TaxTMI 
TaxTMI 
2021 (5) TMI 583
X X X X Extracts X X X X
X X X X Extracts X X X X
....o sub-contracting. 3. On the facts and circumstances of the case, the Ld. CIT(A) erred in not appreciating that the assessee Joint Venture was in full control of the contract, responsible for its completion, submitting bills, receiving payments and making those payments to its members towards sub contract on which tax was deductible u/s 194C. 4. On the facts and circumstances of the case, the Ld. CIT(A) erred in not taxing profit in the hands of the Joint Venture irrespective of such profit was offered to tax in the hands of members. Reliance is placed on decision of Hon'ble Supreme Court in the case of Ch. Atchaiah (1996) 218 ITR 239 (SC) and on the ruling of Hon'ble AAR in the case of Geoconsult ZT GmbH in [2008] 304 ITR 283 (AAR). 5. The appellant prays to be allowed to add, amend, modify, rectify, delete or raise any grounds of appeal during the course of appellate proceedings." 2. The brief facts as emanating from the assessment order are that the assessee is a joint venture represented by M/s. Shraddha Energy & Infraprojects Pvt. Ltd. and M/s. Prasad & Co. Pvt. Ltd. as members sharing profit and losses in ratio 80%-20%. However, gross con....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of his order observed that the Pune Bench of the Tribunal in the case of ITO Vs. Swapnil RDS Joint Venture (supra.) in which case the facts are identical, the Co-ordinate Bench of the Tribunal had held that there was no relationship of contractor and contractee between the joint venture and its partners and since contract receipts, assets, liabilities were apportioned between the members, therefore, taxability of the income has to be considered in the hands of the members and not the joint venture. This decision was followed by the Ld. CIT(Appeal) in deciding assessee's own case for assessment years 2010-11 & 2011-12 against which the Revenue had preferred an appeal before the Co-Ordinate Bench of the Tribunal and the Pune Bench of the Tribunal in its decision dated 29.07.2016 has held as follows : "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. 0712016 (supra) and judicial opinions expressed in the case of SMSL-UANRCL (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h of the Tribunal. However, the Department has not accepted the order of the Tribunal and had preferred an appeal before the Hon'ble High Court of Mumbai and that further the Assessing Officer, to keep issue alive, had held that payment made by the AOP to its members were disallowed and added to the total income of the assesse in terms of u/s.40(a)(ia) of the Act. 8.1 We notice that on identical facts and circumstances, the Co-ordinate Bench of the Tribunal in the case of ITO Vs. Shraddha & Mahalaxmi Joint Venture and others in ITA No.942/PUN/2013 order dated 28.11.2014 after making reference to the several judicial precedents including the case Swapnil RDS Joint Venture, ITA No.771/PN/2011 (supra) has provided relief to the assesse on this issue. The relevant findings of the Co-ordinate Bench in the case of ITO Vs. Shraddha & Mahalaxmi Joint Venture and others is extracted herein below for the sake of completeness: "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 rival and perused th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nly, 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 the payment, which w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 difference between....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntative 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 receipts in their respectiv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en 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 co-operation 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 of total value). Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nal 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 SMSL-UANRCL (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 Ansal Land Mark Township (P.) ....