Income-tax Officer, V. P. Venku Reddy & Avinash Constructions J.V., Pune

ITA 1501/PUN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2717 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 25-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAVE
• Keywords: Rule of consistency; Advance ruling; Relationship of principal and agent
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1501/PN/2014 %' ( ')( / ASSESSMENT YEAR : 2010-11 INCOME TAX OFFICER, WARD 3(1), PUNE ....... / APPELLANT ' / V/S. P. VENKU REDDY AND AVINASH CONSTRUCTIONS J.V., 759/34, BHANDARKAR ROAD, DECCAN GYMKHANA, PUNE 411004 PAN : AAAAP2179C / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI HITENDRA NINAVE / DATE OF HEARING : 04-02-2016 / DATE OF PRONOUNCEMENT : 19-02-2016 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-II, PUNE DATED 30-04 -2014 FOR THE ASSESSMENT YEAR 2010-11. 2. THE REVENUE HAS ASSAILED THE FINDINGS OF THE COMMISSIONE R OF INCOME TAX (APPEALS) BY RAISING FOLLOWING GROUNDS IN THE APPEAL: 2 ITA NO. 1501/PN/2014. A.Y. 2010-11 1) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN HOLDING THAT IN ABSENCE OF ANY CONTRACT OR SUB CONTRACT WORK BY JOINT VENTURE TO ITS MEMBER COMPANIES, PROVISIONS OF SECTION 194C WERE N OT APPLICABLE FOR THE PURPOSE OF TDS WITHOUT APPRECIATING THE FACT TH AT THE WORK CONTRACT ORDER ISSUED TO THE ASSESSEE WERE IN ASSESSEE'S NAM E AND SO ALSO THE PAYMENTS WERE CREDITED TO THE ASSESSEE'S ACCOUNT AN D AS SUCH REALLOCATION OF THESE CONTRACTS AMONG THE MEMBERS O F THE ASSESSEE WOULD AMOUNT TO SUB CONTRACTING. 2) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN NOT APPRECIATING THAT THE ASSESSEE JOINT VENTURE WAS IN FULL CONTROL OF THE CONTRACT, RESPONSIBLE FOR ITS COMPLETION, SUBMITTIN G BILLS, RECEIVING PAYMENTS AND MAKING THOSE PAYMENTS TO ITS MEMBERS T OWARDS SUB CONTRACT ON WHICH TAX WAS DEDUCTIBLE U/S.194C. 3) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN NOT CONSIDERING THAT IF THE SHARE OF PROFIT IS DETERMIN ED IN THE JOINT VENTURE AGREEMENT, THEN IT CANNOT BE ANYING BUT AOP AND WHE RE THE CHARGE IS ON THE INCOME OF THE AOP, IN SUCH STATUS, THE ASSESSIN G OFFICER HAS NO CHOICE BUT TO TAX IT IRRESPECTIVE OF THE FACT AS TO WHETHER SUCH SHARE OF PROFIT HAS BEEN OFFERED TO TAX OR TAXED IN THE HAND S OF MEMBERS OR NOT. RELIANCE IS PLACED ON DECISION OF HON. SUPREME COUR T IN THE CASE OF CH. ACHAIAH (1996) 218 ITR 239 AND ON THE RULING OF AAR IN THE CASE OF GEO CONSULTANT ST GMBH IN 304 ITR 283. 4) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A NY OR ALL THE GROUNDS OF APPEAL. 