thus the claim of appellant no 1 is that (i) PDOC is not an ‘association of persons’ consisting of Deepali Designs, Pico Hong Kong and Pico India; (ii) Deepali Designs is not a member of any association of persons; (iii) the receipts ITAs No.518 & 412/Del/2022 18 and receivables from CWGOC with respect to Deepali Designs’s scope of work is solely and exclusively the income of Deepali Designs, and that Deepali Designs has proprietary interests and overriding titles over such receipts and receivables. Deepali Designs has worked independently for execution of its scope of work with its own resources and man force. 18. The ld. counsel appearing for Appellant No.1 has heavily contested the observations made by the AO holding Appellant No.1 to be a member of AOP, in view of the Circular No.07/2016 dated 7 th March, 2016 issued by the CBDT giving clarification regarding taxability of consortium members. In this context, it will be appropriate to reproduce below the relevant part in para 9 to 9.23 of the assessment order dated 27.01.2022, wherein relevant clauses of the Circular No 07/2016 are also mentioned; “9. In compliance to the directions of Hon'ble ITAT, Deepali Design & Exhibits Pvt.Ltd. has been treated as member of AOP vide order sheet entry dated 04.04.2019 by the then AO, placed on records and for the sake of convenience, the same is reproduced as under:-. “Sh. Gulshan Gaba, AR appeared. It is brought to the knowledge of the AR that the order dated 19.09.2018 of Hon'ble ITAT has not been accepted by the Department and accordingly with the approval of the competent authority, further appeal before Hon'ble Delhi High Court has been filed which Is pending. 2. However, without prejudice to the outcome of the Departmental Appeal before Hon’ble Delhi High Court, the matter of set-aside proceedings was taken up to give effect to the order of Hon'ble Tribunal. Accordingly, M/s Deepali Design and Exhibits Pvt. Ltd. was requested vide this letter F. No. 3516 dated 11.01.2019 ITAs No.518 & 412/Del/2022 19 to furnish necessary documents/evidence and explanation in respect of following points/queries:- a) Copy of relevant agreement when M/s Deepali Design and Exhibits Pvt. Ltd. became member of the AOP of M/s Pico Deepali Overlays Consortium and name of the authorities/Govt Agencies with whom copy of the said agreement was filed/registered with necessary documentary evidence. b) Copy of relevant agreement when M/s Deepali Designs and Exhibits Pvt Ltd. ceased to be member of the AOP namely Pico Deepali Overlays Consortium and name of the authorities/Govt Agencies with whom copy of the said agreement was filed/registered with necessary documentary evidence. c) Copy of original form No, 49A filed with enclosures, if any for any correction of PAN with enclosures where M/s Deepali Designs & Exhibits Pvt. Ltd has been shown as member of AOP. d) Copy of form No. 49A filed with enclosures, if any for any correction in PAN data at any subsequent stage, with respect to change in membership. e) Please provide all the supporting documents/evidence in respect of the (a) to (d) above. f) Necessary details with head wise and month wise bifurcation and amount in respect of work executed by Deepali Design and Exhibits Pvt. Ltd. as Member of M/s Pico Deepali Overlays Consortium(AOP) during the period when M/s Deepali Design & Exhibits Pvt. Ltd. was member of such AOP. g) Necessary details with head wise & period wise bifurcation and amount in respect of claims filed by M/s Deepali Design & Exhibits Pvt. Ltd. before Hon'ble Delhi High Court seeking decree in its favour out of arbitration amount awarded to M/s Pico Deepali Overlays Consortium by the arbitration tribunal and upheld by Hon'ble Supreme Court. h) Please refer to the various addition made on various issues in the assessment order for A.Y. 2011-12 in the case of M/s Pico Deepali Overlays Consortium in respect of addition made us 69A & disallowances u/s 37 of the Act and further upheld by Ld. CIT(A)]. ITAs No.518 & 412/Del/2022 20 You are hereby allowed an opportunity to explain as to why these additions be not made again. Your reply/explanation should be supported by corroborative documents/evidences failing which it may be presumed, that you have no explanation to offer or the explanation offered by you are not satisfactory". 3. The reply/written submissions and the documents, filed by M/s Deepali Design & Exhibits Pvt. Ltd. On various dates in response, have been considered together with following documents which are considered relevant on this issue:- (i) Written submissions dated 09.10.2012 filed during the course of assessment proceedings. (ii) written submissions dated 03.12.2012filed during the course of assessment proceedings (iii) written submissions dated 19.12.2012 filed during the course of assessment proceedings (iv) agreement dated 19.12.2009 relaling to formation of M/s Pico Deepali Overlays Consortium, (v) addendum agreement dated 01.06.2010, (vi) Copy of PAN application dated 07.01.2010, signed by Sh. Vinay Mital, Director of Deepali Design & Exhibits Pvt Ltd. (vii) Application of Form No. 49A dated. 