TaxTMI 
TaxTMI 
2016 (11) TMI 118
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....the matters and additionally one more question can to be formulated and the same is as to: "whether considering the facts and circumstances of the case Section 40(a)(ia) of the Income Tax Act, can be made applicable or not ?" 3. Hence all the group of appeals needs to be considered on the basis of the above referred two questions. 4. The short facts are that the assessee is a PWD Contractor and as per the assessee, he has entered into agreement with Sri Bapuji Construction, whereby a particular percentage of the income of the contract is to be shared in different proportion. The assessee has shown his income to the extent of the amount received by it. However, in the assessment proceedings, the Assessing Officer found that as the TDS was deducted of the total amount of the contract (received by the assessee as well as by Sri Bapuji), the rest of the amount (amount of the contract minus the amount already shown in the return by the assessee) was disallowed and the same was added to the profit/income and the assessment order was passed. In the appeal before CIT (Appeals), it was held that the amount received by Sri Bapuji could not be assessed as the assesse's income and therefor....
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..... The first is a case in which the income never reached the assessee, who even if he were to collect it, does so, not as part of this income, but for and on behalf of the person to whom it is payable. 6.1 Thus to apply the doctrine of diversion of income by overriding title, the first and foremost condition to be satisfied is the nature of the assessee's obligation, whether by the obligation, the income is diverted before it reaches the assessee, or whether the income is required to be applied to discharge an obligation after such income reaches the assessee. In the case before us, we find that the agreement is entered into by the parties even before the contract is awarded and the receipt can be appropriated by the second party even without any further approval from the assessee. Whether these factors can be said to determine the nature of the obligation? In our opinion, they do not. The real determinative factor is the point at which the second party gets a right to receive the income. The agreement would be ineffective and non- executable unless and until the contract is awarded to the assessee and the same is executed in accordance with the terms....
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....ing the contract amount received from the Govt. departments to the sub- contractors, who have actually spent the amounts and therefore such payments do not have a revenue character and the provisions of section 40A(3) cannot apply. He also drew our attention to the decision of the Hon'ble jurisdictional High Court in the case of CIT Vs. Balaji Engineering and Construction Works 323 ITR 351[Kar], where the finding of the Tribunal was upheld. 8. The learned Departmental Representative, on the other hand, submitted that the assessee ought to have considered all the receipts as his income and claimed the payment made to Sri Bapuji as deduction thereafter and the fact that entire TDS has been deducted from his payment proves that the contention of the assessee that it is not showing the receipts and not claiming the payment is not correct. As regards the decision relied upon by the assesseee, he submitted that it relates to disallowance u/s 40A(3) whereas the issue before us is with regard to disallowance u/s 40a(ia) and therefore, the said decision is not applicable to the facts of the case before us. 9. Having heard both the parties, we find that the assessee has not claimed....
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....e taken a similar view and the appeals of the Revenue were dismissed. Under the circumstances, the rest of the appeals for the different assessment year are preferred by the Revenue before this Court. 6. We have heard Mr.E.I.Sanmathi, learned Counsel appearing for the appellants-Revenue and Mr.Chythanya K.K., learned Counsel appearing for the respondent-assessee in all the appeals. 7. As such, the matters can be examined in light of question no.1. The Tribunal, after appreciation of the evidence has found that the agreement between the assessee and Bapuji was more in the nature of joint venture and was not a sub-contract. Such a finding as such in our view is a finding of fact after appreciation and re-appreciation of the evidence initially recorded by the Commissioner (Appeals) and said finding after re-appreciation of the evidence is confirmed by the Tribunal. It is hardly required to be stated that, for the issues based on finding of fact, the Tribunal is the ultimate fact finding authority and this court will not upset the finding of fact unless, such finding of fact is perverse or is contrary to the material on record or based on conjectures and surmises. 8. The lear....