Income-tax Officer, V. M/s. Subhash + BT Patil & Sons + NV Kharote JV., Pune

ITA 148/PUN/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7157 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 01-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS NIRUPAMA KOTRU
• Assessee Lawyers: ULHAS KINI
• Keywords: Rule of consistency; Advance ruling; Relationship of principal and agent
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.148/PUN/2016 / ASSESSMENT YEAR : 2012-13 INCOME TAX OFFICER, WARD 6(3), PUNE. . / APPELLANT V/S M/S. SUBHASH & B.T. PATIL SONS & N.V. KHAROTE JV., 471, VISHNU BHAVAN, 4 TH FLOOR, BUDHWAR PETH, NEAR PASODYA VITHOBA MANDIR, PUNE - 411002 PAN : ABPFS6926F. . / RESPONDENT ASSESSEE BY : SHRI ULHAS KINI REVENUE BY : MRS. NIRUPAMA KOTRU. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE REVENUE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 3, PUNE DT.12.11.2015 FO R THE ASSESSMENT YEAR 2012-13. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RE CORD ARE AS UNDER :- ASSESSEE IS A JOINT VENTURE (JV) CONSISTING OF SUBHASH PROJECTS & MARKETING LTD., B.T. PATIL & SONS BELGAUM CONST RUCTIONS / DATE OF HEARING : 13.11.2017 / DATE OF PRONOUNCEMENT: 15.11.2017 2 PVT. LTD., AND N.V. KHAROTE CONSTRUCTION PVT. LTD. IT IS S TATED THAT THE JV WAS FORMED SOLELY FOR THE PURPOSE OF ACQUIRING PROJECT WOR K OF CONSTRUCTION OF JIHE KATHAPUR LIFT IRRIGATION SCHEME AN D OTHER PROJECTS. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2012-13 ON 25.09.2012 DECLARING NIL TAXABLE INCOME. THE CAS E WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRA MED U/S 143(3) OF THE ACT VIDE ORDER DT.25.02.2016 AND THE TOTAL INCOME WAS DETERMINED AT RS.23,85,52,580/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORD ER DT.12.11.2015 (IN APPEAL NO.PN/CIT(A)-3/ITO WD-3(2), PN/870/2014-15) DECIDED THE ISSUE IN FAVOUR OF THE ASSES SEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPE AL BEFORE US AND HAS RAISED THE FOLLOWING EFFECTIVE GROUND : WHETHER THE LD.CIT(A) WAS CORRECT IN LAW AND ON FA CTS IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF WORK RECEIPTS OF RS.23,85,52,584/- SHARED BY THE JOINT V ENTURE MEMBERS, U/S 40(A)(IA) OF THE I.T. ACT, 1961. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICE D THAT DURING THE YEAR ASSESSEE HAD RECEIVED CONTRACT RECEIP TS OF RS.23,85,52,584/- WHICH WAS DISTRIBUTED BETWEEN THE MEMBE RS AS UNDER : SUBHASH PROJECTS & MARKETING LTD., RS. NIL B.T. PATIL & SONS BELGAUM CONSTRUCTION PVT. LTD. RS. 21,16,84,449/- N.V. KHAROTE CONSTRUCTION PVT. LTD. RS. 2,68,68,135/- AO WAS OF THE VIEW THAT ASSESSEE HAD ASSIGNED THE WOR K ALLOTTED TO ITS MEMBER COMPANIES AND AS SUCH THE ARRANG EMENT BETWEEN THE ASSESSEE AND THE ENTITIES WAS NOTHING BUT A CONTRACT 3 AND THE ASSESSEE BEING A JOINT VENTURE WAS LIABLE TO DED UCT TDS U/S 194C OF THE ACT ON SUB-CONTRACT. HE NOTICED THAT NO TAX HAS BEEN DEDUCTED BY THE ASSESSEE AND THEREFORE PROVISIONS OF SEC.40(A)(IA) OF THE ACT WERE APPLICABLE. THE SUBMISSION OF THE ASSESSEE THAT THE MEMBERS OF THE ASSESSEE JV EXECUTE D THEIR RESPECTIVE SHARE OF WORK INDEPENDENTLY BEARING ITS OWN LOSS AND RETAINED ITS PROFITS BY CARRYING OWN INVESTMENT RISKS AND THE PROFIT EARNED BY THE MEMBERS OF THE ASSESSEE JV WAS OFFERED T O TAX IN THE RETURN OF INCOME, WAS NOT FOUND ACCEPTABLE TO THE AO. HE ALSO NOTED THAT AN IDENTICAL ISSUE AROSE IN A.Y. 2010-11 AND 20 