TMI Blog2012 (11) TMI 1149X X X X Extracts X X X X X X X X Extracts X X X X ..... - - - Dated:- 27-11-2012 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER Appellant by : Shri M. Ravinder Sai Respondent by : Shri P. Murali Mohan Rao ORDER PER ASHA VIJAYARAGHAVAN, J.M.: These are cross appeals by the assessee as well as the revenue directed against the order of CIT(A)-I, Hyderabad dated 26/02/2010 for the AY 2006-07. ITA 701/H/10 Assessee s Appeal 2. The appellant is a Joint Venture (AOP). The joint venture is formed by two constituents namely Madhucon Projects Ltd and Sino Hydro Corporation, China. During the year under consideration the appellant was awarded works worth ₹ 135,69,37,509/- by various government departments. As per the joint venture agreement, the entire works were shared and executed by the constituents. Accordingly, out of the total works, works worth ₹ 132,97,60,010/- was given to Madhucon Projects Ltd and the balance was given to Sino Hydro Corporation, for execution. However, these amounts were not reflected in the profit loss account prepared by the assessee. Only some administrative expenses totaling ₹ 77,961/- had been reflected in the debit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t paid by the assessee shall not be deducted while computing the income. 5. In the circumstances in the appeal preferred before him, the CIT(A) while observing the section 194C(1) does not have any embargo on AOP being contractor for not deducting any tax but the appellant s case is squarely covered by the provision of section 194C(2). The Hon ble ITAT at para 10 of the order observed that since AOP was not a specified person prior to the amendment made by finance Act 2008, the payments made by the assessee to its constituents would not be treated as payment made by the contractor to a sub contractor so as to attract the provisions of section 194C(2). 6. The CIT(A) held that while there is a divergence of opinion with regard to the relationship between the JV and its constituents, the decision of jurisdictional Tribunal is against the assessee, the same is to be followed. He had also cited the case of SPCL-IVRCL Infrastructure (A.Y.2002- 03 ITA No.0365/CIT(A)-II/07-08 dated 21.08.2008) decided by him wherein he had not agreed in principle with the contention of the appellant JV that it is not liable for TDS u/s.194C since the entire turnover was shown by the constituent. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tical purposes, it was the assessee who executed the work contract or the project awarded to the joint venture. No doubt the joint venture is an independent identity and has filed its return of income and was also assessed to tax but it did not offer any profit or income earned on this project/works awarded to it. These facts clearly indicates that the joint venture was only a de-jure contractor but in fact the constituents were the de-facto contractors in respect of the respective portions of work. In such a case the question of the AOP giving the constituents works contract would not arise. In our opinion, in cases where the AOP is formed only for the purpose of obtaining contracts and specific portions of the contract are to be completed by the individual constituents independently, then it cannot be case of the AOP giving works contract to the constituents. This view is supported by the decision of the ITAT Vishakhapatnam in the case of M/s Ttransstory (India) Ltd Guntur 2011-TIOL-499-ITAT-VIZAG. The AAR in the case of In re Mitsubushi Corpn 323 ITR 277 has held that under similar circumstances when an AOP was formed only for the purpose of getting orders and the members carrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edly. In view of the decision of the Calcutta High Court in the case of CIT v Virgin Creations, TDS paid before the due date for filing of the Income Return is an allowable deduction and cannot be disallowed u/s 40(a)(ia).The Special Bench of ITAT, Vishakapatnam in the case of Merilyn Shipping Transports (2012-TIOL-184-ITAT-VIZAG-SB) has held that disallowance u/s 40(a)(i) is only to the extent of the amount outstanding as on the last day of the previous year and amounts which have been paid during the previous year cannot be disallowed for non deduction of TDS. 11. The next addition made by the AO relates to nondeduction of tax and consequent disallowance of ₹ 2,71,38,750/- u/s.40a(i) for the payments made to M/s. Sino Hydro Corporation, China. As per the AO, works worth ₹ 2,71,38,750/- was given as sub contract to Sino Hydro Corporation, China. The assessee could not furnish any evidence that the said concern had filed the return of income offering the resultant income by executing the work given to it by the assessee. Apparently during the assessment proceedings, the assessee vide its letter dated 2.12.2008 submitted that TDS was provided and paid at the time of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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