TMI Blog2014 (12) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of income-tax - The applicant will be liable to be taxed as a separate and independent entity. Disallowance of contract receipts u/s 40(a)(ia) – Held that:- Following the decision in ITO Vs. Gammon Progressive-JV [2014 (12) TMI 313 - ITAT PUNE] – CIT(A) was justified in holding that in absence of any contract or sub-contract work by joint venture to its member companies, provisions of section 194C were not applicable for the purpose of TDS - The two corporate entities forming joint venture were already being assessed since A.Y. 2000-01 onwards on their respective shares and TDS apportionment certificates were also issued by the AO every year for these eight years including the current assessment year to enable them to claim the same - there was no Profit and Loss Account in the assessee’s case and there was no claim of any expenditure - there was no question of any disallowance under the provisions of section 40(a)(ia) - disallowance u/s. 40(a)(ia) made by the AO cannot be sustained - the finding of the CIT(A) cannot be interfered who has rightly held that there is no question of disallowance made u/s. 40(a)(ia) of the Act – Decided against revenue. - ITA. No. 771/PN/2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the ratio of the share of the work done. The actual share in the joint venture of the total work allocated was 60% for M/s.Gammon India Ltd. and 40% for M/s.Progressive Contraction Ltd. In this background it was explained that the contract account and the Balance Sheet of the joint venture reveals nothing but apportionment of contract receipts, assets and liabilities between the members. There was no expenditure booked in the contract account nor any Profit and Loss Account prepared for the purpose since there did not arise any profit or loss to the assessee per se. The Joint venture transferred not only the gross revenue but also the corresponding TDS to its members in the ratio of their work done by individual members for which the appointment certificate was duly issued every year by the Assessing Officer. In this background it was submitted that there was no relationship of contractor and sub-contractor between the joint venture and its two members. Therefore, there was no question of applicability of TDS provisions u/s.194C of the Act. The assessee also explained why a returns were filed by the joint venture as AOP. It was explained that it was done to pass on the credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /sub-contract, in the background of clauses of the agreement, the assessee relied on the decision of Hon'ble Himachal Pradesh High Court in the case of CIT vs. Ambuja Darla Kashlog Mangu Transport Cooperative Society (2009) 227 CTR 299 (HP). 7. In the background of the tax apportionment certificates issued by the Assessing Officer, it was stated on behalf of the assessee that the Assessing Officer has marked copy of this certificate to the members of the joint venture as well as to their respective Assessing Officers, which shows that the Assessing Officer has applied his mind and consciously accepted the fact that the joint venture AOP was for the distribution of receipts amongst its constituents in proportion of their work sharing. Therefore, there was no applicability of provisions of TDS u/s.40(a)(ia) of the Act. 8. Further, the assessee, vide its submission dated 06.09.2010, made comparison of the tax rates applicable to domestic companies, being joint venture partner in their individual capacity and the tax rates applicable to the AOP. However, in submission dated 21.10.2010, it was explained that tax rates in the case of domestic company and the AOP would be the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners had also utilised the TDS credits on the basis of apportionment certificate issued by the Assessing Officer. In view of the above discussion, CIT(A) was justified in holding that in absence of any contract or sub-contract work by joint venture to its member companies, provisions of section 194C were not applicable for the purpose of TDS. The two corporate entities forming joint venture were already being assessed since A.Y. 2000-01 onwards on their respective shares and TDS apportionment certificates were also issued by the Assessing Officer every year for these eight years including the current assessment year to enable them to claim the same in their own cases. Moreover, there was no Profit and Loss Account in the assessee s case and there was no claim of any expenditure. Therefore, there was no question of any disallowance under the provisions of section 40(a)(ia) of the Act. Moreover, disallowance u/s. 40(a)(ia) made by the Assessing Officer cannot be sustained. In effect, the method adopted by the Assessing Officer will also result in double taxation of the same contract revenue which is in violation of the Karnataka High Court decision reported in 197 ITR 321 (Kar.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the object of earning this income but for co ordination in executing the contract so that HCC could also make its own profit. HHC's work and income arising therefrom was quite separate and independent of the applicant's work and income. If the cost incurred by the HCC or the applicant was more than their income, each party will have to bear its loss without any adjustment from the other party. The association of the petitioner company with HCC was undoubtedly for mutual benefit but such association will not make them a single assessable unit and liable to tax as an AOP. For example, a building contractor may associate with a plumber and an electrician to execute a building project. All these persons are driven by profit-making motive. But that by itself will not make the three persons liable to be taxed as an AOP if each one has a designed and independent role to play in the building project. In the instant case, the applicant has stated that the applicant has made its own arrangement for execution of work independent from that of HCC. There is no control or connection between the work done by the applicant and HCC. 8. On the facts hereinabove, the applicant and HCC c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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