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2016 (3) TMI 967 - ITAT PUNE

2016 (3) TMI 967 - ITAT PUNE - TMI - TDS u/s 194C - Disallowance made u/s. 40(a)(ia) - assessee has not deducted tax at source on the payments made to the constituents of J.V. - AOP status - Held that:- As decided in the preceding assessment year i.e. assessment year 2009-10 CIT(A) deleted the disallowance u/s. 40(a)(ia) as 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 .....

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n 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 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. 1502/PN/2014 .....

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e-tax (Appeals) erred in deleting the disallowance made u/s. 40(a)(ia) 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 Income-tax (Appeals) erred in not appreciating that the assessee Joint Venture was in full control of the contra .....

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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 appearing on behalf of the assessee submitted at the outset that the issue raised in the appeal is identical to t .....

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ehemently 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 Progressive Construction Ltd. and Srinivasa Construction Ltd. There was no receipt/expenditure and no profit and loss in the case of assessee as the entire revenue was directly apportioned between the two afor .....

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₹ 87,37,702/- 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 2009-10. The relevant extract of the order of Tribunal dated 11 .....

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fter 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. However, in the explanation given, the assessee has made it clear that the status in which the returns was filed was that of an AOP. It was explained that in the returns of income since beginning till the A.Y. 2006-07, the status was mentioned as AOP only, i.e., when the returns were filed manually. However, fro .....

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hown 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 for the purpose of applicability of provisions of section 194C since TDS provisions are applicable to all entities except individuals and HUF having gross receipts or turnover from business or profession below the prescribed limit. 6. It was further explained on behalf of the assessee that joint venture as s .....

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pts, 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 .....

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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 apart from this disallowance u/s. 40(a)(ia) of the Act. The assessee vide its submissions dated 26.03.2010 and 06.09.2010, explained the difference between revenue sharing arrangement entered into by the joint venture vis-a-vis sub-contract. It was explained on behalf of the assessee that in the case of sub .....

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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 noticed that tax apportionment certificate was issued by the Department vide letter No.Pn/Wd.3(4)/TC/07-08 dated 26.11.2008 of the Assessing Officer in which the Assessing Officer has allowed apportionment of entire TDS of ₹ 9,26,588/- during the year to M/s.Gammon India Ltd., since entire work during th .....

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nt 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/subcontract, 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 .....

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refore, 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 same in this case. This was due to applicability of section .....

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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 the Assessing Officer. The assessee has also raised the issue of consistency stating that the same method was being accepted by the Department in the past 8 to 10 years including A.Y. 2007-08 in which tax apportionment certificate was also being issued. It was contended that this aspect has not been considere .....

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ch 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 through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. It was also contended that Hon'ble Kerala High .....

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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 .....

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ourt 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 under: 6. We have noted that it is an admitted position that no work is carried out by the AOP, it has acted as a conduit between the MSRDC and the two persons constituting this AOP so far as their separate, and neatly identified, work areas are concerned. A mere existence of an AOP cannot lead to taxability .....

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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 partnership between them. There is no sharing of profits or loss. They have specifically provided in the agreement that each party will bear its own loss and retain its profits as and when such profits or loss arise. Having regard to the agreement we are of the view that the applicant cannot be treated as a pa .....

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nship 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 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 .....

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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 .....

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