B.T. PATIL and MAHALAXMI JOINT VENTURE V. PRINCIPAL COMMISSIONER OF INCOME TAX

ITA/100001/2016

AI Insights

The case involves appeals by B T Patil & Mahalaxmi Joint Venture against the orders of the Income Tax Appellate Tribunal, Panaji, which were dated 25.08.2015. The Tribunal had remitted the matter back to the assessing officer for a re-assessment, allowing the assessee to make all claims, including those under Section 80IA of the Income Tax Act. The main contention in the appeals was the classification of the assessee as an 'association of persons' due to their joint venture, which affected their tax assessment. The High Court found that the Tribunal's decision to remit the case back for fresh assessment was appropriate and that the assessee could rely on the later CBDT Circular in their submissions.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 763250 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 13-03-2017
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: ARAVIND KULKARNI
• Keywords: Assessment; Income Tax; Joint venture; Remand; Substantial question of law; Circular No.7/2016
• Section: 80IA; 260A

Judgement Text

"Date of Judgment 13.03.2017 in ITA No.100001/2016 & ITA No.100011/2017 B T Patil & Mahalaxmi Vs. Principal Commissioner of Income Tax and another 1 IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 13TH DAY OF MARCH, 2017 PRESENT THE HON’BLE Dr. JUSTICE VINEET KOTHARI AND THE HON’BLE Dr. JUSTICE H. B. PRABHAKARA SASTRY ITA. No.100001/2016 & ITA No.100011/2017 BETWEEN: B T PATIL & MAHALAXMI JOINT VENTURE 4112, PATSON HOUSE P B ROAD, BELGAUM – 590 003 …APPELLANT (BY SRI:ARAVIND D KULKARNI, ADV) AND: 1. PRINCIPAL COMMISSIONER OF INCOME TAX INCOME TAX OFFICES, FEROX KHIMJIBHAI COMMERCIAL COMPLEX, DR.AMBEDKAR ROAD BELGAUM – 590 001 2. ASSESSING OFFICER WARD-1(3) INCOME TAX OFFICES, FEROX KHIMJIBHAI COMMERCIAL COMPLEX, DR.AMBEDKAR ROAD BELGAUM – 590 001 …RESPONDENTS THESE APPEALS ARE FILED UNDER SECTION 260A OF THE INCOME TAX ACT, 1961 PRAYING TO FORMULATE Date of Judgment 13.03.2017 in ITA No.100001/2016 & ITA No.100011/2017 B T Patil & Mahalaxmi Vs. Principal Commissioner of Income Tax and another 2 THE SUBSTANTIAL QUESTION OF LAW STATED ABOVE; ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, PANAJI IN ITA NO.166 AND 167/PANAJI/2015 DATED 25.08.2015 AND DIRECT THE RESPONDENT NO.2 NOT TO PROCEED WITH ASSESSMENT PROCEEDINGS IN PURSUANCE OF THE ORDER OF INCOME TAX APPELLATE TRIBUNAL, PANAJI IN ITA NO.166 AND 167/PANAJI/2015 DATED 25.08.2015 TILL THE DISPOSAL OF THIS APPEAL, IN THE INTEREST OF JUSTICE AND EQUITY. THESE APPEALS COMING ON FOR ADMISSION THIS DAY, Dr. VINEET KOTHARI, J., DELIVERED THE FOLLOWING: J U D G M E N T Mr.Aravind D Kulkarni, Adv. for appellant. 1. These appeals have been filed by the assessee under Section 260A of the Income Tax Act, 1961, (‘IT Act’ for short) purportedly raising a substantial question of law arising from the order of the learned Income Tax Appellate Tribunal dated 25.08.2015. 2. Para 7 of the order of Tribunal is reproduced below for ready reference: “A perusal of the post-bid MOU further shows that there is an undertaking between Date of Judgment 13.03.2017 in ITA No.100001/2016 & ITA No.100011/2017 B T Patil & Mahalaxmi Vs. Principal Commissioner of Income Tax and another 3 the members of the Joint Venture in clause (11) that “the members shall be responsible to maintain or cause to maintain proper books of accounts in respect of business in the J V and same shall be closed at the end of every financial year.” We are sure that the Assessee must be maintaining some books of accounts from which the profits would be discernable. Here, what further comes to our mind is, if the Assessee is being treated as a Joint Venture and as an Association of Persons, then, the apportionment of the work between the members of the Joint Venture would become a sub-contract. In any case, this has not been looked into by the AO. In the decision relied upon by the ld. AR in the case of Shraddha & Mahalaxmi Joint Venture referred to supra it is also explained that the TDS was credited to the members on the basis of tax apportionment certificate and they have accounted the corresponding contract revenue in their respective returns but in the present case, the Assessee has not been able to show us any such apportionment certificates. A perusal of the assessment order in the present case Date of Judgment 13.03.2017 in ITA No.100001/2016 & ITA No.100011/2017 B T Patil & Mahalaxmi Vs. Principal Commissioner of Income Tax and another 4 shows that the AO has estimated the income of the Assessee at 8% of the contract receipts. He has arrived at the turnover from the contract receipts. This is not permissible. Further, the Assessee in his grounds of appeal has also raised the ground that the Assessee would be entitled to deduction u/s 80IA of the Act. This has also not been considered by the AO. Before the ld. CIT(A) the Assessee has specifically contended that the Assessee is not a contractor but developer of infrastructure facility as envisaged u/s 80IA(4)(i) of the Act. In these circumstances, we are of the view that the assessment needs to be re-done by the AO after granting the Assessee opportunity of being heard. The Assessee would be at liberty to make all claims, even in respect of the claim of deduction u/s 80IA and the AO shall consider the issues afresh. In the result, the assessment orders passed by the AO are set aside in its entirety in respect of the quantum of assessment and all issues are left open before the AO.” Date of Judgment 13.03.2017 in ITA No.100001/2016 & ITA No.100011/2017 B T Patil & Mahalaxmi Vs. Principal Commissioner of Income Tax and another 5 3. Learned Counsel for the appellant-assessee has submitted before us that in view of the later Circular No.7/2016 (F.No.225/2/2016/ITA.II), dated 07.03.2016, though the matter has been remanded back to the learned assessing authority, the finding given in para 6 by the learned Income Tax Appellate Tribunal that the assessee in question will be assessed as ‘association of person’ as he has entered into a joint venture, whereas, certain guidelines in CBDT Circular dated 07.03.3016 which was issued after the order of learned Tribunal was passed on 25.08.2015 operates otherwise. 4. We find from the aforesaid para 7 that the entire matter has been remitted back by the learned Tribunal to the assessing authority for considering all the issues afresh and the assessee has been given liberty to make all claims. Since the Circular was issued after the order of learned Tribunal, the assessee would obviously have the liberty to rely upon the same before the assessing authority and irrespective of any observations Date of Judgment 13.03.2017 in ITA No.100001/2016 & ITA No.100011/2017 B T Patil & Mahalaxmi Vs. Principal Commissioner of Income Tax and another 6 made by the learned Tribunal in this regard, the assessing authority will be free and will have to consider all the issues afresh in accordance with aforesaid para 7 of the learned Tribunal, including the effect of Circular dated 07.03.2016 on the case of the assessee. 5. We do not find any substantial question of law arising in these appeals, which may require our further consideration under Section 260A of the IT Act. 6. These appeals filed by the assessee are therefore dismissed with the aforesaid observations. Sd/- JUDGE Sd/- JUDGE *bgn/- "