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KCL AMRCL Joint Venture, PSR AMRCL Joint Venture And CCPL AMRCL Joint Venture Versus ncome-tax Off icer, Ward 6 (4) , Hyd

2017 (12) TMI 190 - ITAT HYDERABAD

TDS u/s 194C - non deduction of tds on payments made to subcontractors - subcontract relationship between JV partners - Held that:- As per the agreement, all the costs, liability and bank guarantees will be arranged by only AMRCL and KCL will only be a facilitator in procuring the orders. As per our view, JV is only an arrangement between two entities on mutual agreement, JV can be any type depending upon the mutual agreements and object of such agreement. The JV can be run on similar to partner .....

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in sub-contract. See Hindustan Ratna case[2015 (2) TMI 1257 - ITAT HYDERABAD]. Accordingly, ground raised by revenue is dismissed. - Estimation of the profit of the business as well as disallowance u/s 40(ba) - disallowing all the administrative expenses - Held that:- As the assessee has not shown any profit in the business and the assessee being used as a Passover entity and set up only to secure the order, the AO has the option of disallowing all the administrative expenses, if any. Since .....

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t the full value of revenue is already offered for taxation, by following the golden rule that a source of income can be taxed only once. The source of income is a work contract given by the corporation and the same was offered to tax by AMRCL. Same source of income can never be subjected to tax twice, first by the assessee and followed by AMRCL. As far as revenue is concerned, that source is already taxed, in the hands of AMRCL, therefore, it need not be taxed again in the hands of assessee. - .....

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together and, therefore, a common order is passed for the sake of convenience. 2. The Brief facts, as taken from KCL AMRCL JV for AY 2012-13, are that the assessee is an AOP comprising of two members, Viz., M/s Ketan Constructions Ltd. (KCL) and AMR Constructions Ltd. (AMRCL). It was formed as a Joint Venture for securing the contract of widening to 2 lane and improvement from Km 50/0 to 84/2000 of Govindapalli - Balimela - Chitrakonda - Sileru Road (SH-47) in Malkarjini District under L.W.E. S .....

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of TDS made and remitted to the Govt. A/c, it was stated by the assessee that the contract had been given to AMRCL on back to back basis. This fact was communicated to the contractee / employer and the contractee had been asked to deduct TDS in the name of AMRCL u/r 37B of the I.T, Rules. The Assessing Officer rejected the claim of the assessee, as according to him, for any payments made to subcontractors, provision of Sec 194C was applicable and failure to do so warranted disallowance u/s 40(a) .....

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f Engineer (DPI & Roads), Govt. of India. The bid was accepted and the Work so obtained Was divided between the Constituents in the ratio of 51: 49 between KCL & AMRCL respectively for the purposes of smooth execution of work. As per the MoU between the JV members, it was mutually agreed that each Constituent would be responsible for its part of Work. Subsequently, KCL got its part of work executed by the other constituent i.e., AMRCL. Thus, the entire gross receipt of the JV for the ass .....

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f TDS made by them directly in favour of AMRCL that had actually executed the work in terms of Rule 37BA of the I.T. Rules and therefore the assessee had not claimed credit for such TDS in its return. It was submitted that the relationship between the assessee - JV and its constituent members was not a contractor - subcontractor relationship and as such provisions of Sec 194C and Sec 40(a)(ia) were not applicable. And as the amount in question was paid to AMRCL before the year end and considered .....

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the Act was not called for and the same should be deleted. It further stated that the relationship between the JV and its constituents was not in the nature of contractor-subcontractor relationship and therefore provision of Sec 194C were not applicable. For this, it placed reliance on the decision of jurisdictional ITAT in the case of Madhucon Sino - Hydro JV vs. ACIT (ITA NO.701/H/2010 dated 27.11.2012) & DCIT vs. Hindustan Ratna JV (ITA No.1575/Hyd/2014 dated 12.02.2015). 4.1 After consid .....

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s no requirement of TDS on the amounts credited/paid by it to them. Consequently, the disallowance u/s 40(a)(ia) of the IT Act made by the AO is deleted. V. The remuneration paid by it to the members, i.e. the surplus over the expenditure incurred by them for the purpose of its business, is liable to be disallowed in view of the express provision of section 40(ba) of the IT Act. VI. The assessee's net profit is estimated to be 8% of its gross turnover. That would be net of all allowances as .....

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the ld. Commissioner of Income Tax (Appeals) allowing the appeal only in part is erroneous, illegal and unsustainable in law. The Commissioner (Appeals) ought to have allowed the appeal in entirety. 2. The Commissioner (Appeals) erred in holding that the Appellant is liable for the work done in spite of the fact that the contract work was done by its constituents. The Commissioner (Appeals) failed to appreciate that the term of Joint Venture evidently states that the Appellant JV was only for t .....

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(Appeals) erred in not following the binding decisions of the Hon'ble jurisdictional Tribunal in the case of Madhucon SinoHydro JV Vs. ACIT (ITA.No.701/H/2010, dt.27.11.2012) & DCIT Vs. Hindustan Ratna JV (ITA 1575/H/2014, dt.12.02.2015), in entirety. 5. Without prejudice to the above grounds, the rate of profit at 8% is quite absurd when the Commissioner (Appeals) herself observed that no work was performed by the Appellant. For these and other grounds that may be urged at the time of .....

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itted that KCL and AMRCL formed JV in order tor secure the contract of widening to 2 lane and improvement from Km 50/0 to 84/2000 of Govindapalli - Balimela - Chitrakonda - Sileru Road (SH-47) in Malkarjini District under L.W.E. Scheme tendered by the Chief Engineer (DPI & Roads), Govt. of Orissa. It is mutually agreed with the JV partners that PO/WO will be executed by one of the constituent that is AMRCL/KCL on back to back basis. All the work orders were executed by AMRCL during this peri .....

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idual member for the work done by it, is not sustainable, as the Assessee on its own, is not in a position to pay remuneration to any of the member. He also submitted that estimating the profit of the business @ 8%as well as making disallowance u/s 40(ba) also is not proper. According to him, the provisions of section 40(ba) are also not applicable to the assessee s case as business has not generated any profit to make any such payment to the members of the JV. 8. Ld. DR, on the other hand, reli .....

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ntract will be executed by one of the constituents i.e. AMRCL/KCL on back to back basis. As per the agreement, all the costs, liability and bank guarantees will be arranged by only AMRCL and KCL will only be a facilitator in procuring the orders. As per our view, JV is only an arrangement between two entities on mutual agreement, JV can be any type depending upon the mutual agreements and object of such agreement. The JV can be run on similar to partnership basis or mere an entity to secure the .....

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partners. Accordingly, the work executed by the AMRCL is not in sub-contract. Accordingly, ground raised by revenue is dismissed. 9.2 Coming to the findings of the CIT(A) that in the case of assessee estimate of the profit of the business as well as disallowance u/s 40(ba) is the only way out, the fact that JV is created only to secure the orders and nowhere on record, we find that the assessee has actually executed the work. JV is formed merely to secure the orders and not to execute the order .....

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