HCIL Adhikarya(JV), Bhubaneswar V. ITO (TDS), Bhubaneswar

ITA 141/CTK/2014

• Counselvise Citation: 14122114 RSA 2014
• Duration Of Justice: 1 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2015
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 25-04-2014
• Court: TRIBUNAL
• Department Lawyers: ITA NO; SHOVAN KRISHNA SAHU ITA NOS
• Keywords: Advance ruling; Tax effect
• Section: 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH , CUTTACK [ , . . , BEFORE SHRI SUNIL KUMAR YADAV , J M & SHRI B.P.JAIN , A M ./ ITA NO. 496 / CTK /20 1 2 & IT A NO. 141/CTK/201 4 ( [ [ / ASSESSMENT YEAR S : 2009 - 2010 & 2010 - 2011 ) M/S HCIL ADHIKARYA (JV), AT - PLOT NO.512, MARUTI RESIDENCY, RAGHUNATHPUR, BHUBANESWAR, DISTRICT KHURDA VS. ITO (TDS), BHUBANESWAR, DISTRICT KHURDA ./ ./ PAN/GIR NO. : A A AAY 2885 F ( / APPELLANT ) .. ( / RESPONDENT ) AND ./ ITA NO. ITA NO.178/CTK/2013 ( [ [ / ASSESSMENT YEAR : 20 09 - 201 0 ) M/S HCIL ADHIKARYA (JV), AT - PLOT NO.512, MARUTI RESI DENCY, RAGHUNATHPUR, BHUBANESWAR, DISTRICT KHURDA VS. ITO WARD - 2(1), BHUBANESWAR ./ ./ PAN/GIR NO. : A AAAY 2885 F ( / APPELLANT ) .. ( / RESPONDENT ) AND ./ ITA NO. 497/CTK /20 12 AND ITA NO.140/CTK/201 4 ( [ [ / ASSESSMENT YEARS :2009 - 2010 & 2010 - 2011 ) M/S HCIL ADHIKARYA - ARSS (JV), AT - PLOT NO.512, MARUTI RESIDENCY, RAGHUNATHPUR, BHUBANESWAR, DISTRICT KHURDA VS. ITO (TDS), BHUBANESWAR, DISTRICT KHURDA ./ ./ PAN/GIR NO. : A AE FH 3757 R ( / APPELLANT ) .. ( / RESPONDENT ) [ /ASSESSEE BY : SHRI SUNIL MISHRA /REVENUE BY : SHRI SHOVAN KRISHNA SAHU ITA NOS.496 & 497/12 ITA NO.178/13 & ITA NOS.140&141/14 2 / DATE OF HEARING : 1 9 TH MAY , 201 5 / DATE OF PRONOUNCEMENT 21 ST MA Y ,2015 / O R D E R PER BENCH : TH ESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAINST THE RESPECTIVE ORDER S OF CIT (A) - I , BHUBANESWAR FOR THE ASSESSMENT YEAR S 2009 - 2010 & 2010 - 2011. FOR THE SAKE OF REFERENCE, WE EXTRACT THE G ROUNDS RAISED IN APPEAL ITA NO. 496 /CTK/201 2 AS UNDER : - 1. FOR THAT, THE ORDERS OF THE FORUMS BELOW ARE ILLEGAL, ARBITRARY, PERFUNCTORY AND NOT SUSTAINABLE IN THE EYE OF LAW AND ARE LIABLE TO BE QUASHED IN IT'S ENTIRETY. 2. FOR THAT, THE ORDERS OF THE FO RUMS BELOW LACKS THE AUTHORITY AND SANCTION OF INCOME TAX ACT 1961 IN AS MUCH AS THE RIGORS OF SECTION 1940 OF THE ACT IS NOT APPLICABLE TO THE TRANSACTION BETWEEN THE APPELLANT AND THE VENTUROR NAMELY HARICHANDRA INDIA LTD., IN TERMS OF CONDITIONS OF JOIN T VENTURE AGREEMENT FORMING PART AND PARCEL OF CONTRACT AGREEMENT BETWEEN THE APPELLANT AND THE PRINCIPAL BINDING THE VENTURORS WITH JOINT AND SEVERAL LIABILITY AND OBLIGATION FOR PERFORMANCE OF THE CONTRACT INCLUDING STATUTORY COMPLIANCE TO THE EXTENT OF THEIR SHARE OF PARTICIPATION. 3. FOR THAT, THE ORDERS OF THE FORUM BELOW EQUALLY IS WITHOUT ANY AUTHORITY AND SANCTION OF INCOME TAX ACT 1961, AS THE CONDITION PRECEDENT FOR APPLICABILITY OF SECTION 194 (C) OF THE ACT IN THE FORM OF 'CONTRACT' OR 'SUB - CO NTRACT' AGREEMENT BINDING THE APPELLANT WITH THE CO - VENTURORS WITH 'CONTRACTOR - CONTRACTEE' 'PRINCIPAL - CONTRACTOR' OR 'MAIN - CONTRACTOR - SUB - CONTRACTOR' RELATIONS DO NOT EXIST BETWEEN THE APPELLANT AND THE CO - VENTURORS, NOR THE SAME WAS MADE OUT BY THE FOR UMS BELOW. 4. FOR THAT FOR THE REASONS STATED IN THE GROUND NO 2 AND 3 ABOVE THE ACTIONS OF THE FORUMS BELOW IN APPLYING THE RIGORS OF SECTION 194 (C) & 201 OF THE IT IS PURELY AS SURMISES AND CONJECTURE WHICH MAKES THEIR ORDER ILLEGAL AND ARBITRARY. 5 F OR THAT THE FORUMS BELOW HAVE VIOLA TED THE SETTLED POSITION OF LAW, WHERE IT HAS BEEN ENUNCIATED IN ASSOCIATED CEMENT ITA NOS.496 & 497/12 ITA NO.178/13 & ITA NOS.140&141/14 3 COMPANY CASE REPORTED IN (1993) 201 ITR 435(SC) THEIR LORD SHIP ANALYZING SEC. 1940 PROVIDING THE FOLLOWING FORMULATIONS: - (1) A CONTRACT MAY BE ENTERED INTO BETWEEN THE CONTRACTOR AND ANY OF THE ORGANIZATIONS SPECIFIED IN THE SUB - SECTION . (2) CONTRACT IN FORMULATION - 1 COULD NOT ONLY BE FOR CARRYING OUT ANY WORK BUT ALSO FOR SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK. (3) ANY PERSON RESP ONSIBLE FOR P AYING ANY SUM TO A CONTRACTOR IN PURSUANCE OF THE CONTRACT IN FORMULATIONS 1 AND 2, COULD CREDIT THAT SUM TO HIS ACCOUNT OR MAKE ITS PAYMENT TO HIM IN ANY OTHER MANNER. (4) BUT, WHEN