Income-tax Officer, V. M/s. R D S Construction (JV), Pune

ITA 1047/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9131 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 23-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law
• Section: 194C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . . . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWA STHY, JM . / ITA NO. 1047/PUN/2015 / ASSESSMENT YEAR : 2011-12 ITO, WARD - 3(2), PUNE . / APPELLANT V/S M/S. RDS CONSTRUCTION (JV), 363/11, BALAJI NIWAS, DEEP BUNGLOW CHOWK, SHIVAJINAGAR, PUNE 411 016 PAN : AAAAR8625B . / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI RAJEEV KUMAR, CIT / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF CIT(A)-3, PUNE DATED 30-04-2015 FOR THE ASSESSMENT YEAR 2011-12. 2. GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT(A) GROSSLY ERRED IN HOLDING THAT NO INCOME ATTRIBUTABLE ON CONTRACT RECEIPTS COULD BE TAXED IN THE STATUS O F THE AOP. 3. THE LD. CIT(A) GROSSLY ERRED IN IGNORING THAT TH E ASSESSEE, BEING A SEPARATE ENTITY U/S 2(31) OF THE IT ACT, 1961, AND HAVING A PAN SHOULD HAVE PREPARED ITS OWN PROFIT &. LOSS ACCOUNT AS WELL AS THE BALANCE SHEET REFLECTING THE FULL TRANSACTIONS UNDERTAKEN BY IT A ND, NOT JUST SHOWING APPORTIONMENT OF RECEIPTS/PAYMENTS AND ASSETS/LIABI LITIES BETWEEN ITS MEMBERS. 4. THE LD. CIT(A) ERRED IN FAILING TO APPRECIATE TH AT THE WORK CONTRACT ORDERS ISSUED TO THE ASSESSEE BY THE CONTRACTEE WER E IN ITS NAME AND SO ALSO THE PAYMENTS WERE CREDITED TO THE ASSESSEE'S ACCOUN T. AS SUCH, RE-ALLOCATION OF THESE CONTRACTS AMONG THE MEMBERS OF THE ASSESSE E AMOUNTS TO SUB- CONTRACTING. / DATE OF HEARING :27.07.2017 / DATE OF PRONOUNCEMENT: 28.07.2017 2 ITA NO.1047/PUN/2015 5. THE LD. CIT(A) ERRED IN FAILING TO APPRECIATE TH AT AS THE PAYMENTS MADE BY THE ASSESSEE TO MEMBERS WERE CLEARLY TOWARD S SUB-CONTRACT, TAX WAS DEDUCTIBLE FROM SUCH PAYMENTS U/S 194C AND IN V IEW OF THE ASSESSEE'S FAILURE, TO DO SO, THE ASSESSING OFFICER WAS PERFEC TLY JUSTIFIED IN APPLYING THE PROVISIONS OF SEC. 40(A) (IA) OF THE INCOME-TAX ACT , 1961. 6. THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT T HE ASSESSEE AOP WAS IN FULL CONTROL OF THE CONTRACT AND IT WAS THE RESP ONSIBILITY OF THE ASSESSEE TO SUBMIT THE BILLS TO AND RECEIVE PAYMENTS. 