3. SHRI NIKHIL PATHAK APPEARING ON BEHALF OF THE ASSESSEE S UBMITTED AT THE OUTSET THAT THE ISSUE RAISED IN THE APPEAL IS IDEN TICAL TO THE ISSUE ADJUDICATED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN I TA NO. 2121/PN/2012 FOR THE ASSESSMENT YEAR 2009-10 DECIDED ON 27-12- 2013 IN ASSESSEES OWN CASE. THE LD. AR PLACED ON RECOR D A COPY OF THE ORDER PASSED BY TRIBUNAL IN ITA NO. 2121/PN/2012 (SUPRA). 4. SHRI HITENDRA NINAVE REPRESENTING THE DEPARTMENT FAIR LY ADMITTED THAT THE ISSUE RAISED IN THE APPEAL OF THE REVEN UE HAS ALREADY 3 ITA NO. 1501/PN/2014. A.Y. 2010-11 BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN THE ASSESSMENT YEAR 2009-10. HOWEVER, THE LD. DR VEHEMENT LY SUPPORTED THE ORDER OF ASSESSING OFFICER. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE ASSESSEE IS AN AOP ENGAGED IN THE BUSINESS OF CIVIL CONTRA CTORS. THE ASSESSEE IS A JOINT VENTURE BETWEEN M/S. P. VENKU REDDY AND M/S. AVINASH CONSTRUCTION. THERE WAS NO RECEIPT/EXPENDITURE AND NO PROFIT AND LOSS IN THE CASE OF ASSESSEE AS THE ENTIRE REVENUE WAS DIRECTLY APPORTIONED BETWEEN THE TWO AFOREMENTIONED CONSTITUENTS OF J.V. THE ASSESSEE HAS BEEN FILING RETURN OF INCOME IN THE STATUS O F AOP SINCE ASSESSMENT YEAR 2003-04 AT NIL. IN THE IMPUGNED ASSE SSMENT YEAR THE ASSESSEE FILED RETURN OF INCOME ON 27-09-2010 DECLARING NIL INCOME . IN THE COURSE OF SCRUTINY ASSESSMENT THE ASSESSING OFFIC ER HELD THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE ON THE PAYMENTS MADE TO THE CONSTITUENTS OF J.V. THE ASSESSING OFFICER ACC ORDINGLY DISALLOWED THE SUM OF ` 67,67,681/- U/S. 40(A)(IA) OF THE INCOME TAX ACT, 1961. IN FIRST APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWED HIS OWN ORDER IN THE PRECEDING ASSESSMENT YEAR I.E . ASSESSMENT YEAR 2009-10 AND DELETED THE DISALLOWANCE U/ S. 40(A)(IA). HENCE, THE PRESENT APPEAL. 6. WE FIND THAT THE ISSUE RAISED BY THE REVENUE IN THE P RESENT APPEAL IS SIMILAR TO THE ISSUE RAISED IN THE APPEAL BEFORE TH E TRIBUNAL IN THE ASSESSMENT YEAR 2009-10. THE RELEVANT EXTRACT OF THE ORDER OF 4 ITA NO. 1501/PN/2014. A.Y. 2010-11 TRIBUNAL DATED 27-12-2013 IN ITA NO. 2121/PN/2012 IS REP RODUCED HERE-IN-BELOW: 2. AT THE OUTSET OF HEARING, LEARNED AUTHORIZED RE PRESENTATIVE POINTED OUT THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSE E BY THE ORDER OF ITAT, PUNE IN ASSESSEES OWN CASE FOR A.Y. 2008-09, WHERE IN, THE SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER: 3. AT THE OUTSET OF HEARING, LD. AUTHORISED REPRES ENTATIVE POINTED OUT THAT THESE CASES ARE COVERED IN FAVOUR OF THE A SSESSEE BY ITAT, PUNE BENCH, IN ITA.NO.65/PN/2011 FOR A.Y. 200 6-07 DATED 22ND AUGUST 2012 IN THE CASE OF ITO VS. GAMMON PROG RESSIVE-JV, WHEREIN VIDE PARAS 5 TO 9 THE TRIBUNAL DECIDED SIMI LAR ISSUE IN FAVOUR OF THE ASSESSEE BY DISMISSING THE APPEAL OF THE REVENUE, BY OBSERVING AS