19.07.2011 for correction of address PAN database. (viii) Copy of Turnkey agreement no. OCCWG/OVL/100-Pico/2010 dated 02.06.2010 between Organising Committee of CWG and M/s Pico Deepali Overlays Consortium which has been signed by Mr. Ang Swee Meng, Director and Mr. Vinay Mittal [Managing Director of Deepali Design & Exhibits Pvt Ltd.] on behalf of Pico Deepali Overlays Consortium. The agreement also bears the Signature of two witnesses. (ix) Order dated 14.01.2019 of Hon'ble Delhi High Court in OMP(ENF.)[COMM.)3/2016 in the context of IA No.16378/2018 and 16379/2018 moved by M/s Deepali Designs Exhibits Pvt. Ltd. (x) Grounds of appeal taken before Ld. CIT(A)-27, New Delhi (xi) Other relevant documents. 4. After careful consideration of all relevant documents, replies/ submissions filed by the assessee (M/s Pico Deepali Overlays Consortium as AOP) and M/s Deepali Design & Exhibits Pvt. Ltd., it is established that M/s Deepali Design and Exhibits Pvt Ltd was a member of M/s Pico Deepali Overlays Consortium (AOP) during the ITAs No.518 & 412/Del/2022 21 year and therefore M/s Deepali is held to be a member of M/s Pico Deepali accordingly.” 9.1. Further reference is invited to the Point No. 3 of the circular No. 07/2016 vide F. No.225/2/2016/ITA. II issued by CBDT on 07th of March, 2016 which states as under: “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 consortium arrangement for executing EPC/Turnkey contracts which has the following attributes may not be treated as an AOP: a. each member is independently responsible for executing its part of work through its own resources and also bears the risk of its scope of work i.e. there is a clear demarcation in the work and costs between the consortium members and each 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" 9.2. On perusal of the Addendum to the Consortium Agreement dated 01.06.2010 with the Circular No. 07/2016 of CBDT. 9.2.1. Point no. 3 of sub clause 2.1 of clause 2 of the Addendum to the Consortium Agreement dated 01.06.2010, states "Amounts received by the JV on contracts with the CWGOC Delhi 2010 in respect of work performed by Deepali, within the scope of work described in Appendix 2 (including any variations), minus 23% shall be paid to Deepali and the remainder shall belong to PHK”. Whereas, Point No. 3(b) of Circular No. 07/2016 dated the 7th of March, 2016, says that “each member earns profit or incurs losses, based on performance of the contract falling strictly within its scope ITAs No.518 & 412/Del/2022 22 of work. However, consortium members may share contract price at gross level only to facilitate convenience in billing". Hence, the said point in addendum does not show that the sharing of the contract price is only to facilitate convenience in billing and does not fulfill the condition specified above. 9.2.2. Similarly, Point no. 6 of sub clause 2.1 of clause 2 of the Addendum to the Consortium Agreement dated 01.06.2010, states "The parties intend that each member shall carry out its own works peacefully, subject to the supervision and project management of Deepali by the common representative and his staff to ensure that the entire scope of works is delivered in good order to the CWGOC Delhi 2010". Whereas, Point No. 3(d) of the aforesaid circular, says that "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". Hence, the said point clearly shows that the control and management of the consortium is unified and also does not fulfill this condition. 9.2.3. in addition to the above, Point no. 5 of sub clause 2.1 of clause 2 of the Addendum to the Consortium Agreement dated 01.06.2010, states "Deepali shall expeditiously help to obtain all the necessary registrations of the JV with all relevant authorities for tax and all other purposes, but without prejudice to PHK or PEMI’s right to do the same", is not in accordance with Point No. 3(c) of the aforesaid circular, as per this point, the men and materials used for the area of work are, to some extent, in control of Other consortium members also.” 19. The ld. counsel for the assessee has argued contesting the aforesaid observations of the ld. AO on the basis of the following written submissions:- “WRITTEN SUBMISSIONS OF THE APPELLANT ON THE ISSUE OF AOP - GROUNDS 1 AND 2 1. In the impugned assessment order, AO’s reasoning is in para 9.2 (Vol X at page 19). The reasoning is contrary to facts and law. ITAs No.518 & 412/Del/2022 23 Serial No. AO’s reasoning Error committed by the AO i. Point No. 3(b) of the CDBT Circular No. 7 of 2016 (CBDT Circular) is not satisfied. For this AO has relied on clause 2.1(3) of the Addendum Agreement (i) Clause 2.1 (3) is not sharing of contract price. Parties amended the consortium agreement such that Deepali Designs and Exhibits Private Limited (Deepali) was no longer entitled to any profits of the consortium; instead Deepali would earn profit based on performance of the contract falling strictly within its scope of work via. Appendix 2 (Clause 2.1 and 2.2. of the Addendum Agreement). For such an amendment of the legal relationship, Deepali