ITO, WARD- 30(1), NEW DELHI VS. TRG-JKS JOINT VENTRUE, NEW DELHI, ITA 845/DEL/2019, ITAT DELHI
In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Delhi has held that a Joint Venture (JV) cannot be separately taxed as an Association of Persons (AOP) when the contract revenue has already been declared and offered to tax by its constituent members. The case pertains to TRG-JKS Joint Venture for AY 2009–10, and the appeal filed by the Revenue was dismissed in full.
🧾 Background of the Case
TRG-JKS Joint Venture was formed by two private companies—M/s TRG Industries Pvt. Ltd. and M/s JKS Construction Pvt. Ltd.—to execute a contract awarded by the Airport Authority of India (AAI) for works at Coimbatore airport.
While the gross receipts of ₹7.45 crores were recognized by the JV, the actual execution and income recognition were done by the JV members individually in their respective books.
However, the Assessing Officer:
- Treated the JV as an independent taxable AOP,
- Estimated profit @ 8% of gross receipts (₹59.64 lakhs),
- Added mobilization advance of ₹2.34 crores as income, and
- Concluded the assessment without issuing demand notice within statutory time limit.
The CIT(A) deleted all additions both on merits and technical grounds, leading the Revenue to appeal before the ITAT.
⚖️ Key Legal Issues and ITAT’s Observations
✅ 1. Whether the JV should be taxed as an AOP?
The ITAT held no. The Tribunal affirmed that:
- The entire income was already taxed in the hands of JV members in agreed ratios.
- The CIT(A) had verified the financial statements, TDS records, and CBDT Circular No. 7/2016, which clarifies that a JV formed for executing a project shall not be treated as an AOP if profit is declared by members.
“Revenue failed to demonstrate that any conditions of CBDT Circular No. 7/2016 were violated,” the Bench noted.
✅ 2. Addition of Mobilization Advance
The AO taxed the mobilization advance of ₹2.34 crores as income for AY 2009–10. However, the Tribunal observed:
- The advance was adjusted against running bills in AY 2010–11,
- The entire receipts were already offered to tax in the next year,
- Taxing it again would lead to double taxation.
CIT(A) had verified:
- Affidavit from TRG Industries,
- Reconciliation statements,
- And running bill details.
Thus, the Tribunal held the addition was unwarranted.
✅ 3. Violation of Section 153: No Demand Notice Issued
The Tribunal also upheld CIT(A)’s finding that the AO failed to issue demand notice within the time limit under Section 153, which is mandatory for valid assessment. Since Revenue couldn’t refute this, the assessment was invalid on this technical ground as well.
🔍 Key Takeaways
📌 1. CBDT Circular 7/2016 is binding
This judgment reinforces that JVs shouldn’t be taxed as AOPs if the JV members have already recognized and offered income to tax.
📌 2. No Double Taxation of Mobilization Advance
If mobilization advances are already adjusted and taxed in subsequent years, taxing them in the current year is incorrect and contrary to settled principles.
📌 3. Procedural Lapses Matter
Failure to serve demand notice under Section 153 makes the assessment legally unsustainable.
🧠 Final Verdict
The ITAT Delhi dismissed the appeal of the Revenue, affirming that:
- The JV was not a taxable entity separately,
- No income had escaped taxation,
- And procedural lapses by the AO further invalidated the assessment.