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2016 (8) TMI 777 - GUJARAT HIGH COURT

2016 (8) TMI 777 - GUJARAT HIGH COURT - TMI - Credit of TDS - whether the JV was no more in existence - Held that:- Income after 02.09.2002 really belonged to PEL in respect of the work carried out by it after 292002. Therefore, even if joint venture has declared income from work carried out after 02.09.2002 till 31.03.2003 as its income, it does not prevent the revenue from taxing it in the hands of PEL as it is a right person in whose hands income, after supplementary agreement was executed, c .....

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n only in the hands where income therefrom is subjected to tax. If accrual of income in respect of the receipts received dejure by joint venture is shifted to a member of the joint venture through an overriding title, then credit of TDS in respect of such receipts should be considered in the hands of that member of the joint venture in whose hands such income is found assessable. - Decided in favour of the assessee - TAX APPEAL NO. 2434 of 2010 TO TAX APPEAL NO. 2437 of 2010 - Dated:- 11-8-2016 .....

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3. Tax Appeal No.2435 of 2010 and Tax Appeal No.2436 of 2010 challenges the order passed by the ITAT dated 16/04/2010 in ITA No.3179/Ahd/2007 for assessment year 2004-05 and ITA No.3180/Ahd/2007 for assessment year 2005-06 respectively and came to be admitted on the following questions of law: (A) Whether in law, the Appellate Tribunal is justified in holding that the JV was no more in existence after 02.09.2002 and hence income should be taxed in the individual hands of the members of the JV w .....

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ncome and credit of taxes, relating to such income should be given in the hands of JV only? 4. Whereas, Tax Appeal No.2434 of 2010 arising out of the order dated 16/04/2010 passed by the ITAT in ITA No.773/Ahd/2010 for assessment year 2005-06 against the penalty and came to be admitted on the following question of law: (A) Whether in law, the Appellate Tribunal was right in deleting the penalty u/s 271(1)(c)following the decision of the Apex Court in the case of CIT v/s Reliance Petro Products, .....

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findings recorded by the AO as well as the CIT (A) and contended that the once the joint venture was in existence on 02/09/2002, merely on paper resolution it cannot be believed that it is dissolved. 6.1 Learned Counsel for the appellant - department has contended that the AO concluded that on principles of consistency and genuineness there is no justification for PEL to disclose its share of income in its company return of income. As per AO, the change in quantum of execution of work inter se b .....

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l for the appellant has taken this Court to the findings of CIT (A), more particularly, paragraph Nos.7.3, 8.2, 10.3, 12.3 and 13.2 and contended that the said findings are just and proper and the tribunal need not require to interfere with the same. 6.3 After making the above submissions, learned Counsel for the appellant has contended that the appeal may be allowed and questions may be answered in favour of the assessee. 7. On the other hand, Mr.Manish J Shah, learned Counsel for the assessee .....

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horities below. It is not disputed that receipt and expenditure prior to 2902 and pertaining to two members have been clubbed together to form income and expenditure account of the joint venture. But thereafter, vide agreement dt. 2902 LGE&C has completely withdrawn itself from Association and transferred all the work to PEL. In this regard we refer to some more provisions of agreement dt. 2902 to highlight the arrangements between the two members. Whereas, both LGE & C and Patel are joi .....

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works to the original contract with the Employer under the Contract as well as works originally earmarked for Patel. (1) Patel shall complete all the works including additional works within October, 2003 and, shall be solely responsible therefore, if not completed. LGE&C shall not assume any responsibility, liability, obligation or duty with regard to the remaining works of LGE&C and any additional works. Patel shall assume any and all responsibilities for the technical and commercial r .....

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ion, LGE&C may let its employee(s) visit the site and, in such case, Patel will provide proper support. However the costs of the same will not be borne by Patel. Patel shall, at regular interval, in every month, send LGE&C's Head Office a copy of Monthly Progress Report, Statement of Interim Payment Application, approved or certified Statement thereof and any Other material and information which are requested by LGE&C or related to LGE&C's interest. (3) *** (4) *** (5) ** .....

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s from NHAI will be to Patel's account. LGE&C would be paid some compensation of ₹ 2.6 crores for transfer to remaining portion of work to Patel, which would be paid at the end of the contract by Patel. 11. Thus, after withdrawal of LGE&C from the association, no association of persons survived even though legally joint venture continued to exist till the completion of the work. Merely because joint venture is existing, it does not necessarily lead to inference that association .....

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s to be satisfied one is that they should come together to work and secondly they should have intention to earn income from such work. Even though LGE&C and Patel are together but after 2902 they did not have common interest to earn income from this venture. Once LGE&C decides to withdraw from work then his interest in earning income from the work ceased to exist. Once a party to the Joint venture ceases to have interest in earning income from the joint venture then AOP comes to an end. .....

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d in the Income tax assessment means the association in which two or more persons join in a common purpose and the object of each is to produce income profit or gains. Two or more persons to the association must jointly affect the transaction with a common purpose of producing income in a joint venture and both the persons as such play important role in connection with the carrying on of the operation of the business of the joint venture. However, there cannot be a universal formula to find out .....

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the part of the members of the association as an essential ingredient. Voluntarily combining together for a certain purpose i.e. to earn income is considered as essential ingredient, of AOP being an existence. In that case, a firm was constituted by S, main partner and his sons. It continued up to A.Y. 1981-82 as per the last partnership deed which was executed on December 28, 1968. The main source of income of the assessee firm was form the shares held by S in the firm LE. Subsequently, firm L .....

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s of Association. It was held by Hon'ble High Court that there was no act of volition on the part of the rest of the partners of the AOP to continue with a common purpose to produce income, profit and gains. The assesmsent in the status of AOP was held not valid. **** 38. In our considered view income after 292002 really belonged to PEL in respect of the work carried out by it after 292002. Therefore, even if joint venture has declared income from work carried out after 292002 till 3132003 a .....

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