agreed to forego 23% of its gross revenue to Pico Hong Kong Limited (Pico Hong Kong), which is expense of Deepali from its gross receipts and the exclusive income of Pico Hong Kong. There is no sharing of profits. (ii) Similarly, Deepali was not entitled to any profit from the scope of work of Pico Hong Kong and Pico Event Marketing India Pvt. Ltd. specified in Appendix III to the Addendum Agreement. (iii)AO has ignored clauses 1; 2.1 (1), (2) and (6) read with Annexure II; 2.2; 2.3; 2.4; 3.2 and 3.3 of the addendum agreement (Vol VI at 1508 Paperbook) ivi (iv)AO has also ignored deletion of clauses 4.1 and clause 7 of the Consortium Agreement (Vol VI at 1457 Paperbook) ITAs No.518 & 412/Del/2022 24 ii. Point No. 3(d) of the circular is not satisfied. For this AO has relied on clause 2.1 (6) of the Addendum Agreement (i) Clause 2.1(6), to the contrary, evidences that the common representative was only for inter-se coordination. Else each member was to carry its own work independently and separately. And this is also what has happened in reality. (ii) AO has ignored clauses 2.1 (1), 2.2(3); 2.4; 3.2 of the addendum agreement (Vol VI at 1508 Paperbook). (iii) AO has ignored clause 29 of the consortium agreement. (Vol VI at 1472 Paperbook) (iv) The office of the consortium was under the complete control and management of Pico Hong Kong (clause 3 of the consortium agreement) (Vol VI at 1457 Paperbook). Even the present address is that of Pico Hong Kong’s accountant. iii. Point No. 3(c) of the circular is not satisfied. For this AO has relied on clause 2.1 (5) of the Addendum Agreement (i) Clause 2.1 (5) in no manner supports the case of the revenue; the said clauses evidences co¬ordination for administrative convenience. (ii) AO has ignored clauses 1, 2.1 (1) to (3); 2.4; 3.2 of the addendum agreement (Vol VI at 1508 Paperbook). (iii) AO has also ignored deletion of clauses 4.1 and clause 10, 11, 13.1 and 13.2, 14.4 to 14.6, 15 of the Consortium Agreement (Vol VI at 1455 Paperbook) ITAs No.518 & 412/Del/2022 25 To the contrary, the other two requirements mentioned in the CBDT Circular for a consortium to not be an AOP also stands fulfilled: Serial No. Paragraph number of the CBDT Circular Clauses of the contract i. Para 3 a. Clauses 2.1 (1) and (2) read with the Annexure II of the addendum agreement (Vol VI at 1507) and deletion of clauses 4.1 and clause 7 of the Consortium Agreement (Vol VI at 1455 Paperbook) ii. Para 5 (i) Deepali is not an associated enterprise of the Pico companies. The Turnkey contract was also separately executed by Deepali. (Vol I page 98 Paperbook) 3. During the first round of ITAT appellate proceedings, Hon’ble ITAT had directed vide order dated 03.01.2018 a remand and directed the AO to “Now in order to determine, whether the assessee is a member of AOP or not, the AO is directed to submit a remand report categorically giving the finding as to whether the assessee is a member of AOP or not and if he is a member, then what is the determinate share of the assessee in the AOP." -Page 1108 at Vol IV Paperbook. Even in the impugned order, AO has failed to specify the determinate share of Deepali. This is not accidental since Deepali has no share in the profits or loss of the AOP. The return of income of PDOC is at page 2095 at Volume VIII Paperbook wherein Deepali’s share is zero per cent. 4. AO has completely ignored the material fact that revenue from Deepali’s scope of work has been brought to tax in the hands of Deepali in a regular assessment and Deepali has paid the income tax on the same. - page 2172 of ITAs No.518 & 412/Del/2022 26 Vol VIII Paperbook. Deepali has been taxed at the maximum marginal rate and there is therefore no loss to the revenue. 5. AO completely ignored the material facts contained in submissions dated 03.04.2019. - page 266 of Vol I Paperbook. Briefly stated, the facts are: (i) In the return of income filed by Deepali for AY 2011-12 on 25.10.2011, Deepali has not shown any investments or capital balance of PDOC in Schedule E. (ii) Similarly, PDOC has also not shown capital account of Deepali at schedule no. 5 i.e., ‘Capital Account’ of the members of PDOC in its audited financial statement for FY 2010-11. The capital account consists solely of Pico Hong Kong who is stated to 100% share in the consortium profits. - page 2140 of Vol VIII Paperbook. Further, Deepali is not a related party of Pico Hong Kong as per the audited financial statement of PDOC. — page 2146 of Vol VIII PB.” 20. The Ld. DR has filed written submission contending that the Common Wealth Games Organization Committee (CWGOC) has awarded the contract to the consortium M/s Pico Deepali Overlays Consortium on 02.06.2010 , which was based on the joint bid made by the consortium for getting contracts. The Turnkey contract clearly mentioned that all liabilities /rights are of consortium only. Further all the payments will be made to the common bank account of the consortium. Thus this contract was awarded based on the bid submitted by the consortium / AOP of which DDEPL was a member and accordingly now for performance of all