THE PERSON REFERRED TO IN FORMULATION - 3 EITHER CREDITS THE SUM REFERRED TO THEREIN TO THE ACCOUNT OF OR PAYS IT TO THE CONTRACTOR, HE SHALL DEDUCT OUT OF THAT SUM AN AMOUNT EQUAL TO TWO PER CENT AS INCOME - TAX ON INCOME COMPRISED THEREIN.' FROM THE ABOVE FORMULATIONS PROVIDED BY THE HONBLE APEX COURT IT IS ABUNDA NTLY CLEAR THAT, THERE MUST BE A CONTRACT AND THE PAYMENT SHOULD BE MADE IN PURSUANT TO A CONTRACT. THEREFORE, WHEN THE BOTH THE APPELLANT AS WELL AS THE MEMBER CONSTITUTENT OF THE APPELLANT DENIES TO HAVE A CONTRACT AND STATED THE TRANSACTION IN BETWEEN T HEM ARE ONLY TRANSFER OF FUND BASED UPON EQUITY PARTICIPATION AS PER THE TERMS OF THE JOINT VENTURE AGREEMENT, THE FORUMS BELOW OUGHT NOT HAVE BEEN INFERRED REGARDING EXISTENCE OF A CONTRACT IN ABSENCE OF ANY DOCUMENT SUBSTANTIATING TO SUCH PRESUMPTION. HE NCE THE IMPUGNED ORDER IS THE OUTCOME OF PURE SURMISES AND CONJECTURES AND ARE LIABLE TO BE QUASHED. 6. FOR THAT THE ORDER PASSED BY THE FORUMS BELOW WITH THE FINDING THAT THE RELATION BETWEEN THE APPELLANT JOINT VENTURE AND ITS MEMBER CONSTITUENT AS CONT RACTOR AND SUB - CONTRACTOR' WITHOUT ANY CONCRETE EVIDENCE IS ILLEGAL WHEN AS PER THE SETTLED LAW, THE PROPORTIONATE CREDIT OF THE TDS AMOUNT OF THE JOINT VENTURE HAS TO BE ALLOWED IN THE HANDS OF THE INDIVIDUAL CONSTITUENT AS PER THEIR RESPECTIVE SHARE RATI O PROVIDED IN THE JOINT VENTURE AGREEMENT. HENCE, THE MEMBER CONSTITUENTS CANNOT BE TERMED AS SUB - CONTRACTOR OF THE JOINT VENTURE, THEREBY, THE PROVISION OF SECTION 194C IS NOT APPLICABLE. RELIANCE IS PLACED ON JUDGMENT OF ACIT VRS. PRADHAN ITA NOS.496 & 497/12 ITA NO.178/13 & ITA NOS.140&141/14 4 CONSTRUCTION CO ., REPORTED IN MANU.IH/009/2011. 7. FOR THAT THE FORUMS BELOW GROSSLY FAILED TO APPRECIATE PRECEDENTS BEING CREATED BY COURTS OF THE LAND AND OTHER APPELLATE TRIBUNALS UNANIMOUSLY DISAPPROVING THE RELATIONSHIP BETWEEN JOINT VENTURE AND IT'S CO - VENTURORS AS THE RELATIONSHIP OF 'CONTRACTOR - CONTRACTEE' 'CONTRACTOR - SUB - CONTRACTOR' AND HELD THAT ANY TRANSACTION BETWEEN THEM WOULD NOT ATTRACT THE RIGORS OF SECTION 194C AND CONSEQUENTIAL PROVISION OF SECTION 201 OF THE ACT. AS SUCH THE ORDER VIOLATES THE BASI C CANNONS OF LAW OF HONOURING THE PRECEDENCE. 8. FOR THAT THE PRINCIPAL HAVING DEDUCTED TAX FROM THE APPELLANT AND VENTUROR HAVING ADMITTED INCOME AND PAID TAX THEREON, COVERING TAX EFFECT OF THE PROJECT, THE INTEREST OF REVENUE IS WELL PROTECTED. THE LE ARNED CIT (A) FAILED TO APPRECIATE THIS FACT AND HELD THAT AS THE EVENT OF TAX BEING ADMITTED BY THE VENTUROR, THE INTEREST U/S. 201 (IA) WOULD BE CHARGED TILL THE DATE OF FILLING THE RETURN BY VENTUROR, TREATING THE TRANSACTION BETWEEN APPELLANT AND THE V ENTUROR BEING COVERED UIS.1 94C. 9. FOR THAT, ANY OTHER GROUNDS INCIDENTAL TO THE GROUNDS OF THIS CASE MAY KINDLY BE PERMITTED TO URGE AT THE TIME OF HEARING OF THE CASE. 2. TH OUGH VARIOUS GROUNDS ARE RAISED IN THESE APPEALS, BUT THE CONTROVERSY INVOLVE D THEREIN IS WITH REGARD TO LIABILITY OF DEDUCTION OF TDS ON PAYMENTS MADE TO THE CONSTITUENTS OF THE JOINT VENTURE. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT A JOINT VENTURE AGREEMENT WAS EXECUTED BY TWO CONSTITUENTS I.E. M/S HARISH CHANDRA ( INDIA) LTD. (HCIL) AND P.T.ADHIKARYA PERSERO UNDER THE NAME OF HCL - ADHIKARYA JV IN ORDER TO OBTAIN THE CONTRACT FROM RAIL VISKASH NIGAM LTD. (RVNL) . SUBSEQUENTLY THIS JOINT VENTURE (JV) ENTERED INTO A CONTRACT AGREEMENT WITH RAIL VISKASH NIGAM LTD. (RVNL), NEW DELHI FOR CONSTRUCTION OF ROAD BED, FACILITIES AND GENERAL ELECTRIFICATION FOR DOUBLING OF RAILWAY LINES, ITA NOS.496 & 497/12 ITA NO.178/13 & ITA NOS.140&141/14 5 CONSTRUCTION OF MAJOR BRIDGE IN CONNECTION WITH NEW BG RAILWAY LINES BETWEEN HARI D ASHPUR - PARADEEP, EAST COAST RAILWAY IN THE STATE OF ORISSA. ACCO RDING TO THE AO THE ENTITY OF JOINT VENTURE IS A TAXABLE ENTITY WHICH IS COVERED U/S.2(31) OF THE INCOME TAX ACT (HEREINAFTER CALLED AS THE ACT) AS AN ASSOCIATION OF PERSONS (AOP) . THE JOINT VENTURE HAS FILED ITS RETURN WITH THE STATUS OF AOP SINCE THE A SSESSMENT YEAR 2008 - 09 AND THE TAX AUDITOR IN FORM NO.3CD HAS ALSO CERTIFIED THE STATUS OF THE JV AS ASSOCIATION OF PERSONS. 