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2018 (2) TMI 2010
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.... JV was formed as special purpose of vehicle for making a bid for construction of dam at Charthane for Khura- Varoda Sinchan Yojana. The work was allotted to the assessee. The assessee received Rs. 38 Crores as contract charges. The contract charges were distributed between the constituent members of JV i.e. the assessee, for executing the work. The assessee for the impugned assessment year filed its return of income on 01.08.2012 declaring total income as 'Nil'. The case of the assessee was selected for scrutiny. During the course of scrutiny assessment proceedings, the Assessing Officer disallowed Rs. 38 Crores paid by assessee to its members u/s. 40(a)(ia) of the Income Tax Act, 1961 ( hereinafter referred to as 'the Act'). 3. Aggrieved by the assessment order dated 24.11.2014, the assessee filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) by following the order of Tribunal in the case of assessee's sister concern, M/s. Shraddha & Mahalaxmi Joint Venture in ITA No. 942/PN/2013, decided on 28.11.2014, wherein identical issues were involved granted relief to the assessee. Against the findings of Commissioner of Income Tax (Ap....
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....respective share. The Assessing Officer, while deciding the chargeability of income in the hands of the assessee did observe that in the case of M/s. Swapnali RDS Joint Venture (supra), similar addition under section 40(a)(ia) has been made for the assessment year 2008-09 which has been deleted by the Pune Bench of the Tribunal. However, the Department has not accepted the order of the Tribunal and to keep the issue alive, the amount paid by the AOP to its member without deduction of tax is disallowed and added back to the total income of the assessee in terms of section 40(a)(ia) of the Act. We notice that in the identical facts and circumstances, the Co- ordinate Bench of the Tribunal in the case of ITO vs. Shraddha & Mahalaxmi Joint Venture and Others (supra) after making reference to several judicial precedents including M/s. Swapnali RDS Joint Venture (supra) has affirmed the view taken by the CIT(A) and decided against the Revenue. 10.1 The relevant findings of the order of the Co-ordinate Bench of the Tribunal in the case of ITO vs. Shraddha & Mahalaxmi Joint Venture and Others (supra) is reproduced hereunder for ready reference :- "10.We have heard the riv....
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....mentioned as AOP only, i.e., when the returns were filed manually. However, from A.Y. 2007-08, when electronic filing had to be done, due to computer error the status appeared as 'firm' on the ITR acknowledgement, whereas in the computation of total income, it was correctly mentioned as AOP. It was explained that I.T.Return Form No.5 was actually applicable for firms, AOPs and BOIs. Therefore, this error might have occurred. The assessee has also filed computation of total income alongwith acknowledgements from A.Y. 2002-03 to A.Y. 2006-07 in which the status was regularly shown as AOP and even in the application form for allotment of PAN it was shown as AOP. The CIT(A) noticed from the record that status was shown as AOP. However, it was not very much relevant for the purpose of applicability of provisions of section 194C since TDS provisions are applicable to all entities except individuals and HUF having gross receipts or turnover from business or profession below the prescribed limit. 6. It was further explained on behalf of the assessee that joint venture as such does not execute any contract work but were merely formed for obtaining contract work and for receiving th....
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....ment certificates every year during the past eight years to enable the two members to claim the TDS credits in their respective cases. Even in the current assessment year, it was noticed that tax apportionment certificate was issued by the Department vide letter No.Pn/Wd.3(4)/TC/07-08 dated 26.11.2008 of the Assessing Officer in which the Assessing Officer has allowed apportionment of entire TDS of Rs. 9,26,588/- during the year to M/s.Gammon India Ltd., since entire work during the year was carried out by it. Similarly, there has been apportionment to either of the two companies or to both the companies in the earlier years also by the Assessing Officer for enabling them to claim TDS in respective cases. The assessee, vide its submission dated 22.04.2010, furnished the details which revealed that gross revenue from this contract receipts by joint venture was accounted for in case of either or both of the two companies who were members of the joint venture in all assessment years 2001-02 to 2008-09. It was further explained by the assessee that revenue sharing was not exactly 60:40 in each year since it depends on the relative work done in the particular year. Having explained the ....
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..... Authorised Representative relied on the decision of Hon'ble Bombay High Court in the case of Gopal Purohit (2010) 228 CTR 582 (Bom.) and assessee also relied on the decision of the Hon'ble Supreme Court in the case of Radhasoami Satsang vs. CIT (1992) 193 ITR 321 (SC) wherein it was observed that strictly speaking the principle of res judicata does not apply to income tax proceedings since each assessment year was a separate unit in itself and what is decided in one year may not apply in the following year. It was further contended that where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. It was also contended that Hon'ble Kerala High Court in the case of Manjunath Motor Service and Canara Public Conveyances, 197 ITR 321 (Kar.) observed that method adopted by the Assessing Officer would result in double taxation of the same income since gross receipts distributed amongst the two joint venture partners was included as receipt....
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....ny partnership between them. There is no sharing of profits or loss. They have specifically provided in the agreement that each party will bear its own loss and retain its profits as and when such profits or loss arise. Having regard to the agreement we are of the view that the applicant cannot be treated as a partnership which can only be created by an agreement. Nor can it be treated as an AOP. In order to constitute an AOP there will have to be common purpose or common action and the object of the association must be to produce income jointly. It is not enough that the persons receive the income jointly. In the instant case, each of the two parties has agreed to bear its own loss or retain its own profit separately. Both have agreed to execute the job together for better cooperation in their relationship with the Chennai Port Trust. The intention was not to carry out any business in common, only a part of the job will be done by VOACZ according to its technical skill and capability. The other part of the contract will be executed by HCC. The total value of the contract was Rs. 2,62,01,03,120. the applicant's share of work was valued at Rs. 44,52,78,920 (17 per cent ....
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.... issue decided by the Tribunal in M/s. Swapnali RDS Joint Venture (supra), therefore, following the parity of reasoning, we uphold the order of the CIT(A). Consequently, the grounds of appeal raised by the Revenue are dismissed." 10.2 Respectfully following the decision of the Co-ordinate Bench of the Tribunal in the case of ITO vs. Shraddha & Mahalaxmi Joint Venture and Others (supra), we are inclined to hold against the Revenue. We simultaneously find that the case of the assessee is fully supported by CBDT Circular No.07/2016 (supra) and judicial opinions expressed in the case of SMSLUANRCL (JV) (supra) and Linde AG, Linde Engineering Division and Anr. (supra). 10.3 We also simultaneously take affirmative note of the argument on behalf of the assessee that rigours of section 40(a)(ia) are diluted in the facts of the case since the payee has admittedly filed its return of income disclosing the impugned receipts and income earned by it embedded in the receipt has been duly offered for taxation. In this view of the matter, the assessee Joint Venture cannot be treated as assessee in default in view of the decision of the Hon'ble Delhi High Court in the case of Ansa....