works related to such bid made by consortium /AOP, the asseessee cannot claim that they are no longer a part of the AOP. ITAs No.518 & 412/Del/2022 27 20.1 He relied the addendum agreement to the consortium agreement and submitted that from same it is seen that there are several conditions which proves that the M/s DDEPL continues to be a part of AOP only. Also facts of the instant case are different from the conditions mentioned in Circular NO. 7/2016 issued by the CBDT with regard to attributes in EPC/Turnkey projects which makes the consortium partners, not a part of AOP. Ld. DR pointed out how Circular no. 7/2016 cannot benefit the appellant no. 1 and pointed out following aspects in context to the circular and clauses of the agreements as follows:- (i) The condition of para 2(4) talks of distribution of new contracts awarded by CWGOC. Being pertinent the same is reproduced below”- 2(4) In the event there are any new contracts awarded by CWGOC Delhi 2010 to the Consortium, the works in the new contract equivalent to 20% in value minus 23% to be paid to PHK shall be awarded to Deepali only after this has been mutually agreed by the parties, having regard to the capacity and capability of the respective Members to fulfill the scope of the new contracts. The net amount after deduction of the 23% is inclusive of the 10.3%) service tax but excludes any tax deducted at source. Deepali shall provide PHK on demand any tax certified reasonably required by PHK (including but ort limited to anything related to the 10.3%o service tax) 20.2 It was submitted that from the perusal of the above, it is clearly seen that Deepali Designs continues to be entitled for any new contract equivalent to 20% in value awarded by CWGOC. Thus even for speculation, if the contention of assessee is accepted that they are no longer a part of AOP then it is really baffling to understand why the consortium/AOP will award 20% of the future contracts to Deepali Designs. This condition for getting a share in future ITAs No.518 & 412/Del/2022 28 contracts in itself proves that M/s DDEPL continues to be a part of the consortium/AOP. This shows there continues to be unified and common management for controlling the affairs of the AOP and against the condition no. 3d of circular no. 7/2016. (ii) Para 2(6) of the addendum talks of supervision of the contracts. Being pertinent the same is reproduced below:- 2(6) The parties intend that each Member shall carry out its own works peacefully, subject to the supervision and project management of Deepali by the Common Representative and his staff to ensure that the entire scope of works is delivered in good order to the CWGOC Delhi 2010. 20.3 Ld. DR submitted that the above para clearly specifies that M/s Deepali is responsible for supervising and managing the entire project and their role of supervision and managing the work is not confined to the work specifically allotted by the AOP/consortium m/s DDEPL. This again shows that there is unified and common management for controlling and managing the affairs/work awarded to entire consortium and against the condition as mentioned no. 3c & 3d of circular no. 7/2016. (iii) para 2 [5], which is reproduced below, talks of obtaining necessary registration for the JV. (5) Deepali shall expeditiously help to obtain all necessary registrations of the JV with all relevant authorities of tax and all other purposes, but without prejudice to PHK or PEMI's right to do the same. The JV shall pay all legally required registration fees. 20.4 Ld. DR submitted that the above para also proves the facts that all the consortium members were working together and not responsible only for their ITAs No.518 & 412/Del/2022 29 specified work. The addendum clearly says that M/s Deepali is responsible for obtaining all necessary register for the entire work /contracts obtained from CWGOC and their responsibility does not end with their individual work. This also proves that the fact that common men and materials are used for supervising the entire work and the assessee contravenes the condition stipulated in para 3c of the circular. (iv) para 2(3) of the addendum which is reproduced below, talks of sharing of profits. [3] Amounts received by the JV on contracts with the CWGOC Delhi 2010 in respect of work performed by Deepali, within the scope of work described in Appendix 2 (including any variations), minus 23% shall be paid to Deepali and the remainder shall belong to PHK. The net amount after deduction of the 23%is inclusive of the 10.3% service tax but excludes any tax deducted at source. Deepali shall provide PHK on demand any tax certificates reasonably required by PHK (including but not limited to anything related to the 10.3% Service Tax). 