2018 (9) TMI 949

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....]. The assessment for impugned AY was framed by Ld. Income Tax Officer -17(2)(1), Mumbai [AO] u/s 143(3) of the Income Tax Act,1961 on 30/03/2015 wherein the income of the assessee was determined at Rs. 48.48 Lacs after sole addition of Rs. 46.24 Lacs as against returned income of Rs. 2.23 Lacs filed by the assessee on 25/09/2012. The assessee has been assessed as Association of Person [AOP] and was engaged in the business of carrying out construction project. The sole addition of Rs. 46.24 Lacs as made by Ld. AO is the sole subject matter of this appeal. 2. The material on record reveals that the assessee AOP is consortium / Joint Venture between M/s Pratibha Industries Limited [in short 'Pratibha'] & M/s Italian-Thai Development Public C....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....efore us. 4. The quantum of such payment made by the assessee in the impugned AY is Rs. 46.24 Lacs and the assessee, during assessment proceedings, defended the same before Ld. AO on the plea of business expediency. At the same time, the assessee sought direction of Ld. JCIT-17(2) in terms of Section-144A wherein Ld. JCIT, inter-alia, concluded that the profits, if any, should be distributed to the members of AOP only after the payment of taxes and further no payment should be made to the members before payment of tax if no services for the same has been rendered by its members. The assessee defended the same by raising various contentions, which have been extracted in the quantum assessment order. However, not convinced, Ld. AO disallowed....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... on the other entity, which is also not in dispute. No material has been placed on record to suggest that ITD has provided any real services under the contract except lending its association / name against which it has been paid impugned leadership fees @3.5%. The assessee, all along has justified the same on the ground of commercial expediency. However, we find that the assessee was an AOP and the provisions of Section 40(ba) specifically disallow payment made by AOP to its member on account of interest, salary, bonus, commission or remuneration, by whatever name called. Secondly, upon careful consideration of the factual matrix, we find that the impugned payment were mere appropriation of profits and could not be allowed as a deductible ....