UNDER: 5. AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THE FIRST ISSUE IS REGARDIN G STATUS OF THE ASSESSEE. THE ASSESSING OFFICER HAS MENTIONED T HE STATUS AS FIRM. HOWEVER, IN THE EXPLANATION GIVEN, THE ASSESSEE HAS MADE IT CLEAR THAT THE STATUS IN WHICH THE RETURNS WAS FILED WAS THAT OF AN AOP. IT WAS EXPLAI NED THAT IN THE RETURNS OF INCOME SINCE BEGINNING TILL THE A .Y. 2006- 07, THE STATUS WAS MENTIONED AS AOP ONLY, I.E., WHE N THE RETURNS WERE FILED MANUALLY. HOWEVER, FROM A.Y. 200 7-08, WHEN ELECTRONIC FILING HAD TO BE DONE, DUE TO COMPU TER ERROR THE STATUS APPEARED AS FIRM ON THE ITR ACKNOWLEDG EMENT, WHEREAS IN THE COMPUTATION OF TOTAL INCOME, IT WAS CORRECTLY MENTIONED AS AOP. IT WAS EXPLAINED THAT I.T.RETURN FORM NO.5 WAS ACTUALLY APPLICABLE FOR FIRMS, AOPS AND BO IS. THEREFORE, THIS ERROR MIGHT HAVE OCCURRED. THE ASSE SSEE HAS ALSO FILED 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 EVE N IN THE APPLICATION FORM FOR ALLOTMENT OF PAN IT WAS SH OWN AS AOP. THE CIT(A) NOTICED FROM THE RECORD THAT STATUS WAS SHOWN AS AOP. HOWEVER, IT WAS NOT VERY MUCH RELEVAN T FOR THE PURPOSE OF APPLICABILITY OF PROVISIONS OF SECTI ON 194C SINCE TDS PROVISIONS ARE APPLICABLE TO ALL ENTITIES EXCEPT INDIVIDUALS AND HUF HAVING GROSS RECEIPTS OR TURNOV ER FROM BUSINESS OR PROFESSION BELOW THE PRESCRIBED LIMIT. 5 ITA NO. 1501/PN/2014. A.Y. 2010-11 6. IT WAS FURTHER EXPLAINED ON BEHALF OF THE ASSESS EE THAT JOINT VENTURE AS SUCH DOES NOT EXECUTE ANY CONTRACT WORK BUT WERE MERELY FORMED FOR OBTAINING CONTRACT WORK AND FOR RECEIVING THE PAYMENT, WHICH WAS IMMEDIATELY DISTRI BUTED IN THE RATIO OF THE SHARE OF THE WORK DONE. THE ACT UAL SHARE IN THE JOINT VENTURE OF THE TOTAL WORK ALLOCATED WA S 60% FOR M/S.GAMMON INDIA LTD. AND 40% FOR M/S.PROGRESSIVE CONTRACTION LTD. IN THIS BACKGROUND IT WAS EXPLAINE D THAT THE CONTRACT ACCOUNT AND THE BALANCE SHEET OF THE J OINT VENTURE REVEALS NOTHING BUT APPORTIONMENT OF CONTRA CT RECEIPTS, ASSETS AND LIABILITIES BETWEEN THE MEMBER S. THERE WAS NO EXPENDITURE BOOKED IN THE CONTRACT ACCOUNT N OR ANY 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 GROSS RE VENUE BUT ALSO THE CORRESPONDING TDS TO ITS MEMBERS IN TH E RATIO OF THEIR WORK DONE BY INDIVIDUAL MEMBERS FOR WHICH THE APPOINTMENT CERTIFICATE WAS DULY ISSUED EVERY YEAR BY THE ASSESSING OFFICER. IN THIS BACKGROUND IT WAS SUBMIT TED THAT THERE WAS NO RELATIONSHIP OF CONTRACTOR AND SUBCONT RACTOR BETWEEN THE JOINT VENTURE AND ITS TWO MEMBERS. THER EFORE, THERE WAS NO QUESTION OF APPLICABILITY OF TDS PROVI SIONS U/S.194C OF THE ACT. THE ASSESSEE ALSO EXPLAINED WH Y A RETURNS WERE FILED BY THE JOINT VENTURE AS AOP. IT WAS EXPLAINED THAT IT WAS DONE TO PASS ON THE CREDIT