20.5 In context to aforesaid clause of the agreement Ld. DR submitted that, though the above condition gives a specified share of M/s DDEPL but it also makes responsible for providing tax certificates required by M/s Pico Hongkong. This condition cannot be there only to facilitate convenience in billing , as this also shows that all the money from the CWGOC is received only by consortium/AOP and then further distribution takes place and close coordination between members of AOP. The assessee does not fulfill the condition as mentioned in para 3a of the circular. ITAs No.518 & 412/Del/2022 30 20.6 Ld. DR submitted that also Deepali Designs says that they no longer remain part of AOP because they have 0 % share as per clause 2.1 of addendum agreement. However clause 2.1 has to be read in conjunction with clause 2.3 & 2.4 wherein the share of profit is clearly mentioned. Further clause 2.1 talks of residual profit and as M/s Pico Hong Kong was made responsible for common representation, accordingly this residual profit clause doesn't in any way becomes the determining factor for treating DDEPL as a member of AOP or not. (v) M/s DDEPL continues to be a part of AOP and in fact the following amendment by addendum makes it amply clear that Deepali's representative will always remain on the board of the consortium/DOP. The article 9.1b was added to the addendum agreement which is reproduced below:- 3.7Article 9.1(b): (a) Add: "Deepali’s representative on the Board may not be removed from the Board without Deepali's consent." To the end of the first sentence, which begins with "The Board of the JV consists of:" 20.7 As the board of AOP/consortium is responsible for taking all decisions related to the works awarded by the CWGOC, accordingly, Ld. DR submitted that as Deepali's representative continues to be on board even after the addendum agreement, this itself proves the fact that M/s DDEPL was completely involved in managing and overseeing the complete work/contract accordingly the constitution of the board itself proves that there was a common control, supervision and management of the entire work/contract. This concept ITAs No.518 & 412/Del/2022 31 of common Board of managing the affairs of the work of consortium cannot be called only to facilitate inter-se coordination and shows unified approach /management for controlling the entire work which is clearly contravenes condition 3d of the circular. (vi) The assessee has further stated that the turnkey contract was also separately executed by Deepali. This claim clearly contradicts the conditions of turnkey agreement awarded by CWGOC which clearly makes the consortium responsible for execution of all projects awarded to consortium and it doesn’t talk of any individual execution and subsequently responsible for performance of such part contract. 20.8. Ld. Dr pointed out that Deepali Designs has further stated that they have filed their ROI for A.Y. 2011-12 and disclosed its receipts from its scope of work of the contracts received as part of consortium from Common Wealth Games Organising Committee. The assessee has also stated that assessment order in the case of Deepali Designs was also passed on 21.03.2013 and the entire receivable/receipts from its scope of work were brought to tax. It is submitted that as the assessee i.e. Deepali Designs is part of the consortium /AOP accordingly its receipts should be charged in the hands of the AOP only and not individually. Ld. DR has relied the Hon'ble Supreme Court judgement in the case of ITO vs. Ch. Atchaiah 84 taxmann 630 (Supreme Court) submitted that wherein it is clearly held that for income of the AOP, only AOP has to be taxed and merely because some member of AOP has shown the income individually and also been taxed individually, this cannot prevent the AO to tax AOP with respect to that income which is part of AOP only. It is also ITAs No.518 & 412/Del/2022 32 submitted that in the financials/ ROI filed by the AOP, it has shown total receipts as well as total expenses from the contracts receipts from CWG and it also contains all expenses incurred on behalf of the AOP even by the individual members also. 20.9. Ld. DR has submitted that from the perusal of the above, it is absolutely clear that Deepali Designs continues to be a part of AOP and even after signing of addendum to the agreement, they were fully responsible and actively involved in managing and controlling the affairs of the consortium/AOP with regard to all the works awarded by CWGOC. The reliance of the assessee on the circular no. 7/2016 is also misplaced as discussed in detail in above noted paras. 21. Now as with regard to the first issue framed by us, it appeared that the two appellants or the Revenue were not in conflict and there was a consensus amongst them that two appeals are maintainable. In this context, the ld. counsel for the Appellant No.1 had relied on the following judgements where in the rights of persons affected by any adverse order of assessing officer giving rise to tax liability has been found to be eligible to file an appeal and that multiple appeals are maintainable in given set of circumstances:- (i) Gokuldas v Kikabhai Abdulali and Ors. [1958] 33 1TR 94 (Bom); (ii) Maersk BV v DDEIT [2014] 264 CTR 26 (Bom); (iii) CIT v Income Tax Appellate Tribunal and Anr. [1975] 99 ITR 552 (Delhi HC); (iv) CIT v Babu Ram Chandra Bhan [1969] 74 ITR 143 (All); and ITAs No.518 & 412/Del/2022 33 (v) CIT v N Ch. R Row & Co [1983] 144 ITR 557 (Cal) 21.1 The ld. Sr. Counsel appearing for Appellant No.2 only stressed on the fact that in the appeal of the Appellant No.1, the Appellant No.2 is also necessary party. 