TMI Blog2017 (8) TMI 1595X X X X Extracts X X X X X X X X Extracts X X X X ..... ry year for these eight years including the current assessment year to enable them to claim the same - there was no Profit and Loss Account in the assessee s case and there was no claim of any expenditure - there was no question of any disallowance under the provisions of section 40(a)(ia) - disallowance u/s. 40(a)(ia) made by the AO cannot be sustained - the finding of the CIT(A) cannot be interfered who has rightly held that there is no question of disallowance made u/s. 40(a)(ia) of the Act Decided against revenue. - ITA Nos.113 & 114/PUN/2015 - - - Dated:- 9-8-2017 - Ms. Sushma Chowla, JM And Shri Anil Chaturvedi, AM Assessee by: Shri Ulhas Kini Revenue by: Shri Narendra Kumar (CIT). ORDER Anil Chaturvedi, These two appeals filed by the Revenue are emanating out of a consolidated order of Commissioner of Income Tax (A) II, Pune dt. 10.11.2014 for the assessment years 2010-11 and 2011-12. 2. Before us, at the outset Ld.D.R. submitted that though the appeals filed by the Revenue are for different assessment years but the facts and issues involved in both the appeals are identical except for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract on which tax was deductible u/s 194C. 4. The Ld. CIT(A) erred in considering that if the share of profit is determined in the Joint Venture Agreement, then it cannot be anything by AOP and where the charge is on the income of the AOP, in such status, the AO has no choice but to tax it irrespective of the fact 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 the decision of the Hon'ble 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. 5. The Ld. CIT(A) ought to have dismissed the appeal of the assessee and allowed the appeal of the Revenue on the facts and in the circumstances of the case. 4. All the grounds being inter-connected are considered together. 5. AO noticed that during the year the total contract receipts was ₹ 31.43 crores (rounded off) out of which contracts amounting to 8.40 crores (rounded off) and 23.03 crores was sub-let to B.T.Patil and sons Belgaum Construction Pvt. Ltd., and N.V. Kharote Construction Pvt. Ltd., respectively. AO also notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tracts from third party which, in turn, was executed by the two members of AOP. The plea of the assessee AOP was that it was constituted for obtaining work and receiving payments against the said work done by the constituents of the AOP and the said payment was to be distributed in the agreed ratio between the two members of the AOP for carrying out the work. Such assignments of the work to the members as per the Memorandum of Understanding agreed upon is not equivalent to sub-contract and as such the assessee AOP was not liable to deduct tax at source out of the amount distributed amongst the members of the AOP in the agreed ratio of share. The Assessing Officer, while deciding the issue in the hands of the assessee, had given an office note to the effect that in the case of M/s. Swapnali RDS Joint Venture (supra), similar addition under section 40(a)(ia) of the Act has been made for the assessment year 2008-09 which has been deleted by the CIT(A)-II, Pune. Department has filed appeal against this order to ITAT and the matter is pending before ITAT. To keep the issue alive in other cases also, the similar addition is being made in this case also. The facts and circumstances arisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 40% for M/s.Progressive Contraction Ltd. In this background it was explained that the contract account and the Balance Sheet of the joint venture reveals nothing but apportionment of contract receipts, 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 was submitted that there was no relationship of contractor and subcontractor between the joint venture and its two members. Therefore, there was no question of applicability of TDS provisions u/s.194C of the Act. The assessee also explained why a returns were filed by the joint venture as AOP. It was explained that it was done to pass on the credit of TDS to the members on the basis of tax apportionment certificates who have accounted for the corresponding contract revenue in their respective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of CIT vs. Ambuja Darla Kashlog Mangu Transport Cooperative Society (2009) 227 CTR 299 (HP). 7. In the background of the tax apportionment certificates issued by the Assessing Officer, it was stated on behalf of the assessee that the Assessing Officer has marked copy of this certificate to the members of the joint venture as well as to their respective Assessing Officers, which shows that the Assessing Officer has applied his mind and consciously accepted the fact that the joint venture AOP was for the distribution of receipts amongst its constituents in proportion of their work sharing. Therefore, 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 167B of the Act. The assessee also filed details of the returns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the above discussion, 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 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 same in their own cases. Moreover, there was no Profit and Loss Account in the assessee's case and there was no claim of any expenditure. Therefore, there was no question 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 the Karnataka High Court 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could also make its own profit. HHC's work and income arising therefrom was quite separate and independent of the applicant's work and income. If the cost incurred by the HCC or the applicant was more than their income, each party will have to bear its loss without any adjustment from the other party. The association of the petitioner company with HCC was undoubtedly for mutual benefit but such association will not make them a single assessable unit 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 HCC. There is no control or connection between the work done by the applicant and HCC. 8. On the facts hereinabove, the applicant and HCC cannot be treated as an AOOP for the purpose of levy of income-tax. The applicant will be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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