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Issues: Whether payments made by a joint venture to its constituent member for execution of allocated work attracted deduction of tax at source under section 194C and, on failure to deduct tax, disallowance under section 40(a)(ia) was justified.
Analysis: The joint venture did not carry out the contract work as an independent executing entity but functioned as a vehicle for apportioning contract receipts to its members in accordance with the work actually performed by them. On identical facts in earlier years, the same issue had been decided in favour of the assessee, and the record did not show any material change in the factual matrix for the year under appeal. Following the earlier co-ordinate Bench decisions and the settled approach that a mere distribution of receipts to members, without a real contractor-subcontractor relationship, does not attract the TDS obligation under section 194C, the disallowance under section 40(a)(ia) could not be sustained.
Conclusion: The disallowance under section 40(a)(ia) was not warranted and the Revenue's challenge failed.
Ratio Decidendi: Where a joint venture merely allocates contract receipts to its members for the work actually executed by them and there is no genuine contractor-subcontractor relationship, section 194C is not attracted and a corresponding disallowance under section 40(a)(ia) cannot be made.
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