OF TDS TO THE MEMBERS ON THE BASIS OF TAX APPORTIONMENT CERTIF ICATES WHO HAVE ACCOUNTED FOR THE CORRESPONDING CONTRACT R EVENUE IN THEIR RESPECTIVE RETURNS. IT WAS ALSO SUBMITTED THAT NIL INCOME ARISING IN THE HANDS OF THE AOP IS CONFIRMED BY THE ACTION OF THE ASSESSING OFFICER IN NOT ASSESSING AN Y 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, EXPLAI NED THE DIFFERENCE BETWEEN REVENUE SHARING ARRANGEMENT ENTERED INTO BY THE JOINT VENTURE VIS-A-VIS SUB-CON TRACT. IT WAS EXPLAINED ON BEHALF OF THE ASSESSEE THAT IN THE CASE OF SUB-CONTRACT, THERE WAS A RELATIONSHIP OF PRINCIPAL AND AGENT WHEREAS IN THE SITUATION OF REVENUE SHARING, IT WAS ON A PRINCIPAL TO PRINCIPAL BASIS. FURTHER, IN SUBC ONTRACTING, THE CONTRACTOR RETAINS HIS SHARE OF PROFIT ALONGWIT H THE TDS AND ONLY THE BALANCE IS PASSED ON TO SUB-CONTRACTOR . BUT IN 6 ITA NO. 1501/PN/2014. A.Y. 2010-11 JOINT VENTURE, ASSESSEES DID NOT RETAIN ANY SHARE I N THE REVENUE WITH IT AND HAS PASSED THE ENTIRE GROSS REV ENUE ALONGWITH TDS APPORTIONED FOR THEM. IT WAS SUBMITTE D THAT THE DEPARTMENT HAS ALSO ISSUED TAX APPORTIONMENT CERTIFICATES EVERY YEAR DURING THE PAST EIGHT YEARS TO ENABLE THE TWO MEMBERS TO CLAIM THE TDS CREDITS IN THEIR R ESPECTIVE CASES. EVEN IN THE CURRENT ASSESSMENT YEAR, IT WAS NOTICED THAT TAX APPORTIONMENT CERTIFICATE WAS ISSUED BY TH E DEPARTMENT VIDE LETTER NO.PN/WD.3(4)/TC/07-08 DATED 26.11.2008 OF THE ASSESSING OFFICER IN WHICH THE AS SESSING OFFICER HAS ALLOWED APPORTIONMENT OF ENTIRE TDS OF RS.9,26,588/- DURING THE YEAR TO M/S.GAMMON INDIA LT D., SINCE ENTIRE WORK DURING THE YEAR WAS CARRIED OUT B Y IT. SIMILARLY, 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 SUB MISSION DATED 22.04.2010, FURNISHED THE DETAILS WHICH REVEA LED THAT GROSS REVENUE FROM THIS CONTRACT RECEIPTS BY J OINT VENTURE WAS ACCOUNTED FOR IN CASE OF EITHER OR BOTH OF THE TWO COMPANIES WHO WERE MEMBERS OF THE JOINT VENTURE IN ALL ASSESSMENT YEARS 2001-02 TO 2008-09. IT WAS FUR THER EXPLAINED BY THE ASSESSEE THAT 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 M ANGU TRANSPORT COOPERATIVE SOCIETY (2009) 227 CTR 299 (H P). 7. IN THE BACKGROUND OF THE TAX APPORTIONMENT CERTIF ICATES ISSUED BY THE ASSESSING OFFICER, IT WAS STATED ON B EHALF OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS MARKED COPY OF THIS CERTIFICATE TO THE MEMBERS OF THE JOINT VENTUR E AS WELL AS TO THEIR RESPECTIVE ASSESSING OFFICERS, WHICH SH OWS THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND AND CONS CIOUSLY 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. 