3. IT CAME TO THE NOTICE OF THE ITO(TDS) THAT THE HCIL, ONE OF THE CONSTITUENTS OF JV, HAS CLAIMED CREDIT TO THE TDS IN ITS RETURN FILED FOR DIFFERENT ASSESSMENT YEARS BUT THE TAX CREDIT STATEMENT IN FORM NO. 26AS OF HCIL DID NOT SHOW ANY AMOUNT TO HAVE BEEN CREDITED TO ITS ACCOUNT. IN ORDER TO REMOVE SUCH MISMATCH IN TDS, THE JV WAS ASKED TO FILE REVISED E - TDS RETURN. ON VERIFICATION IT WAS SURFACED THAT THE CONTRACT GIVEN TO JV BY THE ASSESSEE WAS EXECUTED BY THE CONSTITUENTS ON BEHALF OF JV AND ACCORDINGLY THE AMOUNT RECEIVED ON EXECUTION OF WORK WAS ALSO APPORTIONED AMONGST THE CONSTITUENTS. THE AO HAS TAKEN A VIEW THAT SINCE THE A SSESSEE HAS GIVE N A SUB - CONTRACT TO ITS CONSTITU E N TS , ASSESSEE WAS REQUIRED TO DEDUCT TDS ON THE PAYMENTS AS PER PROVISIONS OF SECTION 194C OF THE ACT. THE ASSESSEE EXPLAINED BEFORE THE AO THAT JV WAS FORMED ONLY TO OBTAIN THE CONTRACT FROM THE RVNL BUT IT WAS TO BE EXECUTED BY ITS CONSTITUENTS AS THEY HAVE EXPERTISE IN THE FIELD OF CONSTRUCTION . S INCE THE CONTRACT WORK WAS EXECUTED BY THE ASSESSEE ITA NOS.496 & 497/12 ITA NO.178/13 & ITA NOS.140&141/14 6 THROUGH ITS CONSTITUENTS, THERE WAS NO SUBLETTING OF CONTRACT IN FAVOUR OF CONSTITUENTS, THEREFORE, THERE IS N O LIABILITY TO DEDUCT TDS. BEING NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE, THE AO HAS HELD THE ASSESSEE TO BE IN DEFAULT U/S.201(1) OF THE ACT ON ACCOUNT OF NON - DEDUCTION OF TAX AS PER PROVISIONS OF SECTION 194C OF THE ACT. THE AO HAS ALSO CHARGE D THE INTEREST U/S.201(1A) OF THE ACT. 4. AGGRIEVED THEREBY, APPEALS WERE PREFERRED BEFORE THE CIT(A) BUT THE ASSESSEE DID NOT FIND FAVOUR WITH HIM. NOW, THE ASSESSEE IS IN FURTHER APPEALS BEFORE THE TRIBUNAL AND REITERATED ITS SUBMISSIONS. IN SUPPORT OF HIS CONTENTION, LD. AR OF THE ASSESSEE HAS PLACED RELIANCE UPON THE ORDERS OF THE VISAKHAPATNAM BENCH OF THE TRIBUNAL IN CASE OF ITO VS. UAN RAJU CONSTRUCTIONS, ITA NOS. 344/VIZAG/2009 & ITA NO.77/VIZAG/2010, DATED 13 - 5 - 2010, IN WHICH THE TRIBUNAL HAS TAKE N A VIEW THAT THERE WAS NO SUBLETTING OF CONTRACT ONCE THE CONTRACT WAS EXECUTED BY THE CONSTITUENT OF JV. IT WAS FURTHER CONTENDED THAT THIS ORDER OF THE TRIBUNAL WAS FOLLOWED BY THE HYDERABAD BENCH IN CASE OF M/S HINDUSTAN RATNA JV VS. ITO, REPORTED IN ( 2014) 49 ITD 443 (HYD) . 5 . LD. COUNSEL FOR THE ASSESSEE FURTHER INVITED OUR ATTENTION THAT THE DEDUCTEE HAS ALREADY PAID THE TAXES ON THE RECEIPTS, THEREFORE, THE ASSESSEE CANNOT BE HELD TO BE IN DEFAULT U/S.201(1) OF THE ACT. IN SUPPORT OF THIS CONTENTION , HE ALSO PLACED RELIANCE ON THE ORDER OF THE AGRA BENCH OF THE TRIBUNAL IN THE CASE OF RAJEEV KUMAR AGARWAL VS. ADCIT, REPORTED IN (2014) 34 ITR(TRIB) 479 AND THE ORDER OF THE LUCKNOW BENCH OF THE ITA NOS.496 & 497/12 ITA NO.178/13 & ITA NOS.140&141/14 7 TRIBUNAL IN THE CASE OF ACIT VS. RAJA CHKRAVART Y, PASSED IN ITA NO.49/LKW/2013, DATED 29 - 5 - 2014. 6 . PER CONTRA , THE LD. DR HAS INVITED OUR ATTENTION TO THE FACT THAT ASSESSEE INITIALLY DEDUCTED CERTAIN TDS ON THE PAYMENTS MADE TO ITS CONSTITUENTS, THEREFORE, ASSESSEE CANNOT TAKE A CONTRARY VIEW ONCE HE HAS TRE ATED THE CONTRACT TO BE SUBLETTED TO ITS CONSTITUENTS. 7 . HAVING GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES AND THE JUDGMENTS REFERRED TO BY THE PARTIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT UNDISPUTEDLY THE ASSESSEE WAS A JOINT VENTUR E, FORMED BY HCIL AND P.T.ADHIKARYA PERSERO IN THE RATIO OF 60% AND 40% RESPECTIVELY , I N ORDER TO OBTAIN THE CONTRACT FROM RVNL, NEW DELHI FOR CONSTRUCTION OF ROAD BED, FACILITIES AND GENERAL ELECTRIFICATION FOR DOUBLING OF RAILWAY LINES, CONSTRUCTION OF M AJOR BRIDGE IN CONNECTION WITH NEW BG RAILWAY LINES BETWEEN HARIASHPUR - PARADEEP, EAST COAST RAILWAY IN THE STATE OF ORISSA. IT IS ALSO UNDISPUTED FACT THAT AFTER OBTAINING THE CONTRACT FROM THE RVNL IT WAS ASSIGNED TO ITS CONSTITUENTS FOR ITS EXECUTION. ON THE EXECUTION OF THE CONTRACT BY THE CONSTITUENTS THE PAYMENTS WERE MADE TO THE ASSESSEE, THE JOINT VENTURE, BY THE RVNL ON DEDUCTION OF TDS. THE PAYMENTS RECEIVED BY THE ASSESSEE WERE ACCORDINGLY GIVEN TO ITS CONSTITUENTS AS PER THE RATIO DETERMINED IN T HE JOINT VENTURE AGREEMENT. IT IS ALSO AN UNDISPUTED FACT THAT THE CONSTITUENTS OF THE ASSESSEE JV HAVE CLAIMED THE CREDIT OF TDS DEDUCTED AGAINST THE PAYMENT MADE TO JV. THEREFORE, NOW THE ISSUE ARISES AS TO WHETHER THE ASSESSEE JV WAS ITA NOS.496 & 497/12 ITA NO.178/13 & ITA NOS.140&141/14 8 REQUIRED TO DEDUCT THE TDS ON PAYMENTS MADE TO ITS CONSTITUENTS. THE IDENTICAL ISSUE WAS EXAMINED BY THE VISAKHAPATNAM BENCH OF THE TRIBUNAL IN THE CASE OF UAN RAJU CONSTRUCTIONS (SUPRA) ( IN WHICH THE UNDERSIGNED WAS ONE OF THE MEMBER TO THE ORDER ) AND THE TRIBUNAL HAS HELD THAT THERE WAS NO SUBLETTING OF CONTRACT TO THE CONSTITUENTS BY THE JOINT VENTURE. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED HEREUNDER : - 6. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE RECORD. WE HAVE ALSO GONE THROUGH THE JOINT VEN TURE PARTNERS AGREEMENT ENTERED BY THE PARTIES ON 20 - 10 - 2003 AND ALSO THE CODICIL ENTERED BETWEEN THEM. THE MAIN DISPUTE IS WITH REGARD TO THE ASSESSABILITY OF INCOME, IF ANY, IN THE HANDS OF THE ASSESSEE - AOP. THE CASE OF THE AO IS THAT THE JOINT VENTURE AND ITS MEMBERS SHOULD BE TREATED AS SEPARATE PERSONS AND HENCE THE CONTRACT ALLOCATED TO THE MEMBERS SHOULD BE TREATED AS SUB - CONTRACTING. HOWEVER, THE CASE OF THE ASSESSEE IS THAT THE JOINT VENTURE HAS COME INTO EXISTENCE ONLY TO PROCURE AND WIN THE CONTRACTS AND SINCE THE CONTRACTS WERE ALLOCATED BETWEEN THE MEMBERS AND FURTHER THEY WERE EXECUTED SEPARATELY BY EACH OF THE MEMBERS, NO INCOME CAN BE SAID TO HAVE ARISEN IN THE HANDS OF THE ASSESSEE - AOP. 7. IN O UR COUNTRY, THE IMPLEMENTATION OF INFRASTR UCTURE PROJECTS IS TAKING PLACE IN A MASSIVE SCALE. IN THIS CONNECTION, GLOBAL TENDERS ARE INVITED. HENCE TWO OR MORE BUSINESS ENTERPRISES ARE JOINING HANDS BY FORMING A CONSORTIUM OF JOINT VENTURE IN ORDER TO GET QUALIFIED FOR PARTICIPATING IN TENDER PROC ESS. THEY REGULATE THEMSELVES, BY ENTERING INTO AN AGREEMENT, THE METHODOLOGY TO BE ADOPTED FOR EXECUTING THE CONTRACT OBTAINED. BEFORE GOING INTO THE MAIN ISSUES, WE FEEL THAT IT IS IMPERATIVE TO DISCUSS ABOUT THE STATUS AND LEGAL POSITION OF JOINT VENTU RE VIS - A - VIS INCOME TAX ACT. THE JOINT VENTURES ARE NOT BE GOVERNED BY THE PROVISIONS OF THE INDIAN PARTNERSHIP ACT, 1932. IT IS ALSO A KNOWN FACT THAT THERE IS NO STATUTE WHICH GOVERNS A JOINT VENTURE. HENCE THE ISSUE REGARDING THE RELATIONSHIP BETWEEN THE MEMBERS AND ALSO BETWEEN THE MEMBERS AND THE JOINT VENTURE HAS TO BE DECIDED ON THE BASIS OF THE TERMS OF AGREEMENT ENTERED BETWEEN THE PARTIES. THOUGH THE JOINT VENTURE AGREEMENTS GENERALLY FALL IN THE CATEGORY OF ASSOCIATION OF PERSONS (AOP) UNDE R THE INCOME TAX ACT, YET THEIR ASSESSABILITY IN THE STATUS OF AOP WAS NOT FREE FROM DOUBT AND WE NOTICE THAT THE AUTHORITIES HAVE DECIDED THIS ISSUE ON THE BASIS OF FACTS AND CIRCUMSTANCES OF EACH CASE. 8. THE HONBLE SUPREME COURT HAS MADE A DETAILED DISCUSSION ON THE CONCEPT OF JOINT VENTURE IN THE CASE OF FAZIR CHAND GULATI VS. UPPAL AGENCIES PRIVATE LTD. (2008) 10 SCC 345. THE RELEVANT OBSERVATIONS ARE EXTRACTED BELOW: - 17. THIS COURT HAD OCCASION TO CONSIDER THE NATURE OF `JOINT VENTURE' IN NEW HORIZONS LTD VS. UNION OF INDIA [1995 (1) SCC 478). THIS COURT HELD : ITA NOS.496 & 497/12 ITA NO.178/13 & ITA NOS.140&141/14 9 'THE EXPRESSION 'JOINT VENTURE' IS MORE FREQUENTLY USED IN THE UNITED STATES. IT CONNOTES A LEGAL ENTITY IN THE NATURE OF A PARTNERSHIP ENGAGED IN THE JOINT UNDERTAKING OF A PARTICULAR TRANSACTION FOR MUTUAL PROFIT OR AN ASSOCIATION OF PERSONS OR COMPANIES JOINTLY UNDERTAKING SOME COMMERCIAL ENTERPRISE WHEREIN ALL CONTRIBUTE ASSETS AND SHARE RISKS. IT REQUIRES A COMMUNITY OF INTEREST IN THE PERFORMANCE OF THE SUBJECT MATTER, A RIGHT TO DIRECT AND GOVERN THE POLICY IN CONNECTION THEREWITH, AND DUTY, WHICH MAY BE ALTERED BY AGREEMENT, TO SHARE BOTH IN PROFIT AND LOSSES. [BLACK'S LAW DICTIONARY; SIXTH EDITION, P.839]. ACCORDING TO WORDS AND PHRASES, PERMANENT EDITION, A JOINT VENTURE IS AN ASSOCIATION OF TWO OR MORE PERSONS TO CARRY OUT A SINGLE BUSINESS ENTERPRISE FOR PROFIT [P.117, VOL. 23].'