TaxTMI 
TaxTMI 
2018 (9) TMI 1885
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....aha Infra Ltd and profit sharing ratio among the members is 60:20:20 respectively. During the year under consideration the assessee was awarded two contracts by East Central Railway (Construction Organization). It filed its return of income on 29.09.2012 declaring total income of Rs. 3,20,441/-. During the financial year 2010-11, the JV was awarded two contracts by East Central Railway (Construction Organisation) (referred to as 'ECR' in this order) with the following scope. i. Civil Construction of major and minor bridges both in case of original and diverted alignment on pile/well foundation. The work assigned also includes construction of station buildings and level crossing between Saraigarh to Forbesganj (Bihar) for a value of Rs. 67....
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....d 20.04.2010. He, therefore, asked the assessee to explain as to why the payments made to the parties should not be covered under the provisions of section 40 A (2) (b) with respect to reasonableness. 5. Rejecting the various explanations given by the assessee and relying on various decisions the Assessing Officer made addition of Rs. 93,12,189/- by computing the profit of Joint Venture at the rate of 4% of the gross receipts on the ground that the assessee had given the subcontract to persons specified u/s 40A (2) (b) of the IT Act. 6. In appeal the Ld. CIT(A) after obtaining the remand report from the Assessing Officer deleted the addition by observing as under :- (i) I have given careful consideration to the arguments advanced in thi....
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.... of CIT (A), the revenue is in appeal before the Tribunal by raising the following grounds of appeal :- 1. "Whether the Ld. CIT (A) was right on facts and in law in deleting the addition of Rs. 93,12,189/- made by the Assessing Officer by computing the profit of the Joint Venture @ 4% of the gross receipts as the assessee had given the payment to the persons specified u/s 40 A (2) (b) of the Income Tax Act, 1961. 2. Whether the Ld. CIT (A) was right on facts and in law in stating that JV is merely a pass through entity with minimal expenses, no tax liability can be attributed to JV as AOP. 3. That the appellant craves for the permission to add, delete or amend grounds of appeal before or at the time of hearing of appeal." 8. Th....
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....A(2)(b) of the Act which are applicable to the expenditure and not to the receipts and the ld. CIT(A) rightly deleted the same. A similar issue having identical facts has already been adjudicated by the ITAT Delhi Bench "SMC", New Delhi vide order dated 21.11.2016 in ITA No. 2326/Del/2016 for the assessment year 2011-12 in the case of ITO, Ward-2(2), Gurgaon Vs KEC-Asiakom UB (JV), Gurgaon wherein the relevant findings are given in paras 5 & 6 of the order dated 21.11.2016 which read as under: "5. It is noticed that the AO made disallowance u/s 40A(2)(b) of the Act by opining that the assessee should have earned income from subcontracting. At this stage, it is relevant to note the prescription of the relevant part of Section 40A(2), which....
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....the case. Admittedly, the Assessing Officer has invoked the provisions of section 40A(2)(b) as the contract had been given to associated party. I find that under identical circumstances the Tribunal in the case of Kec-Asiakom UB (JV) (supra) has observed as under:- "4. I have heard the ld. AR and perused the relevant material on record. None is present on behalf of the Revenue. In fact, there is no one to attend the proceedings from the side of the Revenue in all the cases fixed before the Bench today. The ld. AR insisted that the appeal be disposed of. I am agreeable with the contention of the ld. AR and, accordingly, proceeding to dispose of the instant appeal ex parte qua the Revenue. 5. It is noticed that the AO made disallowance ....