7 ITA NO. 1501/PN/2014. A.Y. 2010-11 8. FURTHER, THE ASSESSEE, VIDE ITS SUBMISSION DATED 06.09.2010, MADE COMPARISON OF THE TAX RATES APPLIC ABLE TO DOMESTIC COMPANIES, BEING JOINT VENTURE PARTNER IN THEIR INDIVIDUAL CAPACITY AND THE TAX RATES APPLICABLE TO THE AOP. HOWEVER, IN SUBMISSION DATED 21.10.2010, IT WAS EXPLAINED THAT TAX RATES IN THE CASE OF DOMESTIC CO MPANY AND THE AOP WOULD BE THE SAME IN THIS CASE. THIS WA S DUE TO APPLICABILITY OF SECTION 167B OF THE ACT. THE AS SESSEE ALSO FILED DETAILS OF THE RETURNS OF INCOME OF THE TWO CORPORATE ENTITIES BEING JOINT VENTURE MEMBERS, ALO NGWITH ACKNOWLEDGEMENTS OF THEIR I.T. RETURNS, WHICH REVEA LED THAT BOTH OF THEM HAD HUGE POSITIVE RETURNED INCOMES EVE RY YEAR. FOR THIS PAYMENT THE STAND OF THE ASSESSEE WA S THAT THE METHOD OF APPORTIONMENT OF REVENUE TO THE MEMBE RS WAS NOT TO TAKE ANY UNDUE BENEFIT OF LOSSES INCURRE D BY THEM. THEREFORE, IT WAS STATED THAT THERE WAS NO LO SS TO THE REVENUE AS A RESULT OF THIS METHOD ADOPTED BY THE A SSESSEE OF SHARING THE GROSS REVENUE BY ITS MEMBERS, WHICH WAS TAXED IN THEIR HANDS. HOWEVER, THIS EXPLANATION OF THE ASSESSEE DID NOT FIND FAVOUR FROM THE ASSESSING OFF ICER. THE ASSESSEE HAS ALSO RAISED THE ISSUE OF CONSISTEN CY STATING THAT THE SAME METHOD WAS BEING ACCEPTED BY THE DEPARTMENT IN THE PAST 8 TO 10 YEARS INCLUDING A.Y. 2007- 08 IN WHICH TAX APPORTIONMENT CERTIFICATE WAS ALSO BEING ISSUED. IT WAS CONTENDED THAT THIS ASPECT HAS NOT B EEN CONSIDERED IN THE ASSESSMENT ORDER U/S.143(3) FOR A .Y. 2007-08. ON THE PRINCIPLE OF CONSISTENCY, THE LD. AUTHORISED REPRESENTATIVE RELIED ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT (201 0) 228 CTR 582 (BOM.) AND ASSESSEE ALSO RELIED ON THE DECI SION 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 SINCE EACH ASSESSMENT YEAR WAS A SEPARATE UNIT IN ITSELF AND W HAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR. IT WAS FURTHER CONTENDED THAT WHERE A FUNDAMENTAL ASPE CT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS H AS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTI ES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLE NGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE 8 ITA NO. 1501/PN/2014. A.Y. 2010-11 POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. IT WAS ALSO CONTENDED THAT HON'BLE KERALA HIGH COURT IN THE CAS E OF MANJUNATH MOTOR SERVICE AND CANARA PUBLIC CONVEYANC ES, 197 ITR 321 (KAR.) OBSERVED THAT METHOD ADOPTED BY THE ASSESSING OFFICER WOULD RESULT IN DOUBLE TAXATION O F THE SAME INCOME SINCE GROSS RECEIPTS DISTRIBUTED AMONGS T 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 HOLDING T HAT IN ABSENCE OF ANY CONTRACT OR SUB-CONTRACT WORK BY JOI NT VENTURE TO ITS MEMBER COMPANIES, PROVISIONS OF SECT ION 194C WERE NOT APPLICABLE FOR THE PURPOSE OF TDS. TH E TWO CORPORATE ENTITIES FORMING JOINT VENTURE WERE ALREA