TaxTMI 
TaxTMI 
2024 (7) TMI 566
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.... is entitled to claim loss of Rs. 52,180/-,Rs. 11,030/- and Rs. 26,030/- in A.Y.s 2012-13, 2013-14 & 2014-15 respectively. 3. With the assistance of ld. Representatives, we have gone through the record carefully. The brief facts are that M/s. Harish Chandra (India) Limited (in short HCIL) and Subhash Projects & Marketing Limited (in short SPML) had formed a joint venture by entering into an agreement on 19th March, 2007. The object of the joint venture was to submit bid with CPWD, Government of India for development of State High-way in the State of Bihar and execution of the aforesaid Project, if awarded. The JV has been named SPML-HCIL JV. The percentage of participation of the JV was determined at HCIL 67% and SPML 33%. The parties to the JV had entered into a supplementary agreement on 22.07.2007 vide which earlier JV agreement dated 19.03.2007 was partially modified because one of the parties i.e. HCIL had expressed certain difficulties in financial participation and in execution of the job. Therefore, SPML had agreed to execute the entire work. The JV got the work and the work was back to back assigned to SPML. SPML had obtained the required Bank guarantee from several Ban....
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.... On the other hand, it is ascertained from the documents / details so filed that all the bills were raised by the JV and corresponding payments were made to the JV itself by the Project Authority and revenue sharing ratio between two co-venturer was finalized as well as agreed upon well before the execution of the project work. Moreover, the AR of the assessee JV could not come forward with,.any corroborative supporting documents that M/s. HCIL had actually withdrew itself from execution of the project. Hence, the explanation / clarification as offered by the assessee JV is found to be void of any logical footings in normal business parlance.. A comparative study of the activities and accrual of income of other JVs engaged in similar nature oj projects and assessed to tax in this jurisdiction, the expenditure as._ incurred by the assessee JV towards payments to M/s. SPML appears to be exorbitant. A comparative study is appended below:- Name of the JV PAN Assessment' Year GP NP Simplex - Meinhardt JV AADAS0500M 2012-2013 3.00% 2.90% Simplex - Somdatt Builders JV AACAS4701M 2012-2013 2.26% 2.69% Tantia-ondwana JV ....
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....ring the financial year under consideration. The Assessing Officer has examined the comparative study of the activities and the accrual of the income and found that the payment towards M/s. SPML appears to be exorbitant and excessive. Hence, the Assessing Officer added Rs. 39,94,111/- u/s.40A(2)(b) of the Income Tax Act. I have gone through the grounds of appeal and statement of facts, filed by the appellant. It has been made out that the Assessing Officer has not made out the case of the payment being excessive. The Assessing Officer has clearly made out the case in the table that how the payments are excessive. It is clear from para 6 of the assessment order. Hence, on this ground, order of the Assessing Officer is confirmed and the ground raised by the appellant is dismissed". 5. The ld. Counsel for the assessee while impugning the order of the ld. CIT(Appeals) in all these three years has reiterated his submission as were raised before the authorities below. He filed written submissions running into 10 pages. He took us through section 40A(2)(b) and pointed out that in this case, this section is not at all applicable. He relied upon the judgment of the Hon'ble Delhi....
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....siness or profession of the assessee or any director, partner or member of such company, firm, association or family, or any relative of such director, partner or member or any other company carrying on business or profession in which the first mentioned company has substantial interest; (v) a company, firm, association of persons or Hindu undivided family of which a director, partner or member, as the case may be, has a substantial interest in the business or profession of the assessee; or any director, partner or member of such company, firm, association or family or any relative of such director, partner or member; (vi) any person who carries on a business or profession,- (A) where the assessee being an individual, or any relative of such assessee, has a substantial interest in the business or profession of that person; or (B) where the assessee being a company, firm, association of persons or Hindu undivided family, or any director of such company, partner of such firm or member of the association or family, or any relative of such director, partner or member, has a substantial interest in the business or profession of that person. .....
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....ct has been assigned on cost to cost basis to one of the JV partners. The ld. Assessing Officer cannot assume that JV partner could have completed that work. Had it been got down in the open market, then, less than 1.87% of the cost. It is totally an absurd view without support of any facts or in law. The cost of any project cannot be construed as expenditure. It is the cost from which the project is to be executed and on execution of that Project resultant profit/loss has to be offered for tax by the JV partner. Thus we are of the view that it is incorrect expectation of the ld. Assessing Officer that JV will earn profit from assignment of contract to its one of partners. The other partner could raise an objection that profit from the Project should give some loss or profit to other partner also, but there is no grievance by the other partner. He has not undertaken any risk from the contract. He has not put any labour or allocated any assets towards that contract, so in the hands of JV, it is incorrect to suggest that some element of profit for even assignment of the contract to one of the partners deserves to be deemed as a profit. On the other hand, ld. CIT(Appeals) has not reco....