11-12 WHEREIN THE LD.CIT(A) HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST WHICH REVENUE HAD FILED APPEALS BEFO RE THE TRIBUNAL. HE ACCORDINGLY CONSIDERED THE AMOUNT OF RS.23,85,52,584/- THAT WAS DISTRIBUTED TO THE JV PARTNERS BEING LIABLE FOR DISALLOWANCE U/S 40(A)(IA) OF THE ACT ON ACCOUNT OF NO N- DEDUCTION OF TDS AND ACCORDINGLY DISALLOWED THE SAME. A GGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSER VING AS UNDER : 3.2 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND PERUSED MATERIAL ON RECORD. THE ISSUE RAISED IN GRO UNDS NO. 1 TO 4 REVOLVES AROUND THE SINGLE ISSUE OF GIVING CREDIT O F TAX DEDUCTED AT SOURCE TO THE JOINT VENTURE INSTEAD OF THE MEMBERS OF JOINT VENTURE I.E. (I) SUBHASH PROJECTS & MARKETING LTD. (II) B.T. PATIL & SONS BELGAUM CONSTRUCTION PVT. LTD. AND (III) N.V. KHARO TE CONSTRUCTION PVT. LTD., HAS BEEN POINTED OUT BY THE APPELLANT, T HAT THE HONBLE ITAT BENCH HAS PASSED ORDERS IN THE CASE OF SHRADDH A & IHP JOINT VENTURE VIDE ITA NOS. 942/943/PN/2013 ON 28.1 1.2014 ON SIMILAR ISSUES. IN THIS ORDER THE HON'BLE BENCH ANA LYSED THE ISSUE IN THE CONTEXT OF ITS OWN DECISION IN ITO VS SWAPNA LI RDS JOINT VENTURE IN ITA NO. 771/PN/2011. IN THAT CASE, THE F ACTS OF WHICH ARE IDENTICAL, THE HON'BLE BENCH HAS HELD THAT THER E WAS NO RELATIONSHIP OF CONTRACTOR AND CONTRACTEE BETWEEN T HE JOINT VENTURE AND ITS PARTNERS AND SINCE CONTRACT RECEIPTS, ASSET S, LIABILITIES WERE APPORTIONED BETWEEN THE MEMBERS, THEREFORE, TAXABIL ITY OF THE INCOME HAS TO BE CONSIDERED IN THE HANDS OF THE MEM BERS AND NOT THE JOINT VENTURE. FOLLOWING THE ABOVE DECISION OF THE HON'BLE ITAT PUNE, MY PREDECESSOR HAS ALSO ALLOWED THE APPEAL IN APPELLANT'S CASE FOR A.YS. 2010-11 & 2011-12. SINCE THE HON'BLE BENCH HAS 4 ALREADY DECIDED THE MATTER IN SIMILAR CASES, THEREF ORE, HERE 100 IT IS HELD THAT THE INCOME HAS TO BE TAXED IN THE HAND S OF THE MEMBERS. 3.3 REFERENCE IS ALSO INVITED TO THE RECENT HIGH CO URT OF ANDHRA PRADESH JUDGMENT IN THE CASE OF CIT VS BHOORATNAM & COMPANY REPORTED AT 262 CTR 405 (AP). THE QUESTION ADDRESSE D TO THE HIGH COURT WAS THAT WHETHER THE CREDIT FOR TDS BASED ON THE CERTIFICATES PRODUCED IN THE NAME OF THE JOINT VENTURE AND DIREC TORS IS NOT IN ACCORDANCE WITH RULE 37BA UNDER THE INCOME-TAX RULE S AND CREDIT COULD BE DENIED HOLDING THAT THESE DO NOT RELATE TO THE ASSESSEE FIRM OR COMPANY. THE HON'BLE HIGH COURT AFTER REVIE WING THE EVIDENCE GAVE THE FOLLOWING FINDING: '20. THE REVENUE CANNOT BE ALLOWED TO RETAIN TAX DE DUCTED AT SOURCE WITHOUT CREDIT BEING AVAILABLE TO ANYBODV . IF THE CREDIT OF TAX IS NOT ALLOWED TO THE ASSESSEE AND TH E JOINT VENTURE .HAS NOT FILED A RETURN OF INCOME THEN THE CREDIT OF TDS CANNOT BE TAKEN BY ANYBODY. THIS IS NOT IN THE SPIRIT AND INTENTION OF LAW. 21. THEREFORE, IN OUR VIEW THE ASSESSING OFFICER ER RED IN DENYING THE BENEFIT OF THE TDS MENTIONED IN THE TDS CERTIFICATE FILED BY THE ASSESSEE ON THE GROUND THA T THE TDS CERTIFICATE IS ISSUED IN THE NAME OF THE JOINT VENT URE OR A DIRECTOR AND NOT THE ASSESSEE. THE FACTS OF THE CASE OF THE APPELLANT MIRROR THE F ACTS BEFORE THE ANDHRA PRADESH HIGH COURT. THUS, FOLLOWING THAT JUD GMENT AND THE HON'BLE PUNE BENCH DECISION IN IDENTICAL CASE V IDE ORDER DATED 28.11.2014 AS DISCUSSED ABOVE, GROUNDS OF APP EAL NO. 1 TO 4 ARE ALLOWED. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPE AL BEFORE US. 4. BEFORE US, LD.DR. SUPPORTED THE ORDER OF AO. LD.AR. ON T HE OTHER HAND REITERATED THE SUBMISSIONS MADE BEFORE AO AN D LD.CIT(A) AND FURTHER SUBMITTED THAT IDENTICAL ISSUE AROSE IN ASSESSEES OWN CASE FOR A.Y. 2010-11 AND 2011-12 AGAINS T WHICH REVENUE HAD FILED APPEALS BEFORE THE TRIBUNAL. THE TRIBUNA L VIDE ORDER DT.09.08.2017 IN ITA NO.113/PUN/2015 AND ITA NO.114/PUN/2015 DISMISSED THE APPEALS OF REVENUE. HE PLA CED ON RECORD THE COPY OF THE AFORESAID ORDER AND POINTED TO THE RELEVANT PARAS OF THE ORDER OF THE TRIBUNAL. HE FURTHER SUBMITTE D THAT CBDT VIDE CIRCULAR NO.7/2016 [F.NO.225/2/2016/ITA.II] DT.07.03.2016 5 HAS ALSO CLARIFIED THE ISSUE. HE THEREFORE SUBMITTED THAT N O INTERFERENCE TO THE ORDER OF LD.CIT(A) IS CALLED FOR. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPE CT TO DISALLOWANCE U/S 40(A)(IA) OF THE ACT. WE FIND THAT IDENTICAL ISSU E AROSE IN ASSESSEES OWN CASE FOR A.Y. 2010-11 AND 2011-12. THE CO- ORDINATE BENCH OF THE TRIBUNAL VIDE ORDER DT.09.08.2017 HAS DISMISSED THE APPEALS OF REVENUE BY OBSERVING AS UNDER : 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH R ESPECT TO APPLICATION OF PROVISIONS OF SEC.40(A)(IA) OF THE ACT. WE FI ND THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SHRADDHA & MA HALAXMI JOINT VENTURE (SUPRA) ON IDENTICAL FACTS AND AFTER RELYI NG ON THE DECISION IN THE CASE OF SWAPNALI RDS JOINT VENTURE (SUPRA) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER : 10. WE HAVE HEARD THE RIVAL AND PERUSED THE RECORD S. IN THE FACTS OF THE PRESENT CASE, THE ISSUE ARISING BEFORE US IS IN RELATION TO THE APPLICATION OF PROVISIONS OF SECTION 40A(IA) OF THE ACT. THE ASSESSEE AOP HAD RECEIVED CONTRACTS FROM T HIRD PARTY WHICH, IN TURN, WAS EXECUTED BY THE TWO MEMBERS OF AOP. THE PLEA OF THE ASSESSEE AOP WAS THAT IT WAS CONSTITUTE D FOR OBTAINING WORK AND RECEIVING PAYMENTS AGAINST THE S AID WORK DONE BY THE CONSTITUENTS OF THE AOP AND THE SAID PA YMENT WAS TO BE DISTRIBUTED IN THE AGREED RATIO BETWEEN T HE TWO MEMBERS OF THE AOP FOR CARRYING OUT THE WORK. SUCH ASSIGNMENTS OF THE WORK TO THE MEMBERS AS PER THE MEMORANDUM OF UNDERSTANDING AGREED UPON IS NOT EQUI VALENT TO SUB-CONTRACT AND AS SUCH THE ASSESSEE AOP WAS NO T LIABLE TO DEDUCT TAX AT SOURCE OUT OF THE AMOUNT DISTRIBUT ED AMONGST THE MEMBERS OF THE AOP IN THE AGREED RATIO OF SHARE . THE ASSESSING OFFICER, WHILE DECIDING THE ISSUE IN THE HANDS OF THE ASSESSEE, HAD GIVEN AN OFFICE NOTE TO THE EFFECT T HAT IN THE CASE OF M/S. SWAPNALI RDS JOINT VENTURE (SUPRA), SI MILAR ADDITION UNDER SECTION 40(A)(IA) OF THE ACT HAS BEEN MADE FOR THE ASSESSMENT YEAR 2008-09 WHICH HAS BEEN DELETED BY THE CIT(A)-II, PUNE. DEPARTMENT HAS FILED APPEAL AGAINS T THIS ORDER TO ITAT AND THE MATTER IS PENDING BEFORE ITAT. TO K EEP THE ISSUE ALIVE IN OTHER CASES ALSO, THE SIMILAR ADDITIO N IS BEING MADE IN THIS CASE ALSO. THE FACTS AND CIRCUMSTANCES ARISING IN THE PRESENT APPEAL ARE IDENTICAL TO THE FACTS AND C IRCUMSTANCES OF THE CASE BEFORE THE TRIBUNAL IN M/S. SWAPNALI RD S JOINT VENTURE (SUPRA), WHEREIN IT WAS HELD AS UNDER:- '2. AT THE OUTSET OF HEARING, LD. AUTHORISED REPRES ENTATIVE POINTED OUT THAT THIS CASE IS COVERED IN FAVOUR OF THE ASSESSEE BY ITAT, PUNE BENCH, IN ITA.NO.65/PN/2011 FOR A.Y. 2006-07 IN THE CASE OF ITO VS. GAMMON PROGRESSIVE-JV, WHERE IN VIDE PARAS 5 TO 9 THE TRIBUNAL DECIDING SIMILAR ISSUE IN FAVOUR OF THE 6 ASSESSEE BY DISMISSING THE APPEAL OF THE