TaxTMI 
TaxTMI 
2026 (1) TMI 802
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....tary-ship Concern). The assessee was awarded an earthwork relating contract by Western Railways which was sub-contracted by the assessee to M/s. PKS Technobuild Pvt. Ltd. vide sub-contract agreement dated 18.04.2017. In the course of assessment, it transpired that the assessee had received an amount of Rs. 13,02,06,937/- from Western Railways towards the contract work completed, out of which the assessee had passed on an amount of Rs. 12,36,73,470/- to the sub-contractor. The Assessing Officer noticed that apart from the deduction for the sub-let work, the assessee had also claimed separate deduction for of sub-let expense of Rs. 5,19,692/- and for transportation expenses of Rs. 41,48,000/-. The Assessing Officer examined the claim for these two expenses and found that these expenses were not admissible to the assessee considering the terms and conditions of sub-contract agreement with M/s. PKS Technobuild Pvt. Ltd. Accordingly, the sublet expenses of Rs. 5,19,612/- and transportation expenses of Rs. 41,48,000/- was disallowed by the assessee. The assessment was completed under Section 143(3) of the Act on 20.03.2021 at a total income of Rs. 64,68,130/-. 3. Aggrieved with the or....
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....48,000/- was incurred by the assessee as per MOU dated 10.04.2017, made with the sub-contractor before execution of the sub-contract agreement dated 18.04.2017. Therefore, the contention of the Revenue that the MOU dated 18.04.2017 superseded the earlier specific MOU dated 10.04.2017, was not correct. The Ld. AR submitted that the assessee had already incurred transportation expense of Rs. 41,48,000/- at its own cost before transferring the balance work to the sub-contractor M/s. PKS Technobuild Pvt. Ltd. vide sub-contract agreement dated 18.04.2017. He submitted that the genuineness of the expenses was not disputed by the AO. Therefore, the disallowance made by the Assessing Officer was not correct. 5.1 On the issue of sub-contract expense of Rs. 5,19,692/-, the Ld. AR submitted that 1% labour cess and copy charges of Rs. 50/- was directly deducted by Railways while releasing the payment to the assessee and these deductions made by the Railways were not part of sub-contract agreement dated 18.04.2017. Therefore, the assessee had rightly claimed deduction for sub-contract expense of Rs. 5,19,692/- 6. Per contra, Shri Abhijit, Ld. Sr. DR submitted that in the sub-contract agre....
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....s been brought on record. The relevant portion of the said explanation is as under :- "3. Regarding addition under section 37 of the Act for Rs. 46,67,692/- (Ground No. 3 & 4): 3.1 The appellant is a Joint Venture AOP entered into existence vide Joint Venture Agreement dated 17.04.2017 executed between M/s. Miral Infrastructure partnership firm and M/s. P.K. and Sons a proprietary concern in order to jointly execute the contract. Copy of Joint Venture Agreement is enclosed in paper book on page no. 7-25. The scope of work of each party is set forth as 53% and 47% respectively. It is engaged in the business of Government/Railway department or semi Government construction work. For its business, the appellant has maintained regular books of accounts as prescribed under section 44AA of the Act which are subject to audit under section 44AB. During the year under consideration the appellant has shown total sales of Rs. 13,02,07,237/- being earthwork income from work order received from Western Railway as Tender-75 & Tender -76 on the basis of work completed during the year. 3.2 The appellant is working under joint venture agreement and in this it has taken wor....
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.... like site cleaning. leveling, for approach road and transporting earth of 0.5km. 2. Party of First part had given Work for transportation for this 0.5 km which was not part of sub contract agreement. This understanding taken as part of clarification of work given as Sub-contract agreement. Party of 15 part will pay all the expenses for which work already started. Party of Second part will not pay additional amount for this work done by party 1st part. 3. Party of 1st Part will hand over the site, after completion of leveling and work for approach road, and for that the transportation expenses incurred, which will borne by Party of 1st Part. 4. Party of 2nd Part agree to Pay margin as per Sub-contract which was decided by both parties considering work already undertaken by Party of 1st Part 5. This agreement shall be interpreted under laws of the State of Gujarat 6. Attorney's fees and court costs shall be paid by the defendant in the event that judgment must be, and is, obtained to enforce this agreement or any breach thereof. IN WITNESS WHEREOF, the parties hereto set their hands and seals the day and year written above. ....
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....ssessee prior to the date it came into existence i.e. on 17.04.2017. The subcontract agreement with M/s. PKS Technobuild Pvt. Ltd. was entered into on 18.04.2017 i.e. one day after the assessee came into existence. Naturally, there is no reference of the earlier MOU dated 10.04.2017 in the sub-contract agreement dated 18.04.2017 for the reason that no such MOU could have been signed by the assessee on 10.04.2017 when the assessee itself came into existence on 17.04.2017. Merely because the Revenue did not examine the evidences brought on record in support of the transportation expenses, it does not make the expense and claim of the assessee genuine. The precise question as to how the MOU dated 10.04.2017 was entered into when the assessee itself was not in existence on that day, has not been answered. The contention of the Revenue that the MOU dated 10.04.2017 was manufactured by the assessee to give a colour of genuineness to the transportation expenses of Rs. 41,48,000/-, which was never incurred, appears to be correct considering the above discrepancy. There was no reference of the MOU dated 10.04.2017 or any transportation expenses being incurred by the assessee for initial 0.5....