Law:

Section:

Section 4 of the Income-tax Act, 1961 - Association of person - Assessable as - Two applicants, namely, MC, Japan and Rotem, Korea, together with MELCO, Japan and BEML (an Indian company) have formed a consortium (MRMB) and have agreed to jointly participate in a global tender invited by DMRC for Mass Rapid Transport System for designing, manufacturing, supplying, testing, commissioning, training and transfer of technology of 156 Standard Gauge Electrical Multiple Units - DMRC has accepted price proposal submitted by MRMB consortium in relation to contract and awarded same to it - Under consortium agreement, nature of work undertaken and capable of being executed by each party is very much different and scope of work assigned to one party cannot be undertaken or relocated to another; they have different skill sets; lump sum consideration for contract is distributed among consortium members in pre-agreed ratio and profits and losses are being borne by individual members themselves and no common expenditure is being incurred by them - Whether, on facts, MRMB consortium cannot be treated as an AOP for purposes of assessment under Act and applicants can only be subjected to taxation on basis that they are separate taxable entities - Held, yes FACTS The two applicants, namely, MC, Japan and Rotem, Korea together with MELCO, Japan and BEML (an Indian Company) have formed a consortium (MRMB) and agreed to jointly participate in the global tender invited by the DMRC for Mass Rapid Transport System for designing, manufacturing, supplying, testing, commissioning, training and transfer of technology of 156 Standard Gauge Electrical Multiple Units ('EMUs'). For execution of the project, the consortium agreement provides for constitution of project board comprising of project directors from each member for the overall planning, organizing and directing the complete execution of the project in an efficient manner. Under the agreement, each member's responsibility is that : (1) Rotem would be responsible for the mechanical works; (2) MELCO would be responsible for the electrical works; and (3) BEML would be responsible for the localization works. MC as a consortium leader…

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