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TMI Blog2016 (10) TMI 1330X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-11 on 01.10.2010 declaring total taxable income at Nil. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) of the Income Tax Act, 1961 (in short 'the Act') vide order dated 03.01.2013 and the total income was determined at Rs. 15,55,39,150/-. Aggrieved by the order of the Assessing Officer, the assessee carried the matter before ld. CIT(A), who vide consolidated order dated 30.09.2014 (in Appeal No. PN/CIT(A)-II/ITO Wd- 3(1)/218/2013-14 & PN/CIT(A)-II/ITO Wd.3(1)/554/2013-14/98) decided the issue in favour of the assessee. Aggrieved by the order of ld. CIT(A), Revenue is now in appeal before us and has raised the following grounds :- "1. The order of the Ld. CIT(A) is contrary to law and to the facts and circumstances of the case. 2. The Ld. CIT(A) erred in holding that in absence of any contract or subcontract work by the Joint Venture to its members, provisions of section 194C were not applicable for the purpose of TDS without appreciating the fact that the work contract order was issued in the name of the assessee (JV) and payments were also credited to the assessee's account and henceforth reallocation of the contract betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that execution of contract was the responsibility of assessee and this sub-contracting of the work to one of the members of the AOP cannot be considered as revenue sharing arrangement. According to him, the arrangement between the assessee and its members was a sub-contract and in view of the provisions of section 40(a)(ia), the payment made by AOP to the subcontractors without the deduction of tax was liable to be taxed in the hands of the assessee by disallowing the payment under section 40(a)(ia) of the Act. He accordingly made addition of Rs. 15,55,39,150/-. Aggrieved by the order of Assessing Officer, assesses carried the matter before ld. CIT(A), who deleted the addition by holding as under :- "3.4 I have considered the submission of the appellant and perused the material available on record. The appellant has relied on order in the case of Swapnali RDS Joint Venture decided by my predecessor, for the proposition that the facts of appellant's case and the various judgements cited were identical. It has been pointed out that this case is covered in favour of the appellant wherein vide paras 3.4 to 3.14 the CIT (Appeals)-II, has decided similar issue in favour of the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ................................ 3.7 ................................ 3.8 ................................ 3.9 The appellant AOP has also got similar features. Here also the Joint Venture has been formed only for the purpose of obtaining the contract and it is merely a conduit for receiving the payment for the carried out contract. Immediately, the entire revenue is transferred to the two members forming the Joint Venture without deducting anything from the same, in accordance with the work carried out. There is no profit or loss accruing to the appellant Joint Venture, nor there was any expenditure booked in the contract account as such. The Joint Venture also does not retain any profit with itself There does not exist any subcontract agreement between the Joint Venture and the two members. In the above judgment given by the Himachal Pradesh High Court, it was observed by the Hon'ble Court that the heading and wordings of the section 194C and section 194C(2) clearly indicate that the payment should be made to a resident who was a sub-contractor, and the concept of the "sub-contract" was intrinsically linked with section 194C(2). The Hon'ble High Court held that if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly coming together and acting in cooperation with each other for the purpose of obtaining work and executing the contract, while each member carries out its own work independently, does not lead to the conclusion that an AOP for the purposes of assessment was formed. Further, that the consortium cannot be treated as an AOP for income tax purpose and the members were liable to be taxed on the basis that they were separate taxable entities. In this judgment it was noticed that the consortium members do not act as an agent of one another and the members were jointly and severally liable towards the employer (DMRC), the profit and loss were apportioned by the individual members themselves, and the common expenditure were not being incurred by them. Similar was the case with the appellant. Therefore, the ratio of this decision given by the AAR was applicable here also, though here the appellant had itself filed its returns in the status of AOP. However, as discussed above, this was for a specific purpose. Effectively, since revenue as well as the TDS credits were apportioned between the two members of the joint venture, and the two member companies were including these receipts in their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that reliance has been correctly placed on the case of Hyundai Rotem Co IN RE (2010) 323 ITR 277, which is the most recent order from the AAR, which has, in turn, relied upon on the earlier AAR ruling in the case of Van OORD ACZ.BV (supra). The appellant has also stated that the facts of the case of Geoconsultant ZT GmbH (supra) are also distinguishable with reference to the appellant's case. The appellant has explained the following, which is being repeated here for the sake of clarity : 'As regards Id AO's contention that the decision in the case of Geoconsult ZT GMBH has not been considered by the appellate authorities including ITAT we would like to bring to your kind attention the following - i) In Geoconsult ZT GMBH [(2008) 304 ITR 283], the decision in the case of Van Oord ACZ. BV [(2001) 248 ITR 399 (AAR) has been distinguished; whereas ii) In Hyundai Rotem Co. [(2010) 323 ITR 277] the decision in the case of Geoconsult ZT GMBK has been distinguished and the decision in the case of Van Oord ACZ BV [(2001) 248 ITR 399 (AAR) has been followed; and iii) The decision in the case of Hyundai Rotem Co. is more recent than that in the case of Geoconsult ZT GMBH. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te and neatly identified work areas were concerned. In such circumstances, it was held that it will not lead to taxability In the hands of the AOP. The Tribunal also placed reliance on the Advance Ruling in the case of Van Oord ACZ BV in Re (supra) and reproduced extensively from this decision. Therefore, this decision of Pune Bench of ITAT lends support to the appellant's case here. 3.14 In view of the above discussion made from para 3.3 to 3.13, including the two judgments of the Himachal Pradesh High Court cited supra; along with the two decisions of the AAR; as also the chart distinguishing between the decisions of the AAR in the case of Geoconsult ZT GMBH, Hyundai Rotem Co. and Van OORD ACZ BV vis-a-vis the case of Rajdeep & PMCC Infrastructure and the appellant's own case; filed along with the appellant's submission dt. 10-3-2011, it is held that in the absence of any contract for sub-contracting the work by the Joint Venture to its two member companies, provisions of section 194C(2) were not applicable for the purposes of TDS. The two entities forming the Joint Venture were already being assessed since the A. Y.2001-02 onwards on their respective shares, and TDS ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 in which the status was regularly shown as AOP and even in the application form for allotment of PAN it was shown as AOP. The CIT(A) noticed from the record that status was shown as AOP. However, it was not very much relevant for the purpose of applicability of provisions of section 194C since TDS provisions are applicable to all entities except individuals and HUF having gross receipts or turnover from business or profession below the prescribed limit. 6. It was further explained on behalf of the assessee that joint venture as such does not execute any contract work but were merely formed for obtaining contract work and for receiving the payment, which was immediately distributed in the ratio of the share of the work done. The actual share in the joint venture of the total work allocated was 60% for M/s.Gammon India Ltd. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionment to either of the two companies or to both the companies in the earlier years also by the Assessing Officer for enabling them to claim TDS in respective cases. The assessee, vide its submission dated 22.04.2010, furnished the details which revealed that gross revenue from this contract receipts by joint venture was accounted for in case of either or both of the two companies who were members of the joint venture in all assessment years 2001-02 to 2008-09. It was further explained by the assessee that revenue sharing was not exactly 60:40 in each year since it depends on the relative work done in the particular year. Having explained the difference between cases of contract/sub-contract, in the background of clauses of the agreement, the assessee relied on the decision of Hon'ble Himachal Pradesh High Court 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 As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. It was also contended that Hon'ble Kerala High Court in the case of Manjunath Motor Service and Canara Public Conveyances, 197 ITR 321 (Kar.) observed that method adopted by the Assessing Officer would result in double taxation of the same income since gross receipts distributed amongst the two joint venture partners was included as receipts in their respective cases and the joint venture partners had also utilised the TDS credits on the basis of apportionment certificate issued by the Assessing Officer. In 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 certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the persons receive the income jointly. In the instant case, each of the two parties has agreed to bear its own loss or retain its own profit separately. Both have agreed to execute the job together for better co-operation in their relationship with the Chennai Port Trust. The intention was not to carry out any business in common, only a part of the job will be done by VOACZ according to its technical skill and capability. The other part of the contract will be executed by HCC. The total value of the contract was Rs. 2,62,01,03,120. the applicant's share of work was valued at Rs. 44,52,78,920 (17 per cent of total value). The association with the HCC was not with the object of earning this income but for co ordination in executing the contract so that HCC 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's own case for assessment year 2009-10. He placed on record the copy of the order of Tribunal in ITA Nos.942 to 944/PN/2013 order dated 28.11.2014 and pointed to the relevant findings of the Tribunal. He therefore submitted that following the decision of the Co-ordinate Bench of the Tribunal in assessee's own case the appeal of the Revenue needs to be dismissed. The ld. DR, on the other hand, supported the order of Assessing Officer. 6. We have heard the rival submissions and perused the material on record. We find the ld. CIT(A) while deleting the addition had noted that the facts of the present case are identical to that of Swapnali RDS Joint Venture and he had followed the decision of predecessor in assessee's own case for assessment year 2009-10. We find that the Co-ordinate Bench of the Tribunal in assessee's own case for assessment year 2009-10 has decided the issue in favour of the assessee by holding as under :- "10. We have heard the rival and perused the records. In the facts of the present case, the issue arising before us is in relation to the application of provisions of section 40a(ia) of the Act. The assessee AOP had received contracts from third party which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al income, it was correctly mentioned as AOP. It was explained that I.T. Return Form No.5 was actually applicable for firms, AOPs and BOIs. Therefore, this error might have occurred. The assessee has also filed computation of total income alongwith acknowledgements from A.Y. 2002-03 to A.Y. 2006-07 in which the status was regularly shown as AOP and even in the application form for allotment of PAN it was shown as AOP. The CIT(A) noticed from the record that status was shown as AOP. However, it was not very much relevant for the purpose of applicability of provisions of section 194C since TDS provisions are applicable to all entities except individuals and HUF having gross receipts or turnover from business or profession below the prescribed limit. 6. It was further explained on behalf of the assessee that joint venture as such does not execute any contract work but were merely formed for obtaining contract work and for receiving the payment, which was immediately distributed in the ratio of the share of the work done. The actual share in the joint venture of the total work allocated was 60% for M/s.Gammon India Ltd. and 40% for M/s.Progressive Contraction Ltd. In this background ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide letter No.Pn/Wd.3(4)/TC/07-08 dated 26.11.2008 of the Assessing Officer in which the Assessing Officer has allowed apportionment of entire TDS of Rs. 9,26,588/- during the year to M/s.Gammon India Ltd., since entire work during the year was carried out by it. Similarly, there has been apportionment to either of the two companies or to both the companies in the earlier years also by the Assessing Officer for enabling them to claim TDS in respective cases. The assessee, vide its submission dated 22.04.2010, furnished the details which revealed that gross revenue from this contract receipts by joint venture was accounted for in case of either or both of the two companies who were members of the joint venture in all assessment years 2001-02 to 2008-09. It was further explained by the assessee that revenue sharing was not exactly 60:40 in each year since it depends on the relative work done in the particular year. Having explained the difference between cases of contract/sub-contract, in the background of clauses of the agreement, the assessee relied on the decision of Hon'ble Himachal Pradesh High Court in the case of CIT vs. Ambuja Darla Kashlog Mangu Transport Cooperative So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 321 (SC) wherein it was observed that strictly speaking the principle of res judicata does not apply to income tax proceedings since each assessment year was a separate unit in itself and what is decided in one year may not apply in the following year. It was further contended that where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. It was also contended that Hon'ble Kerala High Court in the case of Manjunath Motor Service and Canara Public Conveyances, 197 ITR 321 (Kar.) observed that method adopted by the Assessing Officer would result in double taxation of the same income since gross receipts distributed amongst the two joint venture partners was included as receipts in their respective cases and the joint venture partners had also utilised the TDS credits on the basis of apportionment certificate issued by the Assessing Officer. In view of the above discussion, CIT(A) was justified in holding that in absence of any contract o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant cannot be treated as a partnership which can only be created by an agreement. Nor can it be treated as an AOP. In order to constitute an AOP there will have to be common purpose or common action and the object of the association must be to produce income jointly. It is not enough that the persons receive the income jointly. In the instant case, each of the two parties has agreed to bear its own loss or retain its own profit separately. Both have agreed to execute the job together for better co-operation in their relationship with the Chennai Port Trust. The intention was not to carry out any business in common, only a part of the job will be done by VOACZ according to its technical skill and capability. The other part of the contract will be executed by HCC. The total value of the contract was Rs. 2,62,01,03,120. the applicant's share of work was valued at Rs. 44,52,78,920 (17 per cent of total value). The association with the HCC was not with the object of earning this income but for co ordination in executing the contract so that HCC could also make its own profit. HHC's work and income arising therefrom was quite separate and independent of the applicant' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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