TMI Blog2017 (12) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the assessee has not shown any profit nor paid any remuneration to any of the members, the provisions of section 40(ba) will not be attracted. Coming to the execution of the contract awarded to the assessee, we have already adjudicated that it does not amount to sub-contract. The payment made to AMRCL will never be considered as remuneration, but, paid for execution of back to back work order. Assesse has already considered as revenue in case of AMRCL and offered for taxation. It shows that 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A). 4. The CIT(A) noted that the assessee reiterated the submissions made before the Assessing Officer and submitted that it was constituted by KCL AMRCL (later called AMR India Ltd.) to make it eligible to procure contract work of high value. It had submitted bid for road widening on tender invited by the Chief 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 assessment year under consideration amounting to Rs,9,90,37,026/- was passed to AMRCL, without deduction of any tax at source. The assessee JV had not retained any commission/margin for itself. It was submitted that the said amount was duly offered as income in the return of income filed by AMRCL which had ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 well as the disallowances, including the one u/s 40(ba) of the IT Act. The AO is directed to re-compute the assessee s total income accordingly and compute tax thereon at the maximum marginal rate in view of the provision of section 167B(2) of the Act. 5. Aggrieved by the order of CIT(A), the assessee and the revenue are in appeal before us: 6.1 Assessees grounds of appeal, which are common in all the appeals under consideration: 1. On the facts and in the circumstances of the case, the order of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sino Hydro JV Vs. ACIT (ITA No. 701/Hyd/2010, dtd. 27/11/2012) and DCIT Vs. Hindustan Ratna JV ( ITA No. 1575/Hyd/2014, dt. 12/02/2015) 7.1 Ld. AR submitted that though CIT(A) has deleted the addition made by the AO, but, her finding that remuneration was paid by the assessee to the individual 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, relied on the order of AO. 9. Considered the rival submissions and perused the material facts on record. The two entities, namely, KCL and AMRCL formed a JV 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. Scheme tendered by the Chief Engineer (DPI Roads), Govt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r taxation. It shows that 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. 9.4 In view of the above discussion, the grounds raised by the assessee are allowed and grounds raised by the revenue are dismissed. 10. As the issue is identical in assessee s (KCL AMRCL JV) for AY 2013-14 in ITA no. 793/H/17, in case of CCPL AMRCL JV in ITA No. 792/H/17 for AY 2013-14, in case of PSR AMRCL JV in ITA No. 791/H/17 for AY 2013-14 and revenue s appeal in case of PSR AMRCL JV in ITA No. 781/H/17 for AY 2013-14, to that of assessee s case in KCL AMRCL JV for AY 2012-13 and revenue s case in ITA No. 1256/H/16( in respect of KCL AMRCL JV) for AY 2012-13 (supra), following the decision therein, we allow the appeals of the assessees and dism ..... X X X X Extracts X X X X X X X X Extracts X X X X
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