DY BEING ASSESSED SINCE A.Y. 2000-01 ONWARDS ON THEIR RESPEC TIVE SHARES AND TDS APPORTIONMENT CERTIFICATES WERE ALSO ISSUED BY THE ASSESSING OFFICER EVERY YEAR FOR THES E EIGHT YEARS INCLUDING THE CURRENT ASSESSMENT YEAR TO ENAB LE THEM TO CLAIM THE SAME IN THEIR OWN CASES. MOREOVER , THERE WAS NO PROFIT AND LOSS ACCOUNT IN THE ASSESSEES CA SE AND THERE WAS NO CLAIM OF ANY EXPENDITURE. THEREFORE, T HERE WAS NO QUESTION OF ANY DISALLOWANCE UNDER THE PROVI SIONS OF SECTION 40(A)(IA) OF THE ACT. MOREOVER, DISALLOW ANCE U/S. 40(A)(IA) MADE BY THE ASSESSING OFFICER CANNOT BE SUSTAINED. IN EFFECT, THE METHOD ADOPTED BY THE ASS ESSING OFFICER WILL ALSO RESULT IN DOUBLE TAXATION OF THE SAME CONTRACT REVENUE WHICH IS IN VIOLATION OF THE KARNA TAKA HIGH COURT DECISION REPORTED IN 197 ITR 321 (KAR.). THIS VIEW IS FORTIFIED BY THE 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 C ONDUIT 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 CAN NOT LEAD TO TAXABILITY IN THE HANDS OF THE AOP UNLESS T HE AOP RECEIVES MONIES IN ITS OWN RIGHT. WE HAVE NOTED THA T HON'BLE AUTHORITY OF ADVANCE RULINGS WAS IN SEISIN OF A MATERIALLY IDENTICAL SITUATION IN THE CASE OF VAN O ORD ACZ 9 ITA NO. 1501/PN/2014. A.Y. 2010-11 BV IN RE(248 ITR 399) IN WHICH TWO CONTRACTORS JOIN ED HANDS FOR CARRYING OUT NEATLY IDENTIFIED SEPARATE W ORK WHICH WAS A PART OF COMPOSITE CONTRACT AWARDED TO T HE AOP, BUT THE TAXABILITY OF INCOME FROM SUCH CONTRAC T 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 AGREEM ENT THAT EACH PARTY WILL BEAR ITS OWN LOSS AND RETAIN ITS PR OFITS AS AND WHEN SUCH PROFITS OR LOSS ARISE. HAVING REGARD TO THE AGREEMENT WE ARE OF THE VIEW THAT THE APPLICANT CAN NOT BE TREATED AS A PARTNERSHIP WHICH CAN ONLY BE CREATED BY AN AGREEMENT. NOR CAN IT BE TREATED AS AN AOP. IN ORDE R TO CONSTITUTE AN AOP THERE WILL HAVE TO BE COMMON PURP OSE OR COMMON ACTION AND THE OBJECT OF THE ASSOCIATION MUS T BE TO PRODUCE INCOME 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 SEPARATE LY. BOTH HAVE AGREED TO EXECUTE THE JOB TOGETHER FOR BETTER CO- OPERATION IN THEIR RELATIONSHIP WITH THE CHENNAI PO RT TRUST. THE INTENTION WAS NOT TO CARRY OUT ANY BUSINESS IN COMMON, ONLY A PART OF THE JOB WILL BE DONE BY VOACZ ACCORD ING TO ITS TECHNICAL SKILL AND CAPABILITY. THE OTHER PART OF THE CONTRACT WILL BE EXECUTED BY HCC. THE TOTAL VALUE O F THE CONTRACT WAS RS. 2,62,01,03,120. THE APPLICANT'S SH ARE OF WORK WAS VALUED AT RS. 44,52,78,920 (17 PER CENT OF TOTAL VALUE). THE ASSOCIATION WITH THE HCC WAS NOT WITH T HE OBJECT OF EARNING THIS INCOME BUT FOR CO ORDINATION IN EXECUTING THE CONTRACT SO THAT HCC COULD ALSO MAKE ITS OWN PROFIT. 