REVENUE, H AS HELD AS UNDER: '5. AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT THE FIRST ISSUE IS REGARDING STATUS OF THE ASSESSEE. THE ASSESSING OFF ICER HAS MENTIONED THE STATUS AS FIRM. HOWEVER, IN THE EXPLANATION GIVEN, THE ASSESSEE HAS MADE IT CLEAR T HAT THE STATUS IN WHICH THE RETURNS WAS FILED WAS THAT OF AN AOP. IT WAS EXPLAINED THAT IN THE RETURNS OF INCOME SINCE BEGINNING TILL THE A.Y. 2006- 07, THE STATUS WAS MENTIONED AS AOP ONLY, I.E., WHEN THE RETURNS WERE FILED MANUALLY. HOWEVER, FROM A.Y. 2007-08, WHEN ELECTRONIC FILING HAD TO BE DONE, DUE TO COMPUTER E RROR THE STATUS APPEARED AS 'FIRM' ON THE ITR ACKNOWLEDGEMENT, WHEREAS IN THE COMPUTATION OF TOTA L INCOME, IT WAS CORRECTLY MENTIONED AS AOP. IT WAS EXPLAINED THAT I.T.RETURN FORM NO.5 WAS ACTUALLY APPLICABLE FOR FIRMS, AOPS AND BOIS. THEREFORE, THI S ERROR MIGHT HAVE OCCURRED. THE ASSESSEE HAS ALSO FI LED COMPUTATION OF TOTAL INCOME ALONGWITH ACKNOWLEDGEMENTS FROM A.Y. 2002-03 TO A.Y. 2006-07 IN WHICH THE STATUS WAS REGULARLY SHOWN AS AOP AND EVEN IN THE APPLICATION FORM FOR ALLOTMENT OF PAN I T WAS SHOWN AS AOP. THE CIT(A) NOTICED FROM THE RECORD TH AT STATUS WAS SHOWN AS AOP. HOWEVER, IT WAS NOT VERY MUCH RELEVANT FOR THE PURPOSE OF APPLICABILITY OF PROVISIONS OF SECTION 194C SINCE TDS PROVISIONS ARE APPLICABLE TO ALL ENTITIES EXCEPT INDIVIDUALS AND H UF HAVING GROSS RECEIPTS OR TURNOVER FROM BUSINESS OR PROFESSION BELOW THE PRESCRIBED LIMIT. 6. IT WAS FURTHER EXPLAINED ON BEHALF OF THE ASSESS EE THAT JOINT VENTURE AS SUCH DOES NOT EXECUTE ANY CON TRACT WORK BUT WERE MERELY FORMED FOR OBTAINING CONTRACT WORK AND FOR RECEIVING THE PAYMENT, WHICH WAS IMMEDIATELY DISTRIBUTED IN THE RATIO OF THE SHARE OF THE WORK DONE. THE ACTUAL SHARE IN THE JOINT VENTURE OF THE TOTAL WORK ALLOCATED WAS 60% FOR M/S.GAMMON INDIA LTD. AND 40% FOR M/S.PROGRESSIVE CONTRACTION LTD. I N THIS BACKGROUND IT WAS EXPLAINED THAT THE CONTRACT ACCOUNT AND THE BALANCE SHEET OF THE JOINT VENTURE REVEALS NOTHING BUT APPORTIONMENT OF CONTRACT RECEI PTS, ASSETS AND LIABILITIES BETWEEN THE MEMBERS. THERE W AS NO EXPENDITURE BOOKED IN THE CONTRACT ACCOUNT NOR A NY PROFIT AND LOSS ACCOUNT PREPARED FOR THE PURPOSE SI NCE THERE DID NOT ARISE ANY PROFIT OR LOSS TO THE ASSES SEE PER SE. THE JOINT VENTURE TRANSFERRED NOT ONLY THE GROS S REVENUE BUT ALSO THE CORRESPONDING TDS TO ITS MEMBE RS IN THE RATIO OF THEIR WORK DONE BY INDIVIDUAL MEMBE RS FOR WHICH THE APPOINTMENT CERTIFICATE WAS DULY ISSU ED EVERY YEAR BY THE ASSESSING OFFICER. IN THIS BACKGR OUND IT WAS SUBMITTED THAT THERE WAS NO RELATIONSHIP OF CONTRACTOR AND SUB-CONTRACTOR BETWEEN THE JOINT VEN TURE AND ITS TWO MEMBERS. THEREFORE, THERE WAS NO QUESTI ON OF APPLICABILITY OF TDS PROVISIONS U/S.194C OF THE ACT. THE ASSESSEE ALSO EXPLAINED WHY A RETURNS WERE FILE D BY THE JOINT VENTURE AS AOP. IT WAS EXPLAINED THAT IT WAS DONE TO PASS ON THE CREDIT OF TDS TO THE MEMBER S ON THE BASIS OF TAX APPORTIONMENT CERTIFICATES WHO HAVE ACCOUNTED FOR THE CORRESPONDING CONTRACT REVENUE IN THEIR RESPECTIVE RETURNS. IT WAS ALSO SUBMITTED THA T 'NIL' 7 INCOME ARISING IN THE HANDS OF THE AOP IS CONFIRMED BY THE ACTION OF THE ASSESSING OFFICER IN NOT ASSESSIN G ANY PROFIT/INCOME ARISING FROM THE CONTRACT APART FROM THIS DISALLOWANCE U/S. 40(A)(IA) OF THE ACT. THE ASSESSE E VIDE ITS SUBMISSIONS DATED 26.03.2010 AND 06.09.2010, EXPLAINED THE DIFFERENCE BETWEEN REVENU