22. After taking into consideration the facts of the case and law cited, we are satisfied that as the Appellant No.1 is now under a liability under the Act for the tax payment arising out of the final assessment order thus being aggrieved by the same has a right to file appeal u/s 253(1) of the Act under its own status and capacity to challenge the assessment as a whole and its own liability as separate entity. Thus the two appeals are maintainable. 23. Now coming to second issue, the Bench has given a thoughtful consideration to all the aspects and what we finds most material is that in the addendum dated 01.06.2010, there is a specific clause No.2.4 under the heading, ‘Operation of JV’ and it’s sub-clause (3) provides that; “It is agreed that all the statutory tax obligations of the JV in relation to the project, including but not limited to deduction of taxes, maintenance of records, effecting payment of taxes, filing of returns, etc., shall be the sole responsibility of the PHK and PEMI subject to Dipali providing any and all tax receipts, records, returns and the like requested by PHK and PEMI relating to the work assigned to Dipali.” ITAs No.518 & 412/Del/2022 34 24. We here in these appeals, at this stage, are concerned with the tax liabilities of the appellant no 1 as member of AOP and not in the individual capacity and also not concerned with any other civil consequences that flow out of the agreement dated 09.12.2008 or the addendum dated 01.06.2010. This sub-clause (3) when read with sub-clause (2) which provides PHK shall “Manage all financial matters of the JV”, makes it apparent that inter se JV members there was an obligation upon PHK and PEMI alone to fulfill the statutory liability of tax obligations and compliances in relation to the project. Now such inter se arrangement does not fetter the Assessing officer’s power to determine the status of assessee as AOP. The Assessing officer was supposed to make assessment in accordance with law. The attempt of the parties by such an agreement of allowing the tax liability to be put upon an individual member of the joint venture would not bind the Revenue to limit its powers under the Act towards PHK and PEMI only while leaving Dipali Designs distanced away from the assessment. 25. Then these words in sub-clause (3) “JV in relation to the project” are of vital significance. The word ‘JV’ and ‘project’ here as per preamble and clauses1.2 and 1.4 of original agreement means as follows; “1.2 Joint Venture or JV means the joint venture formed among the parties which will be established on the basis of the terms of this agreement.” ITAs No.518 & 412/Del/2022 35 “ Project means the total of the operations, works, supplies, constructions and services required for the full and in due time completion of the object of the Contracts as described in details therein as well as any other addition, modification or amendment requested by Delhi 2010” 26. This sub-clause (3) firmly establishes that the addendum stipulated that tax liability of the consortium shall be determined for the ‘project’ as a whole. So assignment of works within the ‘project’ to the members of consortium was irrelevant as far as the statutory tax obligations were concerned. The members of consortium had agreed that when it comes to statutory tax obligations the same shall be determined on ‘project’ basis and not on the basis of works independently assigned to each member. 27 The responsibility given by appellant no. 1 to PHK and PEMI to “Manage all financial matters of the JV” and for maintenance of records, effecting payment of taxes, filing of returns, etc.,. must have been with intention that as for assessment and tax liability, consortium shall be a unit and assessed as a unit, which can only be by way of the consortium being treated as AOP and all the members of consortium being member of the AOP. Thus this arrangement is completely out of scope of clause 3(d) of the Circular no 7/2016 of which appellant seeks benefit. There is unified control and management of the consortium as far as the statutory tax liabilities is concerned. ITAs No.518 & 412/Del/2022 36 28. Now if there is any tax liability created on the appellant no. 1 over and above the tax liability it was supposed to bear on the basis of scope of work falling in the hands of appellant no.1 then that may be a dispute inter se the members of consortium as AOP for which there may be remedy under civil law but assessing officer cannot be faulted to have competed the assessment on the consortium as AOP and appellant no. 1 as its member and caters to the argument of Ld. Counsel of appellant no. 1 that 4. AO has completely ignored the material fact that revenue from Deepali’s scope of work has been brought to tax in the hands of Deepali in a regular assessment and Deepali has paid the income tax on the same. 29. Further, there is no force in the contention of ld. Counsel