[EMPHASIS SUPPLIED] THE FOLLOWING DEFINITION OF 'JOINT VENTURE' OCCURRING IN AMERICAN JURISPRUDENCE [2ND EDITION, VOL.46 PAGES 19, 22 AND 23] IS RELEV ANT: 'A JOINT VENTURE IS FREQUENTLY DEFINED AS AN ASSOCIATION OF TWO OR MORE PERSONS FORMED TO CARRY OUT A SINGLE BUSINESS ENTERPRISE FOR PROFIT. MORE SPECIFICALLY, IT IS IN ASSOCIATION OF PERSONS WITH INTENT, BY WAY OF CONTRACT, EXPRESS OR IMPLIED, TO EN GAGE IN AND CARRY OUT A SINGLE BUSINESS VENTURE FOR JOINT PROFIT, FOR WHICH PURPOSE SUCH PERSONS COMBINE THEIR PROPERTY, MONEY, EFFECTS, SKILL, AND KNOWLEDGE, WITHOUT CREATING A PARTNERSHIP, A CORPORATION OR OTHER BUSINESS ENTITY, PURSUANT TO AN AGREEMENT THAT THERE SHALL BE A COMMUNITY OF INTEREST AMONG THE PARTIES AS TO THE PURPOSE OF THE UNDERTAKING, AND THAT EACH JOINT VENTURE MUST STAND IN THE RELATION OF PRINCIPAL, AS WELL AS AGENT, AS TO EACH OF THE OTHER COVERTURES WITHIN THE GENERAL SCOPE OF THE E NTERPRISE. JOINT VENTURES ARE, IN GENERAL, GOVERNED BY THE SAME RULES AS PARTNERSHIPS. THE RELATIONS OF THE PARTIES TO A JOINT VENTURE AND THE NATURE OF THEIR ASSOCIATION ARE SO SIMILAR AND CLOSELY AKIN TO A PARTNERSHIP THAT THEIR RIGHTS, DUTIES, AND LIABI LITIES ARE GENERALLY TESTED BY RULES WHICH ARE CLOSELY ANALOGOUS TO AND SUBSTANTIALLY THE SAME, IF NOT EXACTLY THE SAME AS THOSE WHICH GOVERN PARTNERSHIPS. SINCE THE LEGAL CONSEQUENCES OF A JOINT VENTURE ARE EQUIVALENT TO THOSE OF A PARTNERSHIP, THE COURTS FREELY APPLY PARTNERSHIP LAW TO JOINT VENTURES WHEN APPROPRIATE. IN FACT, IT HAS BEEN SAID THAT THE TREND IN THE LAW HAS BEEN TO BLUR THE DISTINCTIONS BETWEEN A PARTNERSHIP AND A JOINT VENTURE, VERY LITTLE LAW BEING FOUND APPLICABLE TO ONE THAT DOES NOT A PPLY TO THE OTHER. THUS, THE LIABILITY FOR TORTS OF PARTIES TO A JOINT VENTURE AGREEMENT IS GOVERNED BY THE LAW APPLICABLE TO PARTNERSHIPS.' 'A JOINT VENTURE IS TO BE DISTINGUISHED FROM A RELATIONSHIP OF INDEPENDENT CONTRACTOR, THE LATTER BEING ONE WHO, E XERCISING AN INDEPENDENT EMPLOYMENT, CONTRACTS TO DO WORK ACCORDING TO HIS OWN METHODS AND WITHOUT BEING SUBJECT TO THE CONTROL OF HIS EMPLOYER EXCEPT AS TO THE RESULT OF THE WORK, WHILE A JOINT VENTURE IS A SPECIAL COMBINATION OF TWO OR MORE PERSONS WHERE , IN SOME SPECIFIC VENTURE, A PROFIT IS JOINTLY SOUGHT WITHOUT ANY ACTUAL PARTNERSHIP OR CORPORATE DESIGNATION.' (EMPHASIS SUPPLIED) TO THE SAME EFFECT IS THE DEFINITION IN CORPUS JURIS SECUNDUM (VOL. 48A PAGES 314 - 315): 'JOINT VENTURE,' A TERM USED INTER CHANGEABLY AND SYNONYMOUS WITH JOINT ADVENTURE', OR COVENTURE, HAS BEEN DEFINED AS A SPECIAL COMBINATION OF TWO OR MORE PERSONS WHEREIN SOME SPECIFIC VENTURE FOR PROFIT IS JOINTLY SOUGHT WITHOUT ANY ACTUAL PARTNERSHIP OR CORPORATE DESIGNATION, OR AS AN ASS OCIATION OF TWO OR MORE PERSONS TO CARRY OUT A SINGLE BUSINESS ITA NOS.496 & 497/12 ITA NO.178/13 & ITA NOS.140&141/14 10 ENTERPRISE FOR PROFIT OR A SPECIAL COMBINATION OF PERSONS UNDERTAKING JOINTLY SOME SPECIFIC ADVENTURE FOR PROFIT, FOR WHICH PURPOSE THEY COMBINE THEIR PROPERTY, MONEY, EFFECTS, SKILL, AND KNOWL EDGE........ AMONG THE ACTS OR CONDUCT WHICH ARE INDICATIVE OF A JOINT VENTURE, NO SINGLE ONE OF WHICH IS CONTROLLING IN DETERMINING WHETHER A JOINT VENTURE EXISTS, ARE: (1) JOINT OWNERSHIP AND CONTROL OF PROPERTY; (2) SHARING OF EXPENSES, PROFITS AND LOSS ES, AND HAVING AND EXERCISING SOME VOICE IN DETERMINING DIVISION OF NET EARNINGS; (3) COMMUNITY OF CONTROL OVER, AND ACTIVE PARTICIPATION IN, MANAGEMENT AND DIRECTION OF BUSINESS ENTERPRISE; (4) INTENTION OF PARTIES, EXPRESS OR IMPLIED; AND (5) FIXING OF S ALARIES BY JOINT AGREEMENT.' (EMPHASIS SUPPLIED) BLACK'S LAW DICTIONARY (7TH EDITION, PAGE 843) DEFINES `JOINT VENTURE' THUS 'JOINT VENTURE: A BUSINESS UNDERTAKING BY TWO OR MORE PERSONS ENGAGED IN A SINGLE DEFINED PROJECT. THE NECESSARY ELEMENTS ARE: (1 ) AN EXPRESS OR IMPLIED AGREEMENT; (2) A COMMON PURPOSE THAT THE GROUP INTENDS TO CARRY OUT; (3) SHARED PROFITS AND LOSSES; AND (4) EACH MEMBER'S EQUAL VOICE IN CONTROLLING THE PROJECT.' 9. ON A CAREFUL READING OF THE ORDER OF THE HONBLE SUPREME COURT, W E NOTICE THE FOLLOWING ESSENTIAL INGREDIENTS FOR A JOINT VENTURE. A) IT CONNOTES A LEGAL ENTITY IN THE NATURE OF A PARTNERSHIP ENGAGED IN THE JOINT UNDERTAKING OF A PARTICULAR TRANSACTION FOR MUTUAL PROFIT. (OR) B) IT IS IN ASSOCIATION OF PERSONS WITH INTENT, BY WAY OF CONTRACT, EXPRESS OR IMPLIED, TO ENGAGE IN AND CARRY OUT A SINGLE BUSINESS VENTURE FOR JOINT PROFIT, FOR WHICH PURPOSE SUCH PERSONS COMBINE THEIR PROPERTY, MONEY, EFFECTS, SKILL, AND KNOWLEDGE, WITHOUT CREATING A PARTNERSHIP. (OR) C) A S PECIAL COMBINATION OF TWO OR MORE PERSONS WHEREIN SOME SPECIFIC VENTURE FOR PROFIT IS JOINTLY SOUGHT