TMI Blog2014 (12) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... ill be liable to be taxed as a separate and independent entity. Disallowance of contract receipts u/s 40(a)(ia) - the fact that the work contract order issued were in assessee’s name and so also the payments were credited to the assessee’s account and as such reallocation of these contracts among the members of the assessee would amount to sub contracting not appreciated – Held that:- Following the decision in ITO, Ward-3(1), Pune Versus Swapnali RDS Joint Venture [2014 (12) TMI 320 - 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) - disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Geoconsultant ST GmbH in 304 ITR 283. 4. Facts in brief are that the assessee was a joint venture of M/s. Shraddha Constructions and Power Generation Pvt. Ltd. and The Indian Hume Pipe Co. Ltd., is an AOP having contract receipts. It has taken contract and the distribution of contract receipts between these two members had been agreed in the ratio of 70:30% respectively. During the year under consideration, the assessee had received gross contract receipts of ₹ 9,95,00,000 and the entire contract was given to M/s. Shraddha Constructions and Power Generation Pvt. Ltd., for its execution. M/s. Shraddha Constructions and Power Generation Pvt. Ltd. further sub-contracted the said work to Indian Hume Pipe Co. Ltd. for ₹ 2,73,82,672 out of the work allotted to it by the assessee. 5. The plea of the assessee before the Assessing Officer was that the joint venture does not execute any contract but was a conduit for obtaining work, receiving payments against work done by the individual constituents and distribution of amounts in their individual shares as per the agreed ratio. The Assessing Officer opined that the assessee was an AOP which had not executed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the predecessor-in-office of the CIT(A) in Swapnali RDS Joint Venture cited supra which was subsequently upheld by the Tribunal, Pune Bench, and in view of this the appeals preferred by the Revenue are liable to be dismissed. 10. We have heard the rival and perused the records. In the facts of the present case, the issue arising before us is in relation to the application of provisions of section 40a(ia) of the Act. The assessee AOP had received contracts from third party which, in turn, was executed by the two members of AOP. The plea of the assessee AOP was that it was constituted for obtaining work and receiving payments against the said work done by the constituents of the AOP and the said payment was to be distributed in the agreed ratio between the two members of the AOP for carrying out the work. Such assignments of the work to the members as per the Memorandum of Understanding agreed upon is not equivalent to sub-contract and as such the assessee AOP was not liable to deduct tax at source out of the amount distributed amongst the members of the AOP in the agreed ratio of share. The Assessing Officer, while deciding the issue in the hands of the assessee, had given an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness or profession below the prescribed limit. 6. It was further explained on behalf of the assessee that joint venture as such does not execute any contract work but were merely formed for obtaining contract work and for receiving the payment, which was immediately distributed 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-cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... joint venture in all assessment years 2001-02 to 2008-09. It was further explained by the assessee that revenue sharing was not exactly 60:40 in each year since it depends on the relative work done in the particular year. Having explained the difference between cases of contract/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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nveyances, 197 ITR 321 (Kar.) observed that method adopted by the Assessing Officer would result in double taxation of the same income since gross receipts distributed amongst the two joint venture partners was included as receipts in their respective cases and the joint venture 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, disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l skill and capability. The other part of the contract will be executed by HCC. The total value of the contract was ₹ 2,62,01,03,120. the applicant's share of work was valued at ₹ 44,52,78,920 (17 per cent of total value). The association with the HCC was not with 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 th ..... 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