Separate roles and profits reduce ventures’ tax risks

By Pranay Bhatia and Janhavi Sharma, Economic Laws Practice
0
1473
LinkedIn
Facebook
Twitter
Whatsapp
Telegram
Copy link

Recent Indian judicial decisions have increased uncertainty about taxes in respect of joint ventures where the venture is not a legal entity. Many such ventures are treated as an “association of persons” (AOP) – a tax concept leading to higher taxes on revenue. Indeed, the tax authorities have extended the AOP concept not only to industries with hard assets like infrastructure but also to industries such as media and entertainment.

What is an AOP?

The term AOP is not defined under the Income Tax Act, 1961. Section 2(31) of the act defines the term “person” which includes “an association of persons or a body of individuals, whether incorporated or not”. The explanation to the section clarifies that “an AOP shall be deemed to be a person, whether or not formed with the object of deriving income, profits or gains”.

Pranay Bhatia Partner Economic Laws Practice
Pranay Bhatia
Partner
Economic Laws Practice

Various judicial precedents have laid down the parameters that determine the existence of an AOP. The Supreme Court in the case of CIT v Indira Balkrinan (1960) held that a joint venture would be an AOP if the parties have come together with a common purpose to earn revenue from the venture.

You must be a subscribersubscribersubscribersubscriber to read this content, please subscribesubscribesubscribesubscribe today.

For group subscribers, please click here to access.
Interested in group subscription? Please contact us.

你需要登录去解锁本文内容。欢迎注册账号。如果想阅读月刊所有文章,欢迎成为我们的订阅会员成为我们的订阅会员

已有集团订阅,可点击此处继续浏览。
如对集团订阅感兴趣,请联络我们

Economic Laws Practice is a full-service law firm with headquarters in Mumbai and offices in New Delhi, Pune and Ahmedabad. Pranay Bhatia is a partner at the firm and Janhavi Sharma is an associate.

ELP

Economic Laws Practice

1502 A Wing, Dalamal Towers

Free Press Journal Road

Nariman Point, Mumbai 400021

India

Tel: +91 22 6636 7000

Fax: +91 22 6636 7172

Email: PranayBhatia@elp-in.com

JanhaviSharma@elp-in.com

LinkedIn
Facebook
Twitter
Whatsapp
Telegram
Copy link