2017 (12) TMI 190

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....gether and, therefore, a common order is passed for the sake of convenience. 2. The Brief facts, as taken from KCL AMRCL JV for AY 2012-13, are that the assessee is an AOP comprising of two members, Viz., M/s Ketan Constructions Ltd. (KCL) and AMR Constructions Ltd. (AMRCL). It was formed as a Joint Venture for securing the contract of "widening to 2 lane and improvement from Km 50/0 to 84/2000 of Govindapalli - Balimela - Chitrakonda - Sileru Road (SH-47) in Malkarjini District under L.W.E. Scheme" tendered by the Chief Engineer (DPI & Roads), Govt. of Orissa. The return was filed on a total loss of Rs. 30,888/-. It claimed itself to be a 'pass through entity' that had been only formed to obtain the contract work. 2.1 During the Cour....

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.... JV members, it was mutually agreed that each Constituent would be responsible for its part of Work. Subsequently, KCL got its part of work executed by the other constituent i.e., AMRCL. Thus, the entire gross receipt of the JV for the assessment year under consideration amounting to Rs,9,90,37,026/- was passed to AMRCL, without deduction of any tax at source. The assessee JV had not retained any commission/margin for itself. It was submitted that the said amount was duly offered as income in the return of income filed by AMRCL which had actually executed the work and paid taxes thereon. According to the assessee, a specific request had also been made to the employer, i.e. Chief Engineer (DPI & Roads) to transfer the credit of TDS made by t....

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....s of the assessee, the CIT(A) elaborately discussed the issue about the scheme of AOP and analysing the issue with various case laws, summarized her decision as under: "I. The assessee is an AOP. II. It was the contractor in the business of road construction even though the work was done through its members. III. It is liable to compute the profit arising from the contract work and pay tax on the same. IV. The members were not its 'sub-contractors' and, hence, there was no requirement of TDS on the amounts credited/paid by it to them. Consequently, the disallowance u/s 40(a)(ia) of the IT Act made by the AO is deleted. V. The remuneration paid by it to the members, i.e. the surplus over t....

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.... (Appeals) erred in holding that the income of the Appellant has to be estimated at 8% of the gross turnover. The Commissioner (Appeals) having noticed that the Appellant has not executed the works and was formed only for securing contract, ought not to have estimated the income in the hands of the Appellant. 4. The Commissioner (Appeals) erred in not following the binding decisions of the Hon'ble jurisdictional Tribunal in the case of Madhucon SinoHydro JV Vs. ACIT (ITA.No.701/H/2010, dt.27.11.2012) & DCIT Vs. Hindustan Ratna JV (ITA 1575/H/2014, dt.12.02.2015), in entirety. 5. Without prejudice to the above grounds, the rate of profit at 8% is quite absurd when the Commissioner (Appeals) herself observed that no work....

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....hat though CIT(A) has deleted the addition made by the AO, but, her finding that remuneration was paid by the assessee to the individual member for the work done by it, is not sustainable, as the Assessee on its own, is not in a position to pay remuneration to any of the member. He also submitted that estimating the profit of the business @ 8%as well as making disallowance u/s 40(ba) also is not proper. According to him, the provisions of section 40(ba) are also not applicable to the assessee's case as business has not generated any profit to make any such payment to the members of the JV. 8. Ld. DR, on the other hand, relied on the order of AO. 9. Considered the rival submissions and perused the material facts on record. The two enti....

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....enue is dismissed. 9.2 Coming to the findings of the CIT(A) that in the case of assessee estimate of the profit of the business as well as disallowance u/s 40(ba) is the only way out, the fact that JV is created only to secure the orders and nowhere on record, we find that the assessee has actually executed the work. JV is formed merely to secure the orders and not to execute the orders. When the assessee has not executed the order, there is no question of making any profit. As the assessee has not shown any profit in the business and the assessee being used as a Passover entity and set up only to secure the order, the AO has the option of disallowing all the administrative expenses, if any. Since the assessee has not shown any profit no....