2024 (7) TMI 566

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....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 Banks. It has completed those contracts, which were received from....

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.... 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 AABAT5389D 2012-2013 N.A.  0.03 It is quite evident from the above tabular comp....

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....l 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 High Court in the case of United Export -vs.- Commissioner of Income Tax reported in 330 ITR page 549 and other judgments of the ITAT. 6. On ....

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.... 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. .........." An analysis of this section discloses the following constituent elements in the scheme of disallowance: (i) The assessee may be an individual, firm, company, association of persons or Hindu Undivided Family. (ii) The exp....