WITHOUT ANY ACTUAL PARTNERSHIP OR CORPORATE DESIGNATION, OR AS AN ASSOCIATION OF TWO OR MORE PERSONS TO CARRY OUT A SINGLE BUSINESS ENTERPRISE FOR PROFIT. D) THAT EACH JOINT VENTURER MUST STAND IN THE RELATION OF PRINCIPAL, AS WELL AS AGENT, AS TO EACH OF THE OTHER COVERTURES WITHIN THE GENERAL SCOPE OF THE ENTERPRISE . E) AMONG THE ACTS OR CONDUCT WHICH ARE INDICATIVE OF A JOINT VENTURE, NO SINGLE ONE OF WHICH IS CONTROLLING IN DETERMINING WHETHER A JOINT VENTURE EXISTS, ARE: (1) JOINT OWNERSHIP AND CONTROL OF PROPERTY; (2) SHARING OF EXPENSES, PROFITS AND LOSSES, AND HAVING AND EXERCISING SOME VOICE IN DETERMINING DIVISION OF NET EARNINGS; (3) COMMUNITY OF CONTROL OVER, AND ACTIVE PARTICIPATION IN, MANAGEMENT AND DIRECTION OF BUSINESS ENTERPRISE; (4) INTENTION OF PARTIES, EXPRESS OR IMPLIED; AND (5) FIXING OF SALARIES BY JOINT AGREEMENT.' 10. AS STATED EARLIER, IN ORDER TO PARTICIPATE IN THE GLOBAL TENDE R PROCESS, SOME OF THE FOREIGN COMPANIES HAVE ESTABLISHED JOINT VENTURES WITH THE INDIAN COMPANIES. WITH REGARD TO THE ISSUE OF THE ASSESSABILITY OF JOINT VENTURES, THE ITA NOS.496 & 497/12 ITA NO.178/13 & ITA NOS.140&141/14 11 FOREIGN COMPANIES HAVE APPROACHED THE AUTHORITY FOR ADVANCE RULING (AAR). WE DISCUSS BE LOW THE DECISION RENDERED BY AAR IN BRIEF. A) VAN OORD ACZ BV (248 ITR 399): IN THIS CASE THE PARTIES THEREIN HAD SPECIFICALLY PROVIDED IN THE AGREEMENT THAT EACH PARTY WILL BEAR ITS OWN LOSS AND RETAIN THE PROFITS SEPARATELY. THERE WAS ALSO SPECIFIC DEC LARATION THAT IT WAS NOT THE INTENTION TO CREATE A JOINT VENTURE TO CARRY ON BUSINESS IN COMMON. THE PARTIES THEREIN HAD UNDERTAKEN SEPARATE SCOPE OF WORKS ACCORDING TO THEIR RESPECTIVE TECHNICAL SKILLS. THERE WAS NO CONTROL AND CONNECTION BETWEEN THE WORK DONE BY EACH OF THE PARTIES. THUS IT WAS NOTICED THAT THERE WAS NO INTENTION TO CARRY OUT ANY BUSINESS IN COMMON. UNDER THESE FACTUAL CIRCUMSTANCES, THE AAR HELD THAT THE CONSORTIUM CANNOT BE TREATED AS ASSOCIATION OF PERSONS UNDER THE INCOME TAX ACT. IT IS PERTINENT TO NOTE THAT THIS DECISION WAS RENDERED PRIOR TO 1.4.2002, I.E. PRIOR TO THE INSERTION OF THE EXPLANATION TO SECTION 2(31). B) GEO CONSULT ZT GMBH (304 ITR 283): IN THIS CASE, THOUGH THE WORK WAS ALLOTTED TO EACH OF THE MEMBERS AND EACH MEMBE R HAS TO BEAR ITS OWN COSTS AND EXPENSES, YET IT WAS NOTICED THAT THE AGREEMENT STATED THAT THE MEMBERS WILL COLLABORATE FOR ALL THE WORK ASSOCIATED WITH THE PROJECT WHICH IS TO BE MANAGED ON A JOINT BASIS BY ALL THE MEMBERS. FURTHER THE AGREEMENT PROVIDED THAT THE MEMBERS ARE JOINTLY AND SEVERALLY RESPONSIBLE FOR EXECUTION OF PROJECT. THE AAR HAS EXPRESSED OPINION, BY PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF N.V.SHANMUGAM AND CO. V CIT (1971) 81 ITR 301, THAT THE ULTIMATE DI VISION OF PROFITS AMONGST MEMBERS OF THE JOINT ENTERPRISE IS NOT A RELEVANT CRITERION. FINALLY IT WAS HELD THAT THE JOINT VENTURE IS ASSESSABLE AS AOP. C) M/S HYUNDAU ROTEM CO., KOREA AND M/S MITSUBISHI CO., JAPAN (AAR NOS. 798 - 799 OF 2008 DT. 23 - 03 - 201 0. IN THIS CASE, THE AAR HAS HELD THAT THE CONSORTIUM FORMED BY FOUR MEMBERS IS NOT ASSESSABLE AS AOP, SINCE THE AAR HAS FELT THAT THE FACTS OF THE CASE ARE SIMILAR TO THE FACTS RELATING TO VAN OORD ACZ BV, SUPRA. SECTION 2(31) OF THE ACT DEFINES THE TER M PERSON, WHICH INTERALIA, INCLUDES AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS, WHETHER INCORPORATED OR NOT. SINCE THE TERM ASSOCIATION OF PERSONS (AOP) WAS NOT DEFINED IN THE ACT, THE COURTS HAVE INTERPRETED TO MEAN THAT IT IS AN ASSOCIATION ESTABLISHED TO PRODUCE INCOME. HENCE THE FINANCE ACT 2002 HAS INSERTED AN EXPLANATION TO SECTION 2(31), ACCORDING TO WHICH, AN AOP SHALL BE DEEMED TO BE A PERSON, WHETHER OR NOT SUCH AOP WAS FORMED OR ESTABLISHED WITH THE OBJECT OF DERIVING INCOME, PROFI TS OR GAINS. HOWEVER, IN THE INSTANT CASE, THERE IS NO DISPUTE WITH REGARD TO THE ASSESSABILITY OF THE JOINT VENTURE PER SE. BOTH THE ASSESSEE AND THE DEPARTMENT HAVE TAKEN THE STAND THAT THE JOINT VENTURE IS ASSESSABLE IN THE STATUS OF ASSOCIATION OF PERSON. HOWEVER, THE ISSUE IS WHETHER THE AO IS RIGHT IN TREATING THE JOINT VENTURE - AOP AS THE MAIN CONTRACTOR AND ITS MEMBERS AS THE SUB - CONTRACTORS, THEREBY ESTIMATING THE INCOME WHICH WAS NOT EARNED BY THE JOINT VENTURE. 