2018 (2) TMI 593

Engineers Pvt. Ltd. [2015 (3) TMI 102 - DELHI HIGH COURT] has observed that in the case of JV of such kind Section 40A(2) is not applicable. There are other judicial findings in this regard arriving at the same conclusion which are reported as CIT vs. SMSL UANRCL (JV) [2015 (3) TMI 279 - BOMBAY HIGH COURT]. In all the above cases, it has been held that where the constituent participants make a JV to secure a contract, which is merely a pass through entity with minimal expenses, no tax liability cab be attributed by holding the subject entity JV as AOP. No net profit on % bases can be taxed as has been done in this case. Note that AR of the assessee in this case relied upon the order of the CIT(A) and DR relied upon the order of the AO. But the DR could not controvert the finding of the CIT(A) wherein he has followed the precedents of the Hon’ble High Court and Tribunal and Ld. DR also could not place any contrary decision before us. - Decided against revenue. - I.T.A. No. 7041/DEL/2017 - 5-2-2018 - Shri H. S. Sidhu, Judicial Member Department by : Sh. Sampoorananand, Sr. DR Assessee by : Sh. KVS Krishnan, Adv ORDER This appeal by the Revenue is directed against the Order of the Ld. .....

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re the Ld. CIT(A)-2, Gurgaon, who vide his impugned order dated 01.9.2017 has allowed the appeal of the assessee and deleted the addition in dispute. 4. Aggrieved with the impugned order, the Revenue is in appeal before the Tribunal. 5. At the time of hearing, Ld. DR relied upon the order passed by the AO and reiterated the contentions raised by the Revenue in the grounds of appeal. 6. On the other hand, Ld. Counsel of the Assessee relied upon the order of the Ld. CIT(A) and reiterated the contentions made before the Ld. CIT(A). He further stated that since the Ld. CIT(A) has passed a well reasoned order which does not need any interference on our part. Hence, the appeal of the Revenue may be dismissed. 7. I have heard both the parties and perused the relevant records available with us, especially the orders of the revenue authorities. I find that Ld. CIT(A) has discussed the issue in dispute elaborately at page no. 6 to 10 vide para no. 4.1 to 4.5. For the sake of convenience, I am reproducing herewith the relevant findings of the Ld. CIT(A) as under:- 4.1 In appellant's own case for the A.Y. 2011-12, the issue on the similar grounds is held to be in favour by CIT(A)-I, Gurgao .....

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ajkharswan-Sini section-composite work of civil, electrical, signaling and telecommunication engineering under jurisdiction of Dy. Chief Engineer (Con-Il), Chakradharpur of South East Railway. The total value of the contract is INR 64,14,55,217/-. This is the first year of operation of contract. As per the agreement, the scope of the work was pre-defined and neither JV nor the two participants of the JV had the right to get the work executed by some other entity. The basic purpose of forming the JV was to jointly become eligible for the tender as individually none of the two could have bagged the same. There is also a separate agreement dated 14.03.2011 (Copy enclosed) clearly defining the work which has to be done by each JV partner. The JV was formed to apply for the tender raised by South Eastern Railways. The work of both the JV partners is well defined in point no. 3 at page 3 of the JV agreement which is reproduced as under:- "3. The 'Parties' have resolved that the distribution of share, responsibilities, profits, losses and remuneration shall be as under:- a) Lead Partner's share: 80% Name: M/s Kalindee Rail Nirman (Engineers) Ltd Responsibilities: i) Sched .....

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penditure. Whereas in the appellant's case, as explained above, the complete work is done by the JV partner's independently and they only have incurred all the expenditure. The role of the JV is only to route payments received from railways i. e. client to JV participants. The JV does not have any workforce, funds of its own nor any fixed assets as can be seen from the balance sheet for the year ended 31. 03.2011. 4.2 Based on the above facts, the CIT(A)-l has allowed the appeal of the appellant. I have given careful consideration to the arguments advanced in this regard and find that the said appeal is covered by appellant's own case for the A.Y. 2011-12 as the facts are similar and therefore following precedence, the appeal of the appellant is allowed. 4.3 Further decision in the case of CIT vs. Oriental Structural Engineers P. Ltd. and KMS Constructions P. Ltd. [2015] 374 ITR 35 (Del) also supports the case of the appellant. In this case Hon'ble High Court has approved decision of Hon'ble ITAT (Delhi) which had recorded a finding that the joint ventures which have been formed only to secure the contract cannot be subjected to tax as Association of Person (AOP .....

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