for the Appellant No.1 that due to absence of right to any profits of the consortium, the Appellant No.1 cannot be deemed to be a member of the AOP. Indeed, in the return filed, the share of Appellant No.1 is shown to be 0%. Indeed in the addendum, there is division of work, but, that is only a mode of completing the ‘Project’. As far as sharing of profits is concerned Deepali Designs, who is Appellant No.1 before us, had agreed by virtue of sub-clause (3) of Clause 2 of the addendum, to forego 23% of its gross revenue to PHKL. Thus there is revenue sharing also from the works which had fallen in scope of work of Deepali Designs. Not only this but by virtue of sub-clause (4) of Clause 2 of the ITAs No.518 & 412/Del/2022 37 addendum if any new contract was to be allotted in share of Deepali Designs, again the new contract equivalent to 20% in value minus 23% were to be paid to PHK. Thus this arrangement is completely out of scope of clause 3(b) of the Circular no 7/2016 of which appellant no. 1 seeks benefit. 30. There is no force in the contention of Ld. Counsel of appellant no. 1 that this payment to PHK was merely on account of the fact that Deepali Designs had walked out of the earlier agreement. The original agreement and addendum both together lay out the terms of the JV and what addendum has done is that only the stage of the sharing of profits out of the project and the mode of calculating the profit is changed. Else PHK and Deepali Designs both are getting benefits out of the proceeds of the work assigned to Deepali Designs and that amounts to sharing profits and profits of the work assigned to Deepali Designs are not left to be exclusive to Deepali Designs. Certainly Deepali Designs is not getting any share of proceeds of the work assigned to PHK, but PHK is not disputing the existence of AOP so question of PHK not getting share of profit from Deepali Designs is not material. 31. Ld. Counsel of appellant no.1 has relied on following judgments to bring forth as to what are necessary ingredients of constituting a taxable AOP:- (i) In Re Van Oord Acz Bv, [2001] 248 ITR 399 (AAR) (ii) In Re Hyundai Rotem Co. [2010] 323 ITR 277 (AAR) (iii) Linde AG v DDIT, [2014] 365 ITR 1 (Delhi) (iv) CIT v Oriental Structural Engineers Pvt. Ltd., [2015] 374 ITR 35 (Delhi) ITAs No.518 & 412/Del/2022 38 (v) ADIT, Circle - 2(1), New Delhi v Persys Punj Llyod JV, 2016 SCC OnLine ITAT 6543 (vi) Soma TRG Joint Venture v CIT, [2017] 398 ITR 425 (J&K) (vii) ITO Ward-9(2), Ahmedabad v JMC PPPL (JV), ITA/2503/Ahd/2012 by ITAT Ahmedabad order dated 06.09.2017 (viii) PCIT v JMC PPPL (JV), Tax Appeal 393 of 2018 of Gujarat High Court dated 30.04.2018 (ix) ACIT v RNGS Consortium, ITAT, Delhi, 2018 SCC OnLine ITAT 6506 (x) ITO, Ward 2(3), Gurgaon v Kalindee Karthik JV, ITAT, New Delhi, 2018 SCC OnLine ITAT 217 (xi) ITO 12(1)(2) v L&T HCC Joint Venture, ITA 8451/Mum/2011 by ITAT Mumbai dated 06.06.2018 (xii) Backbone Projects Limited v ITO, ITAT (Ahmedabad), 2019 SCC OnLine ITAT 5781 (xiii) PCIT v Backbone Projects Limited, [2021] 124 taxmann.com 262 (SC) (xiv) G Murugesan & Brothers v CIT, [1973] 88 ITR 432 (SC) 32. It is settled by these judgments that each case has to be determined on the basis of distinctive facts. However, in none of the cases there was such specific clause about how statutory tax obligations of the ‘project’ were to be fulfilled. The sharing of profit by appellant no. 1, with PHK and to be assigned further work on mutual agreement, irrespective of assignment of scope of work defined in addendum, in the present case, makes the judgments relied distinguishable. 33. We have also taken into consideration all the relevant clauses of the original agreement and the addendum in to consideration and when we apply the idea of Consortium as Association of Persons for being treated as ‘assessee’ under the Act we find that consortium came into existence for accomplishing the ‘project’ as a whole and the participation of the consortium members in the ITAs No.518 & 412/Del/2022 39 tender process, the submission of bids, execution of contracts, nomination of consortium leader or Project Board, payments and receipts of considerations, the extent of joint and several liability accepted by the consortium members, the risks and cost of any defect or damage on the consortium, insurance in the names of consortium all indicate that there was lot of commonality of interest and mutuality of liabilities to form AOP. 34. It can be observed that although sub-clause (2) of clause 2 defining scope of work provided the assignment of work to each member as per Appendix II and Appendix III. There was scope of change in the scope of work assigned to Deepali by the mutual consent. Thus, there was not a strict distribution of work standards by CWGOC, Delhi 2010. It can be further appreciated that clause 6.1 and 6.2 of the original agreement when read with sub-clause (3) of the clause 2.2 of the addendum, the members of the consortium had agreed that the joint venture shall be jointly and severally liable against Delhi 2010 in respect to the fulfillment of the requirement