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Income Tax Officer, Ward – 3 (1) , Pune Versus P. Venku Reddy and Avinash Constructions J.V.

2016 (3) TMI 966 - ITAT PUNE

TDS u/s 194C - whether the assessee Joint Venture was in full control of the contract, responsible for its completion, submitting bills, receiving payments and making those payments to its members towards sub contract on which tax was deductible u/s.194C? - Held that:- AOP status - Held that:- As decided in the preceding assessment year 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. .....

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der 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 case Commissioner Of Income-Tax Versus Manjunatha Motor Service And Canara Public Conveyances [1991 (6) TMI 23 - KARNATAKA High Court ] - Decided in favour of assessee - ITA No. 1501/PN/2014 - Dated:- 19-2-2016 - S .....

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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 without appreciating the fact that the work contract order issued to the assessee 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. 2) The learned Commissioner of Incom .....

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e of the AOP, in such status, the Assessing Officer has no choice but to tax it irrespective of the fact as to whether such share of profit has been offered to tax or taxed in the hands of members or not. Reliance is placed on decision of Hon. Supreme Court in the case of Ch. Achaiah (1996) 218 ITR 239 and on the ruling of AAR in the case of Geo consultant ST GMBH in 304 ITR 283. 4) The appellant craves leave to add, alter or amend any or all the grounds of appeal. 3. Shri Nikhil Pathak appearin .....

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been considered by the Tribunal in assessee s own case in the assessment year 2009-10. However, the ld. DR vehemently supported the order of Assessing Officer. 5. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. The assessee is an AOP engaged in the business of civil contractors. The assessee is a joint venture between M/s. P. Venku Reddy and M/s. Avinash Construction. There was no receipt/expenditure and no profit an .....

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The Assessing Officer accordingly disallowed the sum of ₹ 67,67,681/- u/s. 40(a)(ia) of the Income Tax Act, 1961. In first appeal, the Commissioner of Income Tax (Appeals) followed his own order in the preceding assessment year i.e. assessment year 2009-10 and deleted the disallowance u/s. 40(a)(ia). Hence, the present appeal. 6. We find that the issue raised by the Revenue in the present appeal is similar to the issue raised in the appeal before the Tribunal in the assessment year 2009-1 .....

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in favour of the assessee by ITAT, Pune Bench, in ITA.No.65/PN/2011 for A.Y. 2006-07 dated 22nd August 2012 in the case of ITO Vs. Gammon Progressive-JV, wherein vide paras 5 to 9 the Tribunal decided similar issue in favour of the assessee by dismissing the appeal of the Revenue, by observing as under: 5. After going through the above submissions and material on record, we find that the first issue is regarding status of the assessee. The Assessing Officer has mentioned the status as firm. Howe .....

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tly mentioned as AOP. It was explained that I.T.Return Form No.5 was actually applicable for firms, AOPs and BOIs. Therefore, this error might have occurred. The assessee has also filed computation of total income alongwith acknowledgements from A.Y. 2002-03 to A.Y. 2006-07 in which the status was regularly shown as AOP and even in the application form for allotment of PAN it was shown as AOP. The CIT(A) noticed from the record that status was shown as AOP. However, it was not very much relevant .....

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rk 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 an .....

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ns 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 of TDS to the members on the basis of tax apportionment certificates who have accounted for the corresponding contract revenue in their respective returns. It was also submitted that Nil income arising in the hands of the AOP is confirmed by the action of the Assessing Officer in not assessing any profit/income arising from the contract .....

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tains his share of profit alongwith the TDS and only the balance is passed on to sub-contractor. But in joint venture, assessees did not retain any share in the revenue with it and has passed the entire gross revenue alongwith TDS apportioned for them. It was submitted that the Department has also issued tax apportionment certificates every year during the past eight years to enable the two members to claim the TDS credits in their respective cases. Even in the current assessment year, it was no .....

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hem to claim TDS in respective cases. The assessee, vide its submission dated 22.04.2010, furnished the details which revealed that gross revenue from this contract receipts by joint venture was accounted for in case of either or both of the two companies who were members of the 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 .....

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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 .....

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revealed that both of them had huge positive returned incomes every year. For this payment the stand of the assessee was that the method of apportionment of revenue to the members was not to take any undue benefit of losses incurred by them. Therefore, it was stated that there was no loss to the revenue as a result of this method adopted by the assessee of sharing the gross revenue by its members, which was taxed in their hands. However, this explanation of the assessee did not find favour from .....

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of Gopal Purohit (2010) 228 CTR 582 (Bom.) and assessee also relied on the decision of the Hon'ble Supreme Court in the case of Radhasoami Satsang vs. CIT (1992) 193 ITR 321 (SC) wherein it was observed that strictly speaking the principle of res judicata does not apply to income tax proceedings since each assessment year was a separate unit in itself and what is decided in one year may not apply in the following year. It was further contended that where a fundamental aspect permeating thro .....

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me 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 T .....

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e 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.). This view is fortified by the decision of the ITAT Pune Bench in ITO vs. Rajdeep & PMCC Infrastructure, wherein the Tribunal has observed as .....

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case of Van Oord ACZ BV In Re(248 ITR 399) in which two contractors joined hands for carrying out neatly identified separate work which was a part of composite contract awarded to the AOP, but the taxability of income from such contract was held to be taxable in the hands of the respective contractors. While holding so Hon'ble Authority for Advance Ruling observed as follows: "7. So far as question Nos. 1 and 2 are concerned the parties have specifically ruled out constitution of any p .....

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e association must be to produce income jointly. It is not enough that the persons receive the income jointly. In the instant case, each of the two parties has agreed to bear its own loss or retain its own profit separately. Both have agreed to execute the job together for better cooperation in their relationship with the Chennai Port Trust. The intention was not to carry out any business in common, only a part of the job will be done by VOACZ according to its technical skill and capability. The .....

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f 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 m .....

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