TMI Blog2012 (10) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... pra), considering the consistent stand taken by the assessee and the parties to the agreement that the status of the joint venture was only Association of Persons, we hold that there could be no case for levying interest under Section 201(1A). - 1409 to 1412 of 2005 - - - Dated:- 28-6-2012 - Mrs. Chitra Venkataraman and K. Ravichandrabaabu, JJ. Dr. Anita Sumanth for the Appellant. K.R. Ravikumar for the Respondent. JUDGMENT Mrs. Chitra Venkataraman, J . - The following is the substantial question of law raised by the assessee in the Tax Case Appeals filed against the order of the Tribunal: "Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in holding that the joint venture of H.C.C. Ltd and Van Oord ACZ (VOACZ) is not an Association of Persons and the payment made to the joint venture should be treated as a payment made to the foreign company and tax deducted at source on that basis? 2. The assessee-Chennai Port Trust floated a tender for the breakwater construction project at Ennore Port. The contract was awarded to a joint venture of Hindustan Construction Company Ltd., a company registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 194C on the payment made to the joint venture as though it was an AOP was incorrect. Hindustan Construction Company Ltd. being an Indian company, tax was to be deducted at the rate of 2% as per Section 194C. Considering the decision of the Advance Ruling Authority holding that the joint venture is not AOP, Chennai Port Trust was liable to deduct tax at source on the payment made to the foreign company as per Section 195(1); thus in respect of the clear terms of the joint venture agreement between the two companies, Chennai Port Trust had failed to deduct tax as per Section 195(1); applying the decision of the Advance Ruling Authority that the joint venture was not AOP, there was a shortfall of deduction for the assessment years 1998-99, 1999-2000 and 2000-2001. Thus, the assessee was treated as one in default and hence, interest was levied under Section 201(1)(a) of the Income Tax Act. 6. The assessee objected to these proceedings, contending that going by the terms of the joint venture agreement between the companies and the award of contract under the agreement between the assessee company and the joint venture, the status of the joint venture was that of an AOP; he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn company in the letter addressed by the foreign company to ITO, TDS-VIII, Chennai, along with the return of the joint venture and the status of the joint venture was shown as AOP and a refund of Rs. 3.24 crores was claimed. Form No.30 was signed by an authorised representative of the joint venture and the declaration was dated 08.12.1999. Since these facts were not there before the AAR at the time of passing of the original order, the present assessee sought for recalling of the order that there was a misrepresentation. The Advance Ruling Authority passed an order on 29.04.2009 and rejected the assessee's petition that the order passed by the Advance Ruling Authority could not be said to have been obtained by fraud or misrepresentation. It observed that the document brought on record by the Port Trust showed its stand that the joint venture consisting of HCC and VOA was an AOP, resident in India. It also pointed out that the foreign company filed a return of income for 1998-99 on 25.11.1998 as a non-resident company and for 1999-2000, on 29.12.2000. It also filed a return showing the status of the joint venture as an AOP on 02.11.1998 before the Income Tax Officer, Ward-34, Mumba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , a course of action which could not be taken exception to. Even going by the order of the Tribunal, we see that much of a discussion was as to whether the joint venture could be taken as an Association of Persons or not. The assessee pointed out that at least till the Advance Ruling Authority passed an order, the Department itself did not deem it fit to reject the assessee's claim that the payments were made under Section 194C, treating the joint venture as Association of Persons. In the background of these circumstances, we hold that the reliance placed on the decision of the Apex Court in CIT v. British Airways [2010] 190 Taxman 304 in almost similar circumstances, comes to the aid of the assessee herein. 12. The Supreme Court observed that till the decision of the Apex Court in CIT v. Eli Lilly Co. (India) (P.) Ltd. [2009] 312 ITR 225/178 Taxman 505, there was a debate on the question as to whether TDS was deductible on foreign salary payment as a component of total salary paid to an expatriate working in India. In the face of such debatable issue, the assessee could not be declared as an assessee in default under Section 192 read with Section 201 of the Income Tax Act. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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