2014 (2) TMI 510 - AT - Income Tax

Tribunal directs bank account verification for TDS liability in Joint Ventures

DCIT Versus M/s MADHUCON SINO HYDRO, HYDERABAD

DCIT Versus M/s MADHUCON SINO HYDRO, HYDERABAD - TMI Issues involved:1. Interpretation of provisions under section 194C of the Income Tax Act regarding tax deduction at source for Joint Ventures.2. Determination of liability to deduct TDS for Joint Ventures formed for obtaining contracts.Analysis:1. The appeals were filed by the department against separate orders of the CIT(A)-II, Hyderabad for assessment years 2005-06 to 2007-2008 and 2009-2010, involving common issues. The department questioned the correctness of the CIT(A) in distinguishing between Joint Ventures formed for obtaining a contract and other Joint Ventures, and in concluding that Joint Ventures formed for obtaining a contract have no liability to deduct TDS. The facts in the case pertained to a Joint Venture engaged in civil contract work, where the Assessing Officer found TDS not deducted on advances paid to constituents. The CIT(A) allowed the appeal based on a previous decision by the ITAT, holding no liability to deduct TDS for payments made to constituents.2. The Tribunal analyzed the facts and previous decisions to determine liability for TDS deduction. It was established that the Joint Venture was formed solely to obtain contracts, with constituents executing the work independently. The Tribunal emphasized that if constituents execute the work without the Joint Venture retaining any profit, there may be no TDS liability. Citing previous decisions, the Tribunal reiterated that in such cases, the profit should be assessed in the hands of individual constituents, not the Joint Venture. However, the Tribunal noted the need for the assessee to prove that the Joint Venture did not execute the work and did not retain any profit. As conclusive evidence was lacking, the Assessing Officer was directed to verify bank accounts to ascertain if the entire contract amount was passed on to constituents without retaining profit.3. The Tribunal allowed the Revenue's appeal for statistical purposes, directing verification of bank accounts to determine TDS liability. The decision in one appeal was applied to others with identical facts, remitting the matter to the Assessing Officer for further examination. The Tribunal emphasized the importance of verifying if the Joint Venture passed on the entire contract amount to constituents to decide on TDS liability. The appeals of the Revenue were allowed for statistical purposes, maintaining consistency with the decision in the initial appeal.This detailed analysis of the judgment highlights the interpretation of provisions under section 194C and the determination of TDS liability for Joint Ventures formed for obtaining contracts, providing a comprehensive understanding of the legal issues involved.