TaxTMI 
TaxTMI 
2017 (11) TMI 1873
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....6 and the total income was determined at Rs. 23,85,52,580/-. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who vide order dt.12.11.2015 (in Appeal No.PN/CIT(A)-3/ITO Wd-3(2), Pn/870/2014-15) decided the issue in favour of the assessee. Aggrieved by the order of Ld.CIT(A), Revenue is now in appeal before us and has raised the following effective ground : "Whether the Ld.CIT(A) was correct in law and on facts in deleting the addition made by the AO on account of work receipts of Rs. 23,85,52,584/- shared by the Joint Venture members, u/s 40(a)(ia) of the I.T. Act, 1961." 3. During the course of assessment proceedings, AO noticed that during the year assessee had received contract receipts of Rs. 23,85,52,584/- which was distributed between the members as under : Subhash Projects & Marketing Ltd., Rs. Nil B.T. Patil & Sons Belgaum Construction Pvt. Ltd. Rs. 21,16,84,449/- N.V. Kharote Construction Pvt. Ltd. Rs. 2,68,68,135/- AO was of the view that assessee had assigned the work allotted to its member companies and as such the arrangement between the assessee and the entities was nothing but a contract and the assessee being....
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....0-11 & 2011-12. Since the Hon'ble Bench has already decided the matter in similar cases, therefore, here 100 it is held that the income has to be taxed in the hands of the members. 3.3 Reference is also invited to the recent High Court of Andhra Pradesh judgment in the case of CIT Vs Bhooratnam & Company reported at 262 CTR 405 (AP). The question addressed to the High Court was that whether the credit for TDS based on the certificates produced in the name of the joint venture and Directors is not in accordance with Rule 37BA under the Income-tax Rules and credit could be denied holding that these do not relate to the assessee firm or company. The Hon'ble High Court after reviewing the evidence gave the following finding: "20. The revenue cannot be allowed to retain tax deducted at source without credit being available to anybodv. If the credit of tax is not allowed to the assessee and the joint venture .has not filed a return of Income then the credit of TDS cannot be taken by anybody. This is not in the spirit and intention of law. 21. Therefore, in our view the Assessing Officer erred in denying the benefit of the TDS mentioned in the TDS certificate filed by the....
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.... that it was constituted for obtaining work and receiving payments against the said work done by the constituents of the AOP and the said payment was to be distributed in the agreed ratio between the two members of the AOP for carrying out the work. Such assignments of the work to the members as per the Memorandum of Understanding agreed upon is not equivalent to sub-contract and as such the assessee AOP was not liable to deduct tax at source out of the amount distributed amongst the members of the AOP in the agreed ratio of share. The Assessing Officer, while deciding the issue in the hands of the assessee, had given an office note to the effect that in the case of M/s. Swapnali RDS Joint Venture (supra), similar addition under section 40(a)(ia) of the Act has been made for the assessment year 2008-09 which has been deleted by the CIT(A)-II, Pune. Department has filed appeal against this order to ITAT and the matter is pending before ITAT. To keep the issue alive in other cases also, the similar addition is being made in this case also. The facts and circumstances arising in the present appeal are identical to the facts and circumstances of the case before the Tribunal in M/s. Swa....
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.... joint venture reveals nothing but apportionment of contract receipts, assets and liabilities between the members. There was no expenditure booked in the contract account nor any Profit and Loss Account prepared for the purpose since there did not arise any profit or loss to the assessee per se. The Joint venture transferred not only the gross revenue but also the corresponding TDS to its members in the ratio of their work done by individual members for which the appointment certificate was duly issued every year by the Assessing Officer. In this background it was submitted that there was no relationship of contractor and sub-contractor between the joint venture and its two members. Therefore, there was no question of applicability of TDS provisions u/s.194C of the Act. The assessee also explained why a returns were filed by the joint venture as AOP. It was explained that it was done to pass on the credit of TDS to the members on the basis of tax apportionment certificates who have accounted for the corresponding contract revenue in their respective returns. It was also submitted that 'Nil' income arising in the hands of the AOP is confirmed by the action of the Assessing O....
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....e tax apportionment certificates issued by the Assessing Officer, it was stated on behalf of the assessee that the Assessing Officer has marked copy of this certificate to the members of the joint venture as well as to their respective Assessing Officers, which shows that the Assessing Officer has applied his mind and consciously accepted the fact that the joint venture AOP was for the distribution of receipts amongst its constituents in proportion of their work sharing. Therefore, there was no applicability of provisions of TDS u/s.40(a)(ia) of the Act. 8. Further, the assessee, vide its submission dated 06.09.2010, made comparison of the tax rates applicable to domestic companies, being joint venture partner in their individual capacity and the tax rates applicable to the AOP. However, in submission dated 21.10.2010, it was explained that tax rates in the case of domestic company and the AOP would be the same in this case. This was due to applicability of section 167B of the Act. The assessee also filed details of the returns of income of the two corporate entities being joint venture members, alongwith acknowledgements of their I.T. returns, which revealed that both of them h....
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....s, provisions of section 194C were not applicable for the purpose of TDS. The two corporate entities forming joint venture were already being assessed since A.Y. 2000-01 onwards on their respective shares and TDS apportionment certificates were also issued by the Assessing Officer every year for these eight years including the current assessment year to enable them to claim the same in their own cases. Moreover, there was no Profit and Loss Account in the assessee's case and there was no claim of any expenditure. Therefore, there was no question of any disallowance under the provisions of section 40(a)(ia)of the Act. Moreover, disallowance u/s. 40(a)(ia) made by the Assessing Officer cannot be sustained. In effect, the method adopted by the Assessing Officer will also result in double taxation of the same contract revenue which is in violation of the Karnataka High Court decision reported in 197 ITR 321 (Kar.). This view is fortified by the decision of the ITAT Pune Bench in ITO vs. Rajdeep & PMCC Infrastructure, wherein the Tribunal has observed as under: "6. We have noted that it is an admitted position that no work is carried out by the AOP, it has acted as a conduit betw....
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.... the applicant was more than their income, each party will have to bear its loss without any adjustment from the other party. The association of the petitioner company with HCC was undoubtedly for mutual benefit but such association will not make them a single assessable unit and liable to tax as an AOP. For example, a building contractor may associate with a plumber and an electrician to execute a building project. All these persons are driven by profit-making motive. But that by itself will not make the three persons liable to be taxed as an AOP if each one has a designed and independent role to play in the building project. In the instant case, the applicant has stated that the applicant has made its own arrangement for execution of work independent from that of HCC. There is no control or connection between the work done by the applicant and HCC." 8. On the facts hereinabove, the applicant and HCC cannot be treated as an AOOP for the purpose of levy of income-tax. The applicant will be liable to be taxed as a separate and independent entity. The question No.1 is answered accordingly." 7. We are in considered agreement with the views so expressed by the Hon'ble Authori....