7. THE LD. CIT(A) ERRED IN NOT CONSIDERING THE LANDMARK JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CH. ACHAIAH (1996) 218 ITR 239 WHEREIN IT WAS HELD THAT IF THE SHARE OF PROFIT IS DETERMINED IN THE JOINT VENTURE AGREEMENT, IT CANNOT BE ANYTHING BUT AOP, A ND WHERE THE CHARGE IS ON THE INCOME OF THE AOP, IN SUCH STATUS, THE ASSES SING OFFICER HAS NO CHOICE BUT TO TAX IT, IRRESPECTIVE OF THE FACT AS T O WHETHER SUCH SHARE OF PROFIT HAS BEEN OFFERED TO TAX OR TAXED IN THE HAND S OF MEMBERS OR NOT. 8. THE LD. CIT(A) ERRED IN NOT CONSIDERING THE RECE NT AND ELABORATE JUDGEMENT OF THE HON'BLE AUTHORITY FOR ADVANCE RULI NGS IN THE CASE OF GEOCONSULTANT ZT GMBH, IN RE (2008) 304 ITR 283 WHE REIN THE JOINT VENTURE WAS HELD TO BE AOP, FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT DECISION IN THE CASE OF CH. ACHAIAH. 9. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LD. CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. BRIEFLY STATED THE RELEVANT FACTS ARE THAT THE ASSESSEE IS A JOINT VENTURE AOP CONSISTING OF TWO CONSTITUENTS, NAMELY RDS CONSTRUC TION COMPANY AND MAHALAXMI INFRAPROJECTS LTD. ASSESSEE FILED THE RETURN OF IN COME ON 30-09-2011 DECLARING TOTAL INCOME AT NIL. AO NOTICED THAT, OUT OF TOTAL CONTRACT RECEIPTS AMOUNTING TO RS.6,38,04,906/- AWARDED TO THE AOP, THE CONTRACT W ORK WAS SUBLET TO RDS CONSTRUCTION COMPANY AND MAHALAXMI INFRAPROJECTS LT D., IN THE RATIO OF 60:40. IN THE OPINION OF THE AO, THE SAID SUBLETTING OF CONTR ACT ATTRACTS THE TDS PROVISIONS. AO INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF T HE ACT. ACCORDINGLY, AO MADE ADDITION OF RS.6,38,04,906/-. 4. DURING THE TIME SET FOR COVERED MATTERS BEFORE U S, LD. COUNSELS FOR THE ASSESSEE/REVENUE SUBMITTED THAT GROUND NOS. 1 TO 9 O F THE APPEAL BY THE REVENUE REVOLVE AROUND THE ISSUE OF CORRECTION OF T HE FINDING OF THE CIT(A), WHO HELD THAT NO INCOME IS ATTRIBUTABLE TO THE CONTRAC T RECEIPTS COULD BE TAXED IN THE STATUS OF THE AOP. ASSESSEE IS THE AOP FORMED AS JO INT VENTURE WITH RDS 3 ITA NO.1047/PUN/2015 CONSTRUCTION COMPANY AND MAHALAXMI INFRAPROJECTS LT D. AS THE MEMBER OF THE AOP. ON FACTS THE AOP IS ENGAGED ONLY IN GETTING T HE CONTRACT, WHO IS TO BE EXECUTED BY THE MEMBERS OF AOP IN THE RATIO OF 60:4 0 BY THE RDS CONSTRUCTION COMPANY AND MAHALAXMI INFRAPROJECTS LTD. IN THE AS SESSMENT, AO INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND TREA TED THE TRANSACTION BETWEEN THE AOP AND THE MEMBERS ON THE SUB-CONTRACTS. DURING T HE FIRST APPELLATE PROCEEDINGS, (LD.CIT(A), ASSESSEE RELIED ON THE ORD ER OF THE TRIBUNAL IN THE CASE OF SWAPNALI RDS JOINT VENTURE IN ITA NO.771/PN/2011 DATED 26-09-2012 AND ALSO IN THE CASE OF ITO VS. RAJDEEP & PMCC INFRASTRUCTUR E AND OTHER JUDGMENT. CIT(A) ACCEPTED THE SAME AS PER THE DISCUSSION GIVE N IN PARA 3.4 TO 3.5 OF THE ORDER OF CIT(A). 5. AGGRIEVED WITH THE ORDER OF CIT(A) THE REVENUE I S IN APPEAL BEFORE US WITH THE GROUNDS EXTRACTED ABOVE. 6. ON HEARING BOTH THE PARTIES AND ON PERUSAL OF TH E ORDER OF THE TRIBUNAL (SUPRA), WE ARE OF THE VIEW THAT IT IS A SETTLED IS SUE NOW AT THE LEVEL OF THE SUPREME COURT IN THE CASE OF RAJDEEP & PMCC INFRAST RUCTURE (SUPRA) IN AN SLP MATTER THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IS NOT TO BE INVOKED IN RESPECT OF THE CONTRACT WORKS EXECUTED IN THEIR IND IVIDUAL CAPACITY BY THE MEMBERS OF THE AOP-JOINT VENTURE. FOR THE SAKE OF COMPLETE NESS OF THIS ORDER, WE PROCEED TO EXTRACT RELEVANT SUPREME COURTS ORDER IN THE CA SE OF CIT VS. RAJDEEP & PMCC INFRASTRUCTURE LTD. REPORTED IN (2016) 73 TAXMANN.C OM 256 (SC) - WHERE TRIBUNAL HELD WHEN NO INCOME ACCRUED TO THE ASSESSEE-AOP BUT TO RESPECTIVE CONSTITUENTS OF AOP IN THEIR INDIVIDUAL CAPACITY, THEN THE ASSESSEE WAS NOT LIABLE TO BE TAXED AND HIGH COURT HELD THAT SIN CE VIEW EXPRESSED BY TRIBUNAL WAS CONSISTENT WITH MATERIALS PLACED ON RECORD, THE RE WAS NO SUBSTANTIAL QUESTION OF LAW ARISING FOR CONSIDERATION, SLP WAS TO BE DIS MISSED. 7. WE ALSO PERUSED THE TRIBUNALS ORDER IN THE CASE OF ITO VS. M/S. SHRADDA & PRASAD JOINT VENTURE IN ITA NOS.1957 & 1958/PN/2014 DATED 29-07-2016. SIMILAR 4 ITA NO.1047/PUN/2015 VIEW WAS TAKEN BASED ON THE ABOVE SAID ORDER OF TH E TRIBUNAL IN THE CASE OF SWAPNALI RDS JOINT VENTURE (SUPRA). THEREFORE, WE ARE OF THE VIEW THAT THE DECISION OF THE CIT(A) GIVEN IN PARA 3.4 TO 3.5 OF HIS ORDER IS REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. FOR THE SAKE O F COMPLETENESS, THE SAID PARA IS EXTRACTED AS UNDER : 3.5 IN VIEW OF THE ABOVE, THE APPELLANTS CASE IS FOUND TO BE SQUARELY COVERED BY THE DECISION OF THE HONBLE ITAT PUNE IN THE CAS E OF SWAPNALI RDS JOINT VENTURE RELIED UPON BY THE APPELLANT, WHICH IS BASE D ON IDENTICAL ISSUES. ACCORDINGLY, THE DISALLOWANCE U/S.40(A)(IA) MADE BY THE A.O. OF RS.6,38,04,906/- IS HELD TO BE NOT SUSTAINABLE AND GROUNDS OF APPEAL NO. 1 TO 4 RAISED BY THE APPELLANT ARE ALLOWED. 8. FROM THE ABOVE, IT IS EVIDENT, THE TRIBUNAL WHIL E ADJUDICATING THE APPEAL IN CASE OF SWAPNALI RDS JOINT VENTURE (SUPRA) RELIED O N THE ORDER OF THE TRIBUNAL IN THE CASE OF RAJDEEP & PMCC INFRASTRUCTURE (SUPRA). THE SAME IS APPROVED BY THE HONBLE SUPREME COURT AS STATED ABOVE. ACCORDINGLY , ALL THE GROUNDS OF THE REVENUE ARE DISMISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF JULY, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE; DATED : 28 TH JULY, 2017. / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE COPY // //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A) - 3 , PUNE 4. THE CIT - 3 , PUNE 5 . DR, ITAT, A BENCH PUNE; 6 . / GUARD FILE.