of the project as well as in respect to any contractual or legal obligation of joint venture. Even after the scope of work assigned to respective they were not independently responsible for executing this part of work with regard to the risk of its scope. In this context, clause 3.2 of the addendum is relevant and worthy to be reproduced: “3.2 Article 7 : delete in its entirety and replace with “The risks and liabilities of each party” shall be as per the scope of work to be undertaken and the participation of each party as contained in the Addendum. In the event the risks and liabilities that materialize are general in nature and ITAs No.518 & 412/Del/2022 40 cannot be determined to be attached to any individual scope of work by any party, such as a general deduction by CWGOC Delhi 2010 from the payments on the main contract with the Consortium, such deduction shall be apportioned to PHK & PEMI 80%, and to Deepali 20%.” 34.1 The aforesaid Article 7, although provides for risks and liabilities of each party shall be as per scope of work to be undertaken, but, still left scope open for re-working of the liabilities in regard to general deductions of CWGOC Delhi 2010. 35. It can be further seen that clause 9 of the original agreement provide for a Board of the JV which was to be a supreme body of the JV to decide upon all the issues regarding policy and organization of the JV. It was to supervise the observance of all agreements between the JV members that regard all the operations of the JV and the project execution. This Board amongst others had powers to give guidelines for the execution of the projects and the contracts and the addendum provided that Deepali’s representative on the Board may not be removed from the Board without Deepali’s consent. This indicates that this Board had a supervisory power even with regard to scope of work falling in the share of Deepali Designs and that Deepali Designs had a privilege to stay on the Board on its own terms. That completely negates the argument that Deepali Designs had distanced itself with all the activities of the consortium except to the extent of scope of work assigned. This further shows that the control and management of the consortium was unified. ITAs No.518 & 412/Del/2022 41 35.1 It can be further appreciated that the original agreement provide that appointment of common representative of the JV which had power of general management of the project and coordination and general supervision of the quality control in the work site. The extent of powers given to the common representative further strengthens the observations of this Bench that the control and management of the consortium was unified and not merely for inter se coordination. 35.2 Further, the addendum provided by clause 3.12 for deletion and replacement of Article 11 and thereby the common representation was fully authorized to obtain insurance policies for the activities of the JV as defined by the contracts for as requested by CGWOC Delhi 2010. The Board of the JV was supposed to approve the terms and conditions of the insurance policies in advance and Deepali Designs had agreed to contribute to the JV the amount of the insurance premium paid by the JV in respect of Deepali’s scope of work. 36. Ld. Counsel for appellant no.1 had submitted that bench is required to examine the question of appellant no. 1 being part of AOP only on the reasons given by the assessing officer and not expand the scope. However, we are of considered opinion that while discussing the applicability of the in Circular NO. 7/2016 on the facts and circumstances of the case arising out of interpretation and construction of various clauses of agreement and the addendum a wholesome conclusion has to be drawn and same cannot be restricted as to how ITAs No.518 & 412/Del/2022 42 and to what extent the Ld. AO referred to various clauses of the agreement and the addendum. 37. Thus, we are of the considered view that consortium as AOP fails to fulfill the requirement of clause (a) of Clause 3, clause (b) and clause (d) of the Circular No.7 of 2016 and there is no error in the findings of the ld. AO in treating Appellant No.1 as member of the consortium and to assess the consortium as AOP. The issue no. 2 is decided against the appellant no. 1. 38. In the result, it is held that appellant no. 1 Deepali Designs Exhibits (P) Ltd.), is a member of assessee AOP, Pico Deepali Overlays Consortium for the purpose of assessment of relevant AY. The respective grounds taken in appeal no. ITAs No.518/Del/2022 arising out of issue no. 2 decided against the appellant no. 1 stand disallowed. Further, as affected party the appellant no. 1 has right to file appeal on merits of additions in its own capacity and status. So let both the appeals be fixed for final hearing on merits of grounds, by Registry in due course. Order pronounced in the open court on 22.12.2023. Sd/- Sd/- (NARENDER KUMAR BILLAIYA) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 22 nd December, 2023. dk ITAs No.518 & 412/Del/2022 43 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi