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2012 (10) TMI 563 - AT - Income TaxCommercial profits and its accrual - allegation of diversion of income - Joint venture - sub contractors - Estimation of income being 9% of the turnover - Disallowance under S.40A(2) - excessive and unreasonable payments - The dispute herein is regarding assessability of income in the hands of the assessee as an Association of Persons (AOP). The case of the Assessing Officer is that the "JV and its members should be treated as separate persons and hence the contracts allocated to the members should be treated as "sub contracting receipts". On the other hand, the assessee made a case that the JV has come into existence only to procure and win the contracts and the contracts were allocated between the members and the members executed the contracts and offered income for taxation in their respective hands. Held that:- If each member of the JV offered the income derived from respective share of contract works in their hands it is not possible to tax the same contract receipt in the hands of the consortium of JV. There is no merit in the argument of the DR that the JV is the "main contractor" and members are the sub-contractors. Further there is no meaning in estimating the income in the hands of the assessee. - The question of estimating the profit does not arise and the assessing officer has contradicted himself by applying the provisions of S.40A(2) of the Act and also invoking the provisions of S.145(3) - the appellant AOP did not execute any contract work in question and therefore, did not derive any income during the year and the additions made by the assessing officer could not be sustained. In the facts of the case, we hold that there is no mistake in the order of the CIT(A) in holding that the question of estimating profit does not arises and in deleting the addition made in the hands of the assessee. Addition u/s. 43B - the balance amount of VAT at 1.2% which was withheld by the Irrigation Department of the State Government of Andhra Pradesh subject to certain clarifications to be received by them from the Commercial Taxes Department - The assessee JV withheld the same in turn from the amounts paid to the Lead Contractor/Sub-Contractor - Assessing Officer was of the mistaken view that the assessee JV debited the same to Profit & Loss Account and did not pay the same to the Department before the due date for filing the return of income which in fact is not correct. - As work was given on back-to-back sub-contract basis and the amount of VAT was not received by the JV as the same was withheld by the Department and therefore, the JV had to withhold an equal amount from the payments to be made to the subcontractor - appeal by revenue dismissed. Addition u/s. 40(a)(ia) - mobilization advance - Held that:- Mobilization Advance stands as Liability in the books of accounts of the Lead Contractor/Sub- Contractor as it is only on capital account and the JV is not liable - having admitted that assesee has deducted TDS on mobilisation advance in para No. (b) at Page No. 16/18 of the Assessment Order, that, what inspired him to make such a disallowance is really incomprehensible. - against revenue. Differences in Balance sheet - Assessing Officer had not followed the principle of double entry book keeping, as he had taken the Receipts and Payments Account of the assessee and the Balance sheet independently or separately, due to which the "difference of Balance sheet" arises. The Assessing Officer while passing his order was not clear in applying the principles of accounting and made an unwarranted and unjustified addition of Rs. 38,62,05,043. – Held that: - No"Difference in Balance Sheet" or "Unexplained Investment" as there was no asset found. Therefore, the addition of Rs. 38,62,05,043 made by the Assessing Officer cannot be sustained in law and deletion by the CIT(A) is justified - ground of the Revenue is rejected.
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