A joint venture is subjected to taxation under the provisions of Income Tax Act,1961
. It is the umbrella Act for all the matters relating to income tax and empowers the Central Board of Direct Taxes (CBDT)
to formulate rules ( The Income Tax Rules,1962
) for implementing the provisions of the Act. The CBDT is a part of Department of Revenue
in the Ministry of Finance
. It has been charged with all the matters relating to various direct taxes in India and is responsible for administration of direct tax laws through the Income Tax Department
. The Income Tax Act is subjected to annual amendments by the Finance Act
, which mentions the 'rates' of income tax and other taxes for the corresponding year.
Taxation of a joint venture, depends upon the agreement between the parties, forming the joint venture. If the joint venture is established in the form of a partnership firm or as a company, it is taxed accordingly i.e. as a partnership or as a company. But in all other cases, a joint venture is treated as an association of persons (AOP) or a body of individuals(BOI).
An Association of Persons (AOP) means two or more persons who join for a common purpose with a view to earn an income. The term 'person' includes any company or association or body of individuals, whether incorporated or not. The association need not be on the basis of a contract. Therefore, if two or more persons join hands to carry on a business but do not constitute a partnership they may be assessed as an AOP. But, an AOP does not mean any and every combination of persons. It is only when they associate themselves in an income-producing activity that they become an association of persons.
Body of Individuals (BOI) means a conglomeration of individuals who carry on some activity with the objective of earning some income. It would consist only of individuals. Entities like companies or firms cannot be members of a body of individuals. Income tax shall not be payable by an assessee in respect of the receipt of share of income by him from BOI and on which the tax has already been paid by such BOI.