E SHARING ARRANGEMENT ENTERED INTO BY THE JOINT VENTU RE VIS-A-VIS SUB- CONTRACT. IT WAS EXPLAINED ON BEHALF OF THE ASSESSEE THAT IN THE CASE OF SUB-CONTRACT, THERE WA S A RELATIONSHIP OF PRINCIPAL AND AGENT WHEREAS IN THE SITUATION OF REVENUE SHARING, IT WAS ON A PRINCIPAL TO PRINCIPAL BASIS. FURTHER, IN SUB-CONTRACTING, THE CONTRACTOR RETAINS HIS SHARE OF PROFIT ALONGWITH TH E TDS AND ONLY THE BALANCE IS PASSED ON TO SUB- CONTRACTO R. BUT IN JOINT VENTURE, ASSESSEES DID NOT RETAIN ANY SHARE IN THE REVENUE WITH IT AND HAS PASSED THE ENTIRE GR OSS REVENUE ALONGWITH TDS APPORTIONED FOR THEM. IT WAS SUBMITTED THAT THE DEPARTMENT HAS ALSO ISSUED TAX APPORTIONMENT CERTIFICATES EVERY YEAR DURING THE PA ST EIGHT YEARS TO ENABLE THE TWO MEMBERS TO CLAIM THE TDS CREDITS IN THEIR RESPECTIVE CASES. EVEN IN THE CURR ENT ASSESSMENT YEAR, IT WAS NOTICED THAT TAX APPORTIONM ENT CERTIFICATE WAS ISSUED BY THE DEPARTMENT VIDE LETTE R NO.PN/WD.3(4)/TC/07-08 DATED 26.11.2008 OF THE ASSESSING OFFICER IN WHICH THE ASSESSING OFFICER HA S ALLOWED APPORTIONMENT OF ENTIRE TDS OF RS.9,26,588/ - DURING THE YEAR TO M/S.GAMMON INDIA LTD., SINCE ENT IRE WORK DURING THE YEAR WAS CARRIED OUT BY IT. SIMILARL Y, THERE HAS BEEN APPORTIONMENT TO EITHER OF THE TWO COMPANIES OR TO BOTH THE COMPANIES IN THE EARLIER Y EARS ALSO BY THE ASSESSING OFFICER FOR ENABLING THEM TO CLAIM TDS IN RESPECTIVE CASES. THE ASSESSEE, VIDE ITS SUBMISSION DATED 22.04.2010, FURNISHED THE DETAILS WHICH REVEALED THAT GROSS REVENUE FROM THIS CONTRAC T RECEIPTS BY JOINT VENTURE WAS ACCOUNTED FOR IN CASE OF EITHER OR BOTH OF THE TWO COMPANIES WHO WERE MEMBER S OF THE JOINT VENTURE IN ALL ASSESSMENT YEARS 2001-0 2 TO 2008-09. IT WAS FURTHER EXPLAINED BY THE ASSESSEE T HAT REVENUE SHARING WAS NOT EXACTLY 60:40 IN EACH YEAR SINCE IT DEPENDS ON THE RELATIVE WORK DONE IN THE PARTICULAR YEAR. HAVING EXPLAINED THE DIFFERENCE BETWEEN CASES OF CONTRACT/SUB-CONTRACT, IN THE BACKGROUND OF CLAUSES OF THE AGREEMENT, THE ASSESSE E RELIED ON THE DECISION OF HON'BLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF CIT VS. AMBUJA DARLA KASHLOG MANGU TRANSPORT COOPERATIVE SOCIETY (2009) 227 CTR 299 (HP). 7. IN THE BACKGROUND OF THE TAX APPORTIONMENT CERTIFICATES ISSUED BY THE ASSESSING OFFICER, IT WA S STATED ON BEHALF OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS MARKED COPY OF THIS CERTIFICATE TO THE MEMBERS OF THE JOINT VENTURE AS WELL AS TO THEIR RESPECTIVE ASSESSING OFFICERS, WHICH SHOWS THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND AND CONSCIOUS LY ACCEPTED THE FACT THAT THE JOINT VENTURE AOP WAS FO R THE DISTRIBUTION OF RECEIPTS AMONGST ITS CONSTITUENTS I N PROPORTION OF THEIR WORK SHARING. THEREFORE, THERE WAS NO APPLICABILITY OF PROVISIONS OF TDS U/S.40(A)(IA) OF THE ACT. 8 8. FURTHER, THE ASSESSEE, VIDE ITS SUBMISSION DATED 06.09.2010, MADE COMPARISON OF THE TAX RATES APPLICABLE TO DOMESTIC COMPANIES, BEING JOINT VENTU RE PARTNER IN THEIR INDIVIDUAL CAPACITY AND THE TAX RA TES APPLICABLE TO THE AOP. HOWEVER, IN SUBMISSION DATED 21.10.2010, IT WAS EXPLAINED THAT TAX RATES IN THE CASE OF DOMESTIC COMPANY AND THE AOP WOULD BE THE SAME I N THIS CASE. THIS WAS DUE TO APPLICABILITY OF SECTION 167B OF THE ACT. THE ASSESSEE ALSO FILED DETAILS OF THE RETURNS OF INCOME OF THE TWO CORPORATE ENTITIES BEI NG JOINT VENTURE MEMBERS, ALONGWITH ACKNOWLEDGEMENTS O F THEIR I.T. RETURNS, WHICH REVEALED THAT BOTH OF THE M HAD HUGE POSITIVE RETURNED INCOMES EVERY YEAR. FOR THIS PAYMENT THE STAND OF THE ASSESSEE WAS THAT THE METH OD OF APPORTIONMENT OF REVENUE TO THE MEMBERS WAS NOT TO TAKE ANY UNDUE BENEFIT OF LOSSES INCURRED BY THEM. THEREFORE, IT WAS STATED THAT THERE WAS NO LOSS TO THE REVENUE AS A RESULT OF THIS METHOD ADOPTED BY THE ASSESSEE OF SHARING THE GROSS REVENUE BY ITS MEMBER S, WHICH WAS TAXED IN THEIR HANDS. HOWEVER, THIS EXPLANATION OF THE ASSESSEE DID NOT FIND FAVOUR FRO M THE ASSESSING OFFICER. THE ASSESSEE HAS ALSO RAISED THE ISSUE OF CONSISTENCY STATING THAT THE SAME METHOD WA S BEING ACCEPTED BY THE DEPARTMENT IN THE PAST 8 TO 1 0 YEARS INCLUDING A.Y. 2007-08 IN WHICH TAX APPORTIONMENT CERTIFICATE WAS ALSO BEING ISSUED. IT WAS CONTENDED THAT THIS ASPECT HAS NOT BEEN CONSIDERED IN THE ASSESSMENT ORDER U/S.143(3) FOR A.Y. 2007-08. O N THE PRINCIPLE OF CONSISTENCY, THE LD. AUTHORISED REPRESENTATIVE RELIED ON THE DECISION OF HON'BLE BO MBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT (2010) 228 CTR 582 (BOM.) AND ASSESSEE ALSO RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS. CIT (1992) 193 ITR 321 (SC) WHEREIN IT WAS OBSERVED THAT STRICTLY SPEAKING THE PRINCIPLE OF RE S JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS S INCE EACH ASSESSMENT YEAR WAS A SEPARATE UNIT IN ITSELF AND WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR. IT WAS FURTHER CONTENDED THAT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY O R THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NO T BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHAN GED IN A SUBSEQUENT YEAR. IT WAS ALSO CONTENDED THAT HON'B LE KERALA HIGH COURT IN THE CASE OF MANJUNATH MOTOR SERVICE AND CANARA PUBLIC CONVEYANCES, 197 ITR 321 (KAR.) OBSERVED THAT METHOD ADOPTED BY THE ASSESSING OFFICER WOULD RESULT IN DOUBLE TAXATION OF THE SAME INCOME SINCE GROSS RECEIPTS DISTRIBUTED AMONGST THE TWO JOINT VENTURE PARTNERS WAS INCLUDED AS RECEIPTS IN THEIR RESPECTIVE CASES AND THE JOINT VENTURE PARTNERS HAD ALSO UTILISED THE TDS CREDITS ON THE BASIS OF APPORTIONM ENT CERTIFICATE ISSUED BY THE ASSESSING OFFICER. IN VIE W OF THE ABOVE DISCUSSION, CIT(A) WAS JUSTIFIED IN HOLDI NG THAT IN ABSENCE OF ANY CONTRACT OR SUB-CONTRACT WOR K BY JOINT VENTURE TO ITS MEMBER COMPANIES, PROVISIONS OF SECTION 194C WERE NOT APPLICABLE FOR THE PURPOSE OF TDS. THE TWO CORPORATE ENTITIES FORMING JOINT VENTU RE WERE ALREADY BEING ASSESSED SINCE A.Y. 2000-01 ONWARDS ON THEIR RESPECTIVE SHARES AND TDS APPORTIONMENT CERTIFICATES WERE ALSO ISSUED BY THE 9 ASSESSING OFFICER EVERY YEAR FOR THESE EIGHT YEARS INCLUDING THE CURRENT ASSESSMENT YEAR TO ENABLE THE M TO CLAIM THE SAME IN THEIR OWN CASES. MOREOVER, THERE WAS NO PROFIT AND LOSS ACCOUNT IN THE ASSESSEE'S CASE A ND THERE WAS NO CLAIM OF ANY EXPENDITURE. THEREFORE, T HERE WAS NO QUESTION OF ANY DISALLOWANCE UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. MOREOVER, DISALLOWANCE U/S. 40(A)(IA) MADE BY THE ASSESSING OFFICER CANNOT BE SUSTAINED. IN EFFECT, THE METHOD ADOPTED BY THE ASSESSING OFFICER WILL ALSO RESULT I N DOUBLE TAXATION OF THE SAME CONTRACT REVENUE WHICH IS IN VIOLATION OF THE KARNATAKA HIGH COURT DECISION REPO RTED IN 197 ITR 321 (KAR.). THIS VIEW IS FORTIFIED BY TH E DECISION OF THE ITAT PUNE BENCH IN ITO VS. RAJDEEP & PMCC INFRASTRUCTURE, WHEREIN THE TRIBUNAL HAS OBSERVED AS UNDER: '6. WE HAVE NOTED THAT IT IS AN ADMITTED POSITION T HAT NO WORK IS CARRIED OUT BY THE AOP, IT HAS ACTED AS A CONDUIT BETWEEN THE MSRDC AND THE TWO PERSONS CONSTITUTING THIS AOP SO FAR AS THEIR SEPARATE, AND NEATLY IDENTIFIED, WORK AREAS ARE CONCERNED. A MERE EXISTENCE OF AN AOP CANNOT LEAD TO TAXABILITY IN TH E HANDS OF THE AOP UNLESS THE AOP RECEIVES MONIES IN ITS OWN RIGHT. WE HAVE NOTED THAT HON'BLE AUTHORITY OF ADVANCE RULINGS WAS IN SEISIN OF A MATERIALLY IDENT ICAL SITUATION IN THE CASE OF VAN OORD ACZ BV IN RE(248 ITR 399) IN WHICH TWO CONTRACTORS JOINED HANDS FOR CARR YING OUT NEATLY IDENTIFIED SEPARATE WORK WHICH WAS A PAR T OF COMPOSITE CONTRACT AWARDED TO THE AOP, BUT THE TAXABILITY OF INCOME FROM SUCH CONTRACT WAS HELD TO BE TAXABLE IN THE HANDS OF THE RESPECTIVE CONTRACTORS. WHILE HOLDING SO HON'BLE AUTHORITY FOR ADVANCE RULING OBSERVED AS FOLLOWS: '7. SO FAR AS QUESTION NOS. 1 AND 2 ARE CONCERNED T HE PARTIES HAVE SPECIFICALLY RULED OUT CONSTITUTION OF ANY PARTNERSHIP BETWEEN THEM. THERE IS NO SHARING OF PR OFITS OR LOSS. THEY HAVE SPECIFICALLY PROVIDED IN THE AGREEMENT THAT EACH PARTY WILL BEAR ITS OWN LOSS AN D RETAIN ITS PROFITS AS AND WHEN SUCH PROFITS OR LOSS ARISE. HAVING REGARD TO THE AGREEMENT WE ARE OF THE VIEW T HAT THE APPLICANT CANNOT BE TREATED AS A PARTNERSHIP WH ICH CAN ONLY BE CREATED BY AN AGREEMENT. NOR CAN IT BE TREATED AS AN AOP. IN ORDER TO CONSTITUTE AN AOP TH ERE WILL HAVE TO BE COMMON PURPOSE OR COMMON ACTION AND THE OBJECT OF THE ASSOCIATION MUST BE TO PRODUCE IN COME JOINTLY. IT IS NOT ENOUGH THAT THE PERSONS RECEIVE THE INCOME JOINTLY. IN THE INSTANT CASE, EACH OF THE TWO PARTIES HAS AG REED TO BEAR ITS OWN LOSS OR RETAIN ITS OWN PROFIT SEPAR ATELY. BOTH HAVE AGREED TO EXECUTE THE JOB TOGETHER FOR BE TTER CO-OPERATION IN THEIR RELATIONSHIP WITH THE CHENNAI PORT TRUST. THE INTENTION WAS NOT TO CARRY OUT ANY BUSIN ESS IN COMMON, ONLY A PART OF THE JOB WILL BE DONE BY V OACZ ACCORDING TO ITS TECHNICAL SKILL AND CAPABILITY. TH E OTHER PART OF THE CONTRACT WILL BE EXECUTED BY HCC. THE T OTAL VALUE OF THE CONTRACT WAS RS. 2,62,01,03,120. THE APPLICANT'S SHARE OF WORK WAS VALUED AT RS. 44,52,78,920 (17 PER CENT OF TOTAL VALUE). THE ASSOCIATION WITH THE HCC WAS NOT WITH THE OBJECT O F 10 EARNING THIS INCOME BUT FOR CO ORDINATION IN EXECUT ING THE CONTRACT SO THAT HCC COULD ALSO MAKE ITS OWN PR OFIT. HHC'S WORK AND INCOME ARISING THEREFROM WAS QUITE SEPARATE AND INDEPENDENT OF THE APPLICANT'S WORK AN D INCOME. IF THE COST INCURRED BY THE HCC OR THE APPL ICANT WAS MORE THAN THEIR INCOME, EACH PARTY WILL HAVE TO BEAR ITS LOSS WITHOUT ANY ADJUSTMENT FROM THE OTHER PARTY. THE ASSOCIATION OF THE PETITIONER COMPANY WI TH HCC WAS UNDOUBTEDLY FOR MUTUAL BENEFIT BUT SUCH ASSOCIATION WILL NOT MAKE THEM A SINGLE ASSESSABLE UNIT AND LIABLE TO TAX AS AN AOP. FOR EXAMPLE, A BUILDIN G CONTRACTOR MAY ASSOCIATE WITH A PLUMBER AND AN ELECTRICIAN TO EXECUTE A BUILDING PROJECT. ALL THES E PERSONS ARE DRIVEN BY PROFIT-MAKING MOTIVE. BUT THA T BY ITSELF WILL NOT MAKE THE THREE PERSONS LIABLE TO BE TAXED AS AN AOP IF EACH ONE HAS A DESIGNED AND INDEPENDEN T ROLE TO PLAY IN THE BUILDING PROJECT. IN THE INSTAN T CASE, THE APPLICANT HAS STATED THAT THE APPLICANT HAS MAD E ITS OWN ARRANGEMENT FOR EXECUTION OF WORK INDEPENDENT FROM THAT OF HCC. THERE IS NO CONTROL OR CONNECTION BETWEEN THE WORK DONE BY THE APPLICANT AND HCC.' 8. ON THE FACTS HEREINABOVE, THE APPLICANT AND HCC CANNOT BE TREATED AS AN AOOP FOR THE PURPOSE OF LEV Y OF INCOME-TAX. THE APPLICANT WILL BE LIABLE TO BE TAXE D AS A SEPARATE AND INDEPENDENT ENTITY. THE QUESTION NO.1 IS ANSWERED ACCORDINGLY.' 7. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS SO EXPRESSED BY THE HON'BLE AUTHORITY FOR ADVANCE RULI NG. WE ADOPT THE REASONING OF THE HON'BLE AAR AND, RESPECTFULLY FOLLOWING THE SAME, APPROVE THE CONCLU SION ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE I N THE MATTER.' IN VIEW OF THE ABOVE DISCUSSION, WE ARE NOT INCLINE D TO INTERFERE IN THE FINDING OF THE CIT(A) WHO HAS DIRE CTED THE ASSESSING OFFICER TO DELETE THE ADDITION. THE S AME IS UPHELD. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED.' 3. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF REVENUE. 4. FACTS BEING SIMILAR, SO FOLLOWING SAME REASONING WE ARE NOT INCLINED TO INTERFERE WITH THE FINDING OF THE CIT(A ) WHO HAS RIGHTLY HELD THAT THERE IS NO QUESTION OF DISALLOWA NCE MADE U/S. 40(A)(IA) OF THE ACT. SAME IS UPHELD.' 11. SINCE THE FACTS ARE, MUTATIS MUTANDIS, IDENTICA L TO THE FACTS AND ISSUE DECIDED BY THE TRIBUNAL IN M/S. SWAPNALI RDS JOINT VENTURE (SUPRA), THEREFORE, FOLLOWING THE PARITY OF REASONI NG, WE UPHOLD THE ORDER OF THE CIT(A). CONSEQUENTLY, THE GROUNDS OF A PPEAL RAISED BY THE REVENUE ARE DISMISSED. 12. THE FACTS AND THE ISSUE IN ITA NOS.942 AND 943/ PN/2013, ARE IDENTICAL TO THE FACTS AND ISSUE IN ITA NO.944/PN/2 013 AND OUR DECISION IN ITA NO.944/PN/2013, SHALL APPLY MUTATIS MUTANDIS TO ITA NO.942 AND 943/PN/2013. 11 13. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE DISMISSED. BEFORE US, REVENUE HAS NOT PLACED ANY MATERIAL ON R ECORD TO POINT OUT ANY DISTINGUISHING FEATURE IN THE FACTS OF THE PRES ENT CASE AND THAT OF SWAPNALI RDS JOINT VENTURE (SUPRA). IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD .CIT(A). THUS THE GROUNDS OF REVENUE ARE DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE FOR A.Y. 2010 -11 IS DISMISSED. 9. AS FAR AS APPEAL FOR A.Y. 2011-12 IS CONCERNED, SINCE BOTH THE PARTIES BEFORE US HAVE SUBMITTED THAT THE FACTS OF THE CASE FOR THE ASSESSMENT YEAR 2010-11 ARE IDENTICAL TO THE FACTS OF THE CASE FOR A.Y. 2011-12, WE, THEREFORE, FOR SIMILAR REASONS ST ATED HEREIN WHILE DISPOSING OF THE APPEAL FOR A.Y. 2010-11 AND FOR S IMILAR REASONS, DISMISS THE APPEAL OF REVENUE FOR A.Y. 2011-12 ALSO . 10. IN THE RESULT, THE APPEAL OF THE REVENUE FOR A.Y. 2011-12 IS DISMISSED. 11. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE DISMISSED. 6. BEFORE US, REVENUE HAS NOT PLACED ANY MATERIAL ON RECO RD TO POINT OUT ANY DISTINGUISHING FEATURE IN THE FACTS OF THE PRE SENT CASE AND THAT OF THE EARLIER YEARS OR HAS PLACED ANY CONTRAR Y BINDING DECISION IN ITS SUPPORT OR DEMONSTRATED THAT THE ORDER OF ITAT IN ASSESSEES OWN CASE FOR EARLIER YEARS HAVE BEEN SET AS IDE / STAYED BY THE HIGH COURT. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A). THUS, THE GROUND OF REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED ON 15 TH DAY OF NOVEMBER, 2017. SD/- SD/- ( VIKAS AWASTHY ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 15 TH NOVEMBER, 2017. YAMINI 12 #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . 4. 5. 6. CIT(A)-3, PUNE. PRL.CIT-2, PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER , / / TRUE COPY / / -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.