TaxTMI 
TaxTMI 
2018 (2) TMI 593
X X X X Extracts X X X X
X X X X Extracts X X X X
....eal. 2. The brief facts of the case are the assessee has filed the return of income declaring NIL income on 24.9.2013. Later on , the case of the assessee was selected for scrutiny as per CASS cycle and a notice u/s. 143(2) of the Income Tax Act, 1961 (hereinafter referred as the Act) was issued on 05.9.2014. Subsequently, notice u/s. 142(1) of the Act alongwith a questionnaire was issued on 10.7.2015. In response to the notices, the A.R. of the assessee appeared the assessment proceedings from time to time and filed the details including copy of return, computation of income, Tax Audit Report in Form 3CB and CD and its annexure with balance sheet and profit and loss account. In this case, the assessee is a joint venture constituted between Kalindee Rail Nirman (80%) and Karthik Nirman Pvt. Ltd. (20%) vide an agreement dated 30.3.2011. This JV was constituted to take a contract from railways which consisted different kinds of works of civil, electrical, signaling and telecommunication engineering. The work was awarded to this JV and it has taken a PAN in the status of an AOP. For the AY 2013-14 assessee filed a NIL return on 24.9.2013 and the assessment u/s. 143(3) of the Act wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t shown as sub-contract expenses. Audit fees of Rs. 22,060/- has been claimed However, the return has been filed without claiming any loss at Nil. The case was selected for scrutiny and the assessment was completed by AO alleging that the JV is shifting the profit to the partners by passing on 100% of the receipts. The AO has made a working based on his own assumption and presumptions that 4% of the gross earning of the JV as deemed profit and makes an assessment of income of Rs. 7,24,460/-. In the assessment order, the AO came to an erroneous conclusion that the JV is a separate entity and that it should have declared some income. The appellant is highly aggrieved by the above order and has filed this appeal before your goodself. All the grounds are pertaining to the contention of the assessee that JV is only a pass-through, entity and does not exists on its own. There is no income of the JV. It has to be assessed at Nil. The brief facts of the case 'are that the appellant is a joint venture. The same was formed so as to apply for the tender raised by South Eastern Railways. Copy of application/bid made to secure the tender is enclosed for y....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t venture's task was distinctly outlined right from the inception of the contract. No member of the JV can rather assign or transfer the interest, right or liabilities of the contract and had to perform its work on its own and the respective partners are having all resources of an power, machines and technology to execute their part of the contract. The assessee JV is formed only for this contract and will come to an end upon completion of the contract. The same is also mentioned in JV agreement at page no. 4 para 9 which reads as under:- "9. DURATION OF JOINT VENTURE AGREEMENT It shall be valid during the entire currency of the contract including the period of extension of any and the maintenance period after the work is completed and Security Deposit is released." Further it may be noted in the tender document itself that the work of the JV participants has been clarified. Each of the work done by JV participants is duly certified by the Indian Railways and then only it is billed to the JV which is further billed to the Indian Railways on exactly the same basis i. e. there is a back to back arrangement for the work done by each JV participa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndings in this regard arriving at the same conclusion which are reported as CIT vs. SMSL UANRCL (JV) [2015] 372 ITR 425 (Bom). In all the above cases It has been held that where the constituent participants make a JV to secure a contract, which is merely a pass through entity with minimal expenses, no tax liability cab be attributed by holding the subject entity JV as AOP. No net profit on % bases can be taxed as has been done in this case. 4.5 In consideration of the settled position of the law and the precedence being in favour of appellant, the grounds of appeal of the appellant are allowed." 8. After perusing the aforesaid finding, I find that the issues in dispute are squarely covered by assessee's own case for the AY 2011-12 as the facts are similar and therefore, the Ld. CIT(A) has followed the same precedence and rightly allowed the appeal of the assessee. I further find that Ld. CIT(A) has also respectfully followed the decision in the case of CIT vs. Oriental Structural Engineers P. Ltd. and KMS Constructions P. Ltd. [2015] 374 ITR 35 (Del) of the Hon'ble High Court of Delhi wherein the Hon'ble Court has approved decision of ITAT (Delhi) which had recorded....