AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (5) TMI 303
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....r own work and there exists no association between them. Merely participation in the tender jointly does not mean that there is an AOP. Similarly, merely preparing of accounts and having surplus of some account also that there was an AOP. The Delhi High Court has an occasion to discuss the AOP issue in the similar circumstances in the case of Linde AG Linde Engineering Division reported in 365 ITR 1 (Copy of order enclosed). The CSDT vide circular No. 7/2016. Dated 07/03/2016 has issued the detailed guidelines in this regard. Later, the department withdrew the SLP filed in this case before the Supreme Court by its order dated 26.08.2016 reported in 73 taxmann.com 212 on the basis of above said circular. 2. That the JV itself is not an AOP and any payment made by JV to the JV partner does not fall under the purview of section 40A (2). The payment made by the JV to the JV partner is not expenditure but it is a diverted income. The High Court of Delhi in the case of Oriental structure Engineering Private Limited as reported in 58 taxmann 77 (copy enclosed) and the High Court of the Jammu and Kashmir in the case of Soma TRG joint venture as reported in 86 taxmann 83 (copy enclose....
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....kom UB (JV) for AY 2011-12. For the sake of convenience, the relevant findings of the ITAT, SMC Bench in the case of KEC PLR KPIPL-JV vs. ITO and KEC AsiaKom UB JV vs. ITO decided in ITA No. 7763/Del/2018 (AY 2015-16) and 7764/Del/2018 (AY 2015-16) vide order dated 09.5.2019 are reproduced as under:- "13. I have considered the rival arguments made by both the sides and perused the relevant material on record. The assessee is a joint venture of KEC International Limited and M/s Asia Communication & Electronics SDN BHD and M/s Unique Builders who are engaged in the business of civil construction and all the parties entered into JV agreement dated 13.07.2010 for the execution of the contract awarded by Eastern Railways Kolkata. KEC International Limited was appointed as the lead partner of the JV. I find the assessee filed return of income declaring a total loss of Rs. 29,295/- by giving the following financial details:- SI. No. Particulars Amount (Rs.) 1 Revenue from operations (1,28,99,176) 2 Paid to the JV partner (1,28,81,117) 3 Other Expenses 11,236 4 Profit/(Loss) (29,295) 14. I find the Assessing Officer disallowed expenditure @ 4% of the total expe....
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....d the Assessing Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction.' 6. On going through the mandate of the above provision, it is clear that the disallowance under this section is made in respect of the expenses incurred or payments made which are not deductible. This section has no application to income aspect of the assessee. As the AO has made disallowance u/s 40A(2)(b) in respect of income which the assessee in his opinion ought to have earned rather than certain expenses incurred, I am of the considered opinion that the provisions of this section are not attracted. I, therefore, uphold the impugned order on this score deleting the disallowance." 9. The aforesaid order was followed in the assessee's own case in ITA No. 5943/Del/2016 for the assessment year 2012-13 vide order dated 28.02.2017 wherein it h....
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.... of assessee." 10. So, respectfully following the aforesaid referred to order, I do not see any merit in this appeal of the department. 11. In ITA Nos. 7045 & 7046/Del/2017, identical issue having similar facts is involved, therefore, the findings given in the former part of this order shall apply mutatis mutandis. 12. In the result, the appeals of the department are dismissed." 10. Since the order of the CIT (A) is in consonance with the decisions of the Tribunal in other group concerns, therefore, in absence any contrary material brought to our notice against the orders of the Tribunal and considering the fact that the Ld. CIT (A) while deciding the issue has followed the decisions of the Hon'ble High Court, therefore, we find no infirmity in the order of Ld. CIT(A). Accordingly, the same is upheld and the grounds raised by the revenue are dismissed." 15. Since the facts of the impugned appeal are identical to the facts of the case decided by the Tribunal in the case of ITO vs. M/s KEC-Delco Varaha (JV) cited (supra) therefore, respectfully following the same, I set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition. The grounds raised....
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....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 is as under:- . '40A(2)(a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub-section, and the Assessing Officer is of opinion that such expenditure is excessive or 'unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction. 6. On going through the mandate of the above prctnsion; it is clear that the disallowance under this section is made in respect of the expenses incurred or payments made which are not deductible. This section has no app....