11. ON THE BASIS OF THE UNDE RSTANDING OF THE CONCEPT OF JOINT VENTURE, LET US CONSIDER THE FACTS IN THE PRESENT CASE. THE AMENDED CLAUSE 3 READS AS UNDER: A) THE JOINT VENTURERS SHALL SUBJECT TO THE PROVISIONS HEREINAFTER CONTAINED, BE ENTITLED TO SHARE THE WORK AS MUTUALLY AGREE D ON ITEM WISE, DEPENDING ON THE WORK SCHEDULE. SHARING OF THE WORK AND EXECUTION OF THE ITA NOS.496 & 497/12 ITA NO.178/13 & ITA NOS.140&141/14 12 WORK CAN BE ALTERED AT ANY GIVEN TIME WITH MUTUAL CONSENT OF BOTH THE J.V. PARTNERS. AS PER THE ORIGINAL CLAUSE 3(A), THE MEMBERS OF JOINT VENTURE WOULD SHARE IN A PRESCRIBED PERCENTAGE IN ALL PROFITS ARISING OUT OF JOINT VENTURE. HOWEVER, THE SAID CLAUSE WAS IN CONTRADICTION TO THE PREAMBLE OF THE AGREEMENT; WHEREIN IT HAD BEEN STATED THAT THE MEMBERS ARE DESIROUS OF SHARING THE CONTRACT AMOUNT. IN VIEW OF THE AB OVE, IT APPEARS THAT THE CLAUSE 3(A) WAS AMENDED IN ACCORDANCE WITH THE ORIGINAL INTENTION OF THE MEMBERS. HOWEVER IN CLAUSE 12 DEALING WITH FINAL ACCOUNTS, WE FIND A MENTION ABOUT SHARING OF PROFIT OR LOSS, BUT THERE IS NO MENTION ABOUT THE PROPORTION. HO WEVER, IN REALITY, THE MEMBERS HAVE SHARED THE WORK ONLY AND HENCE THERE WAS NO PROFIT OR LOSS FOR THE JOINT VENTURE. 11.1 FURTHER, CLAUSE 9 OF THE AGREEMENT WHICH DEALS WITH THE RESOURCES SPECIFICALLY STATES THAT EACH JOINT VENTURER SHALL PROVIDE PLANT AND EQUIPMENT REQUIRED FOR THE EXECUTION OF THEIR PORTION OF CONTRACT AND SUCH PLANT AND MACHINERY SHALL NOT BECOME ASSET OF THE JOINT VENTURE. THUS THERE IS NO CLEAR PROVISION IN THE JOINT VENTURE WHICH PROVIDE FOR JOINT EXECUTION OF THE PROJECT AND JOIN T REALIZATION OF PROFIT. 11.2 CLAUSE - 4 DEALS WITH THE RELATIONSHIP BETWEEN THE MEMBERS OF THE JOINT VENTURES. SUB - CLAUSES (C) AND (D) ARE RELEVANT. C. THIS AGREEMENT SHALL NOT BE CONSTRUED BY EITHER JOINT VENTURER HERETO AS CONSTITUTING EACH OF THEM TH E AGENT OF THE OTHER NOR THE JOINT VENTURE AS THE AGENT FOR EITHER OF THEM. E. THE JOINT VENTURERS AGREE THAT THIS AGREEMENT SHALL NOT CONSTITUTE A PARTNERSHIP AND ANY LIABILITIES OF ANY SORT WHATSOEVER WHICH ONE JOINT VENTURER MAY INCUR TOWARDS OR ON BE HALF OF THE OTHER JOINT VENTURERS SHALL BE IN ACCORDANCE WITH THIS AGREEMENT AND BE THERETO LIMITED AS PER THE CONCEPT OF THE JOINT VENTURE, EACH JOINT VENTURER SHALL STAND IN THE RELATION OF A PRINCIPAL AS WELL AS AN AGENT OF THE OTHER. HOWEVER CLAUSE 4 (C) OF THE AGREEMENT SPECIFICALLY STATES THAT THE MEMBERS DO NOT CONSTITUTE THE AGENT OF EACH OTHER. THE SAID CLAUSE ALSO STATES THAT THE JOINT VENTURE SHOULD NOT BE TAKEN AS THE AGENT OF THE MEMBERS ALSO. THUS, ACCORDING TO THE AGREEMENT, EACH MEMBER ST ANDS IN ITS OWN RIGHT AND NO SPECIFIC RELATIONSHIP IS CREATED BETWEEN THE JOINT VENTURE AND ITS MEMBERS. 12. THUS, ON AN UNDERSTANDING OF THE CONCEPT OF THE JOINT VENTURE AND THE TERMS OF AGREEMENT BETWEEN THE MEMBERS OF THE PRESENT CASE, WE ARE OF THE VIEW THAT IN THE INSTANT CASE, THE CONSORTIUM OF JOINT VENTURE HAS BEEN FORMED ONLY TO PROCURE THE CONTRACT WORKS. BY WAY OF THE AGREEMENT, THE PARTIES HAVE ONLY REGULATED THE RELATIONSHIP INTER SE WITH RESPECT TO THEIR JOINT RESPONSIBILITY THAT EXISTED IN RELATION TO THE PRINCIPAL, VIZ., M/S KONKAN RAILWAY. IN REALITY, BOTH THE PARTIES HAVE DIVIDED THE CONTRACT WORKS BETWEEN THEMSELVES AND THEY HAVE EXECUTED THEIR SHARE OF WORK ON THEIR OWN RISKS. IT IS PERTINENT TO NOTE HERE THAT THE AO HAS NOT GIVEN ANY FINDING ON THE ISSUES LIKE THAT EACH MEMBER HAD AUTHORITY TO INTERFERE WITH OR CONTROL THE WORK EXECUTED BY THE OTHER MEMBER; THAT BOTH THE MEMBERS HAVE JOINTLY EXECUTED THE PROJECT AND THUS PRODUCED THE INCOME JOINTLY. IN OUR OPINION, THE FINDING ON THE L INES STATED ABOVE IS CRUCIAL TO DETERMINE THE ISSUE OF AVAILABILITY OF INCOME IN THE HANDS OF JOINT VENTURE - AOP. ON THE CONTRARY, THE AO IS ON RECORD THAT THE EACH OF THE ITA NOS.496 & 497/12 ITA NO.178/13 & ITA NOS.140&141/14 13 MEMBERS HAS DECLARED THE INCOME DERIVED FROM THEIR RESPECTIVE SHARE OF CONTRACT WORK S IN THEIR HANDS. IN THIS KIND OF SITUATION, WE DO NOT FIND ANY MERIT IN THE PRESUMPTION MADE BY THE AO THAT THE JOINT VENTURE IS THE MAIN CONTRACTOR AND THE MEMBERS ARE THE SUB - CONTRACTORS. ONCE THIS PRESUMPTION HAS BEEN FOUND TO BE WRONG, THEN THE QU ESTION OF ESTIMATION OF INCOME BY WAY OF SUB - CONTRACT COMMISSION DOES NOT ARISE. SO ALSO THE QUESTION OF DEDUCTION OF TAX U/S 194C(2) OF THE ACT AND THE DISALLOWANCE U/S 40(A)(IA) DOES NOT ARISE. IN VIEW OF THE FORE GOING DISCUSSIONS, WE DO NOT FIND ANY IN FIRMITY IN THE DECISION REACHED BY THE LD CIT(A). 