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 PART Y. THE ASSOCIATION OF THE PETITIONER COMPANY WITH HCC WAS UNDOUBTEDLY FOR MUTUAL BENEFIT BUT SUCH ASSOCIATION WILL 10 ITA NO. 1501/PN/2014. A.Y. 2010-11 NOT MAKE THEM A SINGLE ASSESSABLE UNIT AND LIABLE T O TAX AS AN AOP. FOR EXAMPLE, A BUILDING CONTRACTOR MAY ASSO CIATE WITH A PLUMBER AND AN ELECTRICIAN TO EXECUTE A BUIL DING PROJECT. ALL THESE PERSONS ARE DRIVEN BY PROFIT-MAK ING MOTIVE. BUT THAT BY ITSELF WILL NOT MAKE THE THREE PERSONS LIABLE TO BE TAXED AS AN AOP IF EACH ONE HAS A DESI GNED AND INDEPENDENT ROLE TO PLAY IN THE BUILDING PROJEC T. IN THE INSTANT CASE, THE APPLICANT HAS STATED THAT THE APP LICANT HAS MADE ITS OWN ARRANGEMENT FOR EXECUTION OF WORK INDEPENDENT FROM THAT OF HCC. THERE IS NO CONTROL O R CONNECTION BETWEEN THE WORK DONE BY THE APPLICANT A ND HCC.' 8. ON THE FACTS HEREINABOVE, THE APPLICANT AND HCC CANNOT BE TREATED AS AN AOOP FOR THE PURPOSE OF LEVY OF IN COME- TAX. THE APPLICANT WILL BE LIABLE TO BE TAXED AS A SEPARATE AND INDEPENDENT ENTITY. THE QUESTION NO.1 IS ANSWER ED 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, RESPECT FULLY FOLLOWING THE SAME, APPROVE THE CONCLUSION ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 8. IN VIEW OF THE ABOVE DISCUSSION, WE ARE NOT INCL INED TO INTERFERE IN THE FINDING OF THE CIT(A) WHO HAS DIRE CTED THE ASSESSING OFFICER TO DELETE THE ADDITION. THE SAME IS UPHELD. 9. IN THE RESULT, THE APPEALS FILED BY THE REVENUE IS DISMISSED. 4. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF REVENUE. FACTS BEING SIMILAR, SO FOLLOWING SAME REAS ONING WE ARE NOT INCLINED TO INTERFERE WITH THE FINDING OF THE C IT(A) WHO HAS RIGHTLY HELD THAT THERE IS NO QUESTION OF DISALLOWA NCE MADE U/S. 40(A)(IA) OF THE ACT IN ALL THESE CASES. SAME IS UP HELD. EVEN BEFORE US NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONING , WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF CIT(A), WHO HAS R IGHTLY HELD THAT THERE IS 11 ITA NO. 1501/PN/2014. A.Y. 2010-11 NO QUESTION OF DISALLOWANCE MADE UNDER SEC. 40(A)(I A) OF IT ACT IN THIS CASE. THE SAME IS UPHELD. 3. IN THE RESULT, APPEAL FILED BY REVENUE IS DISMIS SED. 7. THE LD. DR HAS NOT BEEN ABLE TO CONTROVERT THE FINDINGS OF THE CO- ORDINATE BENCH OF THE TRIBUNAL ON THE ISSUE RAISED. RESPE CTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH, WE DISMISS THE AP PEAL OF THE REVENUE BEING DEVOID OF ANY MERIT. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED BE ING DEVOID OF ANY MERIT. ORDER PRONOUNCED ON FRIDAY, THE 19 TH DAY OF FEBRUARY, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 19 TH FEBRUARY, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-II, PUNE 4. ' / THE CIT-II, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE