TaxTMI 
TaxTMI 
2014 (2) TMI 138
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....unts were not reflected in the profit & loss account prepared by the assessee. Only some administrative expenses totaling Rs.77,961/- had been reflected in the debit side and the loss was claimed. The AO had recast the P&L of the Assessee by including the total contract value and deducting the amounts of contract allocated between the two constituents. Out of this the AO has disallowed (i) Rs. 2,71,38,750/- as not being reflected in the hands of MPL- one of the constitutents (ii) Rs. 24,96,00,027/- being the contract amounts for whicuh TDS was not deducted and (iii) Rs. 2,71,38,750/- being amount due to the Chinese constituent of the consortium on the ground TDS was paid in the subsequent year and (iv) Rs. 86,39,27,480/- on the ground that TDS was paid belatedly. The AO determined the taxable income of the Assessee at rs. 116,77,27,038/- 3. The mains issue is whether the appellant being an AOP/JV is liable to deduct tax at source from the payments made to the constituent partners. The AO has relied on the decision of Hon'ble ITAT, Hyderabad in the case of KCT-PES, JV Vs. ITO Ward 14(2), Hyderabad in ITA No.779 and 780/Hyd/2003. The issues raised by the appellant before the ITAT ....
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....8) decided by him wherein he had not agreed in principle with the contention of the appellant JV that it is not liable for TDS u/s.194C since the entire turnover was shown by the constituent. Accordingly, to maintain consistency in stand the CIT(A) held that the appellant was required to deduct tax at source from the payments made by it to the JV constituents. That as per facts available on record, the appellant JV in this appeal has in fact deducted tax at source on a portion of the payment made by it to its constituents JV M/s. Madhucon Projects Ltd. Hence the CIT(A) has held that the Assessee is liable to deduct tax at source in respect of contract works carried out by the constituents. Consequently the CIT(A) has confirmed the disallowance of certain payments to constituents on the ground that Tax has not been deducted at source by the AOP. 7. Aggrieved the Assessee is in appeal. The Assessee AOP was formed by the two constituents only for the purpose of obtaining the contracts from the government. But once the contract was obtained, the work to be carried out by each of the constituent is clearly demarcated. The respective constituent carries out the work earmarked to them ....
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....ITAT-VIZAG. The AAR in the case of In re Mitsubushi Corpn 323 ITR 277 has held that under similar circumstances when an AOP was formed only for the purpose of getting orders and the members carried out specific portions of the project, the profit of the project should be assessed in the hands of the individual constituents and not in the hands of Consortium AOP. The Hyderabad tribunal has held in the case of ACIT v M/s Pardhana Construction Co in ITA No 1046/Hyd/2010 dated 7.01.2011 (for the AY 2006-07) and in the case of M/s Soma Enterprises v DCIT in ITA No 1116/Hyd/2010 dated 15.06.2011 have held that if the constituent has offered income from the JV, then credit must be given to the TDS made by the client, even though the TDS certificates may be in the name of the AOP. This clearly shows that the profits from the JV are to be offered by the respective constituents and the constituents shall be entitled to the TDS credit deducted by the client, even if such TDS certificates are in the name of the AOP. In the circumstances there is no question of AOP granting works contract to the constituents, requiring deduction of tax at source. 9. In the circumstances we hold that the Asse....
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....ng the work given to it by the assessee. Apparently during the assessment proceedings, the assessee vide its letter dated 2.12.2008 submitted that TDS was provided and paid at the time of remittance of the amount to China. It was submitted that the remittance was sent in subsequent years and not in the year under consideration. The AO therefore held that there was lapse on the part of the assessee with regard to tax deduction at source in terms of section 195 of the Act. He therefore disallowed the amount as per section 40a(i) of the Act. This was confirmed on appeal by the CIT(A) 12. In view of our conclusion earlier that the profits of the individual constituents are to be assessed in their individual hands and there is no question of the Assessee deducting tax at source while passing on the payments to the constituents towards their share of work carried out by them, the disallowance of Rs. 2,71,38,750/- being the share of receipts of the chines concern towards their share of work carried out in the hands of the Assessee is deleted. However, it has to be verified whether the Chinese concern has offered this income for tax in India. If the Chinese concern has not filed income ....