8 . FOLLOWING THIS ORDER OF THE TRIBUNAL, THE HYDERABAD BENCH OF THE TRIBUNAL HAS TAKEN SIMILAR VIEW IN CASE OF M/S HINDUSTAN RATNA JV (SUPRA) BY HOLDING THAT THERE COULD NOT BE ANY SUB - CONTRACT BETWEEN J V AND ITS CONSTITUENTS AS THE JV HAS BEEN FORMED ONLY TO PROCURE CONTRACT WORKS FROM GOVERNMENT. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE : - 22. IN VIEW OF THE ABOVE DISCUSSION AND CONSIDERING THE FACTS A ND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE RELATIONSHIP CREATED BY THE PARTNERSHIP DEED DATED 31 ST AUGUST, 2007 AND PARTNERS CANNOT BE CONSIDERED AS SUB - CONTRACTORS OF THE FIRM AND THEY ARE JOINTLY AND SEVERALLY LIABLE TOWARDS THE OWNERS FOR THE EXECUTION OF THE CONTRACT COMMITMENTS IN ACCORDANCE WITH THE CONTRACT CONDITIONS. BEING SO, THE PROVISIONS OF SECTION 194C CANNOT BE ATTRACTED SO AS TO TREAT THEM AS SUB - CONTRACTORS OF THE FIRM THEREBY INVOKING THE PROVISIONS OF SECTION 40(A)(IA). IN OTHER WORDS, WE CAN SAFELY CONCLUDE THAT THERE IS NO SUB - CONTRACT BETWEEN JV AND THE CONSTITUENTS AND SINCE THE JV HAS BEEN FORMED ONLY TO PROCURE CONTRACT WORKS FROM THE GOVERNMENT AND THE CONTRACT IS BEING EXECUTED BY THE CONSTITUENT PARTNERS IN THEIR SH ARING RATIO 60:40 AS PER THE TERMS OF JV, IT CANNOT BE SAID THAT THE JV IS A CONTRACTOR AND ITS CONSTITUENTS ARE SUBCONTRACTORS. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE REVENUE AUTHORITIES AND DELETE THE DISALLOWANCE OF RS. 111,09,23,018/ - MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 23. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 9 . IT IS ALSO UNDISPUTED FACT THAT THE DEDUCTEE HAS ALREADY PAID THE TAXES ON THE PAYMENTS RECEIVED FROM THE JV. SINCE TH E TAX HAS BEEN PAID ON THE RECEIPTS BY THE DEDUCTEE, THE DEDUCTOR CANNOT BE HELD TO BE ASSESSEE IN DEFAULT. IN THIS REGARD A REFERENCE WAS MADE TO THE ORDERS OF ITA NOS.496 & 497/12 ITA NO.178/13 & ITA NOS.140&141/14 14 THE TRIBUNAL IN CASE OF RAJA CHKRAVARTY (SUPRA) AND RAJEEV KUMAR AGARWAL (SUPRA), IN WHICH IT H AS BEEN HELD THAT ONCE THE DEDUCTEE HAS MADE THE PAYMENT OF TAXES ON THE RECEIPTS THE DEDUCTOR CANNOT BE HELD TO BE ASSESSEE IN DEFAULT. THEREFORE, ON BOTH COUNTS, THE ASSESSEE CANNOT BE HELD TO BE IN DEFAULT U/S.201(1) OF THE ACT. 10. SO FAR AS THE INTE REST CHARGED U/S.201(1A) OF THE ACT IS CONCERNED, THE SAME CANNOT BE CHARGED ONCE IT IS HELD THAT THERE IS NO LIABILITY TO DEDUCT THE TDS ON THE PAYMENTS MADE BY THE ASSESSEE TO ITS CONSTITUENTS. IT IS IR RELEVANT THAT IN FEW ASSESSMENT YEARS, THE ASSESSEE HAS DEDUCTED THE TDS ON PAYMENT S MADE TO ITS CONSTITUENTS . IF THE ASSESSEE HAS DONE SOMETHING WRONG, IT DOES NOT MAKE HIM RESPONSIBLE TO COMMIT MISTAKE IN SUCCEEDING YEARS. FOLLOWING THE VIEW TAKEN BY THE TRIBUNAL IN DIFFERENT CASES, WE ARE OF THE CONSIDER ED VIEW THAT THE JOINT VENTURE IS NOT RESPONSIBLE TO DEDUCT THE TDS ON THE PAYMENTS MADE TO ITS CONSTITUENTS FOR THE WORK EXECUTED BY THEM IN THE LIGHT OF THE FACTS , WHERE THE JOINT VENTURE WAS FORMED TO OBTAIN THE CONTRACT FROM THE GOVERNMENT AND THE CON TRACT WAS EXECUTED BY THE CONSTITUENTS. WE, THEREFORE, OF THE VIEW IN THE INSTANT CASE THAT, THE ASSESSEE WAS NOT LIABLE TO DEDUCT THE TDS, THEREFORE, HE CANNOT BE HELD TO BE IN DEFAULT AND LIABLE TO BE CHARGED INTEREST U/S.201(1A) OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) AND HOLD THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TDS , ITA NOS.496 & 497/12 ITA NO.178/13 & ITA NOS.140&141/14 15 THEREFORE, HE CANNOT BE HELD TO BE IN DEFAULT U/S.201(1) OF THE ACT AND LIABLE FOR ANY INTEREST TO BE CHARGED U/S.201(1A) OF THE ACT. 11 . IN THE RESULT, ALL AP PEAL S OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 / 05 / 201 5 . SD/ - SD/ - ( . . ) ( B. P. JAIN ) ( ) ( SUNIL KUMAR YADAV) / ACCOUNTANT MEMBER / JUDICIAL MEMBER CUTTACK ; DA TED 21 /0 5 / 201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, CUTTACK 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT , CUTTACK 6. [ / GUARD FILE. //TRUE COPY//