Income-tax Officer, V. Progressive Srinivasa Joint Venture, Pune

ITA 1502/PUN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2708 (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. 1502/PN/2014 %' ( ')( / ASSESSMENT YEAR : 2010-11 INCOME TAX OFFICER, WARD 3(4), PUNE ....... / APPELLANT ' / V/S. PROGRESSIVE SRINIVASA JOINT VENTURE, SOMA HEIGHTS 3, SIDDHIVINAYAK SOCIETY, KARVE ROAD, KARVE PUTLA, PUNE 411038 PAN : AAAAP2103N / 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. 1502/PN/2014. A.Y. 2010-11 1) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN DELETING THE DISALLOWANCE MADE U/S. 40(A)(IA) WITHOUT APPRECIATI NG THE FACT THAT THE WORK CONTRACT ORDER ISSUED TO THE ASSESSEE WERE IN ASSESSEES NAME AND SO ALSO THE PAYMENTS WERE CREDITED TO THE ASSESSEE' S ACCOUNT AND AS SUCH REALLOCATION OF THESE CONTRACTS AMONG THE MEMB ERS OF 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 ANYTHING BUT AOP AND W HERE 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 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. 665/PN/2013 FOR THE ASSESSMENT YEAR 2009-10 DECIDED O N 11-04-2014 IN ASSESSEES OWN CASE. THE LD. AR PLACED ON RECORD A C OPY OF THE ORDER PASSED BY TRIBUNAL IN ITA NO. 665/PN/2013(SUPRA). 4. SHRI HITENDRA NINAVE REPRESENTING THE DEPARTMENT FAIR LY ADMITTED THAT THE ISSUE RAISED IN THE APPEAL OF THE REVEN UE HAS ALREADY 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. 3 ITA NO. 1502/PN/2014. A.Y. 2010-11 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 PROGRESSIVE CONSTR UCTION LTD. AND SRINIVASA CONSTRUCTION LTD. THERE WAS NO RECEIPT/EXPENDIT URE AND NO PROFIT AND LOSS IN THE CASE OF ASSESSEE AS THE ENTIRE REVE NUE 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 2001-02 AT NIL. IN THE IMPUGNED ASSE SSMENT YEAR THE ASSESSEE FILED RETURN OF INCOME ON 14-10-2010 DECLARING NI L INCOME AND CLAIMED REFUND OF ` 1,98,000/-. 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 ` 87,37,702/- 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 TRIBUNAL DATED 11-04-2014 IN ITA NO. 665/PN/2013 IS REP RODUCED HERE-IN-BELOW: 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDER OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND AN ID ENTICAL ISSUE HAD COME 4 ITA NO. 1502/PN/2014. A.Y. 2010-11 UP BEFORE THE TRIBUNAL IN THE CASE OF M/S. GAMMON P ROGRESSIVE JV(SUPRA). WE FIND THE TRIBUNAL VIDE ITA NO.65/PN/2 011 ORDER DATED 22- 08-2012 FOR A.Y. 2007-08 WHILE DECIDING THE ISSUE A GAINST THE REVENUE HAS HELD AS UNDER : 5. AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THE FIRST ISSUE IS REGARDING STATUS OF THE ASSESSEE. THE ASSESSING OFFICER 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 W ERE FILED MANUALLY. HOWEVER, FROM A.Y. 2007-08, WHEN ELECTRONIC FILING HAD TO BE DONE, DUE TO COMPUTER ERROR 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. T HEREFORE, THIS ERROR MIGHT HAVE OCCURRED. THE ASSESSEE HAS ALSO FILED CO MPUTATION 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 IT WAS SHOWN AS AOP. THE CIT(A) NOTICED FROM THE RECORD THAT STATUS WAS SHOWN AS AO P. HOWEVER, IT WAS NOT VERY MUCH RELEVANT FOR THE PURPOSE OF APPLICABI LITY OF PROVISIONS OF SECTION 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. 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 PAYME NT, WHICH WAS IMMEDIATELY DISTRIBUTED IN THE RATIO OF THE SHARE O F 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 C ONTRACTION LTD. IN THIS BACKGROUND IT WAS EXPLAINED THAT THE CONTRACT ACCOUNT AND THE BALANCE SHEET OF THE JOINT VENTURE REVEALS NOTHING BUT APPORTIONMENT OF CONTRACT RECEIPTS, ASSETS AND LIABILITIES BETWEEN T HE MEMBERS. THERE WAS NO EXPENDITURE BOOKED IN THE CONTRACT ACCOUNT NOR A NY PROFIT AND LOSS ACCOUNT PREPARED FOR THE PURPOSE SINCE THERE DID NO T ARISE ANY PROFIT OR LOSS TO THE ASSESSEE PER SE. THE JOINT VENTURE TRAN SFERRED NOT ONLY THE GROSS REVENUE BUT ALSO THE CORRESPONDING TDS TO ITS MEMBERS IN THE RATIO OF THEIR WORK DONE BY INDIVIDUAL MEMBERS FOR WHICH THE APPOINTMENT CERTIFICATE WAS DULY ISSUED EVERY YEAR BY THE ASSES SING OFFICER. IN THIS BACKGROUND IT WAS SUBMITTED THAT THERE WAS NO RELAT IONSHIP OF CONTRACTOR AND SUB-CONTRACTOR BETWEEN THE JOINT VENTURE AND IT S TWO MEMBERS. THEREFORE, THERE WAS NO QUESTION OF APPLICABILITY O F TDS PROVISIONS 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 5 ITA NO. 1502/PN/2014. A.Y. 2010-11 PASS ON THE CREDIT OF TDS TO THE MEMBERS ON THE BAS IS OF TAX APPORTIONMENT CERTIFICATES WHO HAVE ACCOUNTED FOR T HE CORRESPONDING CONTRACT REVENUE IN THEIR RESPECTIVE RETURNS. IT WA S ALSO SUBMITTED THAT NIL INCOME ARISING IN THE HANDS OF THE AOP IS CON FIRMED BY THE ACTION OF THE ASSESSING OFFICER IN NOT ASSESSING ANY PROFIT/I NCOME ARISING FROM THE CONTRACT APART FROM THIS DISALLOWANCE U/S. 40(A)(IA ) OF THE ACT. THE ASSESSEE VIDE ITS SUBMISSIONS DATED 26.03.2010 AND 06.09.2010, EXPLAINED THE DIFFERENCE BETWEEN REVENUE SHARING AR RANGEMENT ENTERED INTO BY THE JOINT VENTURE VIS-A-VIS SUB-CONTRACT. I T WAS EXPLAINED ON BEHALF OF THE ASSESSEE THAT IN THE CASE OF SUB-CONT RACT, 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 SUBCONTRACTING, THE CONTRACTOR RETAINS HIS SHARE OF PROFIT ALONGWITH THE TDS AND ONLY THE BALANCE IS PASSED ON TO SUB-CONTRA CTOR. BUT IN JOINT VENTURE, ASSESSEES DID NOT RETAIN ANY SHARE IN THE REVENUE WITH IT AND HAS PASSED THE ENTIRE GROSS REVENUE ALONGWITH TDS A PPORTIONED 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 CURRENT ASSESSMENT YEAR, IT WAS NOTICED THAT TAX APPORTIONMENT CERTIFICATE WAS ISSUED BY THE DEPARTM ENT VIDE LETTER NO.PN/WD.3(4)/TC/07-08 DATED 26.11.2008 OF THE ASSE SSING OFFICER IN WHICH THE ASSESSING OFFICER HAS ALLOWED APPORTIONME NT OF ENTIRE TDS OF RS.9,26,588/- DURING THE YEAR TO M/S.GAMMON INDIA L TD., SINCE ENTIRE WORK DURING THE YEAR WAS CARRIED OUT BY IT. SIMILAR LY, THERE HAS BEEN APPORTIONMENT TO EITHER OF THE TWO COMPANIES OR TO BOTH THE COMPANIES IN THE EARLIER YEARS 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 REVEALED TH AT GROSS REVENUE FROM THIS CONTRACT RECEIPTS BY JOINT VENTURE WAS AC COUNTED FOR IN CASE OF EITHER OR BOTH OF THE TWO COMPANIES WHO WERE MEMBER S OF THE JOINT VENTURE IN ALL ASSESSMENT YEARS 2001-02 TO 2008-09. IT WAS FURTHER EXPLAINED BY THE ASSESSEE THAT REVENUE SHARING WAS NOT EXACTLY 60:40 IN EACH YEAR SINCE IT DEPENDS ON THE RELATIVE WORK DON E IN THE PARTICULAR YEAR. HAVING EXPLAINED THE DIFFERENCE BETWEEN CASES OF CONTRACT/SUB- CONTRACT, IN THE BACKGROUND OF CLAUSES OF THE AGREE MENT, THE ASSESSEE RELIED ON THE DECISION OF HON'BLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF CIT VS. AMBUJA DARLA KASHLOG MANGU TRANSPOR T COOPERATIVE SOCIETY (2009) 227 CTR 299 (HP). 7. IN THE BACKGROUND OF THE TAX APPORTIONMENT CERTI FICATES ISSUED BY THE ASSESSING OFFICER, IT WAS STATED ON BEHALF OF THE A SSESSEE THAT THE ASSESSING OFFICER HAS MARKED COPY OF THIS CERTIFICA TE TO THE MEMBERS OF THE JOINT VENTURE AS WELL AS TO THEIR RESPECTIVE AS SESSING OFFICERS, WHICH SHOWS THAT THE ASSESSING OFFICER HAS APPLIED HIS MI ND AND CONSCIOUSLY ACCEPTED THE FACT THAT THE JOINT VENTURE AOP WAS FO R THE DISTRIBUTION OF RECEIPTS AMONGST ITS CONSTITUENTS IN PROPORTION OF THEIR WORK SHARING. 6 ITA NO. 1502/PN/2014. A.Y. 2010-11 THEREFORE, THERE WAS NO APPLICABILITY OF PROVISIONS OF TDS U/S.40(A)(IA) OF THE ACT. 8. FURTHER, THE ASSESSEE, VIDE ITS SUBMISSION DATED 06.09.2010, MADE COMPARISON OF THE TAX RATES APPLICABLE TO DOMESTIC COMPANIES, BEING JOINT VENTURE PARTNER IN THEIR INDIVIDUAL CAPACITY AND TH E TAX RATES 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 IN THIS CASE. THIS WAS DUE TO APPLICABILIT Y OF SECTION 167B OF THE ACT. THE ASSESSEE ALSO FILED DETAILS OF THE RET URNS OF INCOME OF THE TWO CORPORATE ENTITIES BEING JOINT VENTURE MEMBERS, ALONGWITH ACKNOWLEDGEMENTS OF THEIR I.T. RETURNS, WHICH REVEA LED THAT BOTH OF THEM HAD HUGE POSITIVE RETURNED INCOMES EVERY YEAR. FOR THIS PAYMENT THE STAND OF THE ASSESSEE WAS THAT THE METHOD OF APPORT IONMENT 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 LO SS TO THE REVENUE AS A RESULT OF THIS METHOD ADOPTED BY THE ASSESSEE OF SH ARING THE GROSS REVENUE BY ITS MEMBERS, WHICH WAS TAXED IN THEIR HA NDS. 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 WAS BEING ACCEPTED BY THE DEPA RTMENT IN THE PAST 8 TO 10 YEARS INCLUDING A.Y. 2007-08 IN WHICH TAX A PPORTIONMENT 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. ON THE PRINCIPLE OF CONSISTENCY, THE LD. AUTHOR ISED REPRESENTATIVE RELIED ON THE DECISION OF HON'BLE BOMBAY 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 O F RADHASOAMI SATSANG VS. CIT (1992) 193 ITR 321 (SC) WHEREIN IT WAS OBSERVED THAT STRICTLY SPEAKING THE PRINCIPLE OF RES JUDICATA DOE S NOT APPLY TO INCOME TAX PROCEEDINGS SINCE EACH ASSESSMENT YEAR WAS A SE PARATE UNIT IN ITSELF AND WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN TH E FOLLOWING YEAR. IT WAS FURTHER CONTENDED THAT WHERE A FUNDAMENTAL ASPE CT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOU ND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSI TION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT AL L APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. IT WAS ALSO CONTENDED THAT HON'BLE KERALA HIGH COURT IN THE CASE OF MANJU NATH MOTOR SERVICE AND CANARA PUBLIC CONVEYANCES, 197 ITR 321 (KAR.) O BSERVED THAT METHOD ADOPTED BY THE ASSESSING OFFICER WOULD RESUL T 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 TD S CREDITS ON THE BASIS OF APPORTIONMENT CERTIFICATE ISSUED BY THE ASSESSIN G OFFICER. IN VIEW OF THE ABOVE DISCUSSION, CIT(A) WAS JUSTIFIED IN HOLDI NG THAT IN ABSENCE OF ANY CONTRACT OR SUB-CONTRACT WORK BY JOINT VENTURE TO ITS MEMBER COMPANIES, PROVISIONS OF SECTION 194C WERE NOT APPL ICABLE FOR THE 7 ITA NO. 1502/PN/2014. A.Y. 2010-11 PURPOSE OF TDS. THE TWO CORPORATE ENTITIES FORMING JOINT VENTURE WERE ALREADY BEING ASSESSED SINCE A.Y. 2000-01 ONWARDS O N THEIR RESPECTIVE SHARES AND TDS APPORTIONMENT CERTIFICATES WERE ALSO ISSUED BY THE ASSESSING OFFICER EVERY YEAR FOR THESE EIGHT YEARS INCLUDING THE CURRENT ASSESSMENT YEAR TO ENABLE THEM TO CLAIM THE SAME IN THEIR OWN CASES. MOREOVER, THERE WAS NO PROFIT AND LOSS ACCOUNT IN T HE ASSESSEES CASE AND THERE WAS NO CLAIM OF ANY EXPENDITURE. THEREFOR E, THERE WAS NO QUESTION OF ANY DISALLOWANCE UNDER THE PROVISIONS O F 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 IN DOUBLE TAXATI ON OF THE SAME CONTRACT REVENUE WHICH IS IN VIOLATION OF THE KARNATAKA HIGH COURT DECISION REPORTED IN 197 ITR 321 (KAR.). THIS VIEW IS FORTIF IED BY THE DECISION OF THE ITAT PUNE BENCH IN ITO VS. RAJDEEP & PMCC INFRA STRUCTURE, 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 T HE MSRDC AND THE TWO PERSONS CONSTITUTING THIS AOP SO FAR AS THEIR S EPARATE, AND NEATLY IDENTIFIED, WORK AREAS ARE CONCERNED. A MERE EXISTE NCE OF AN AOP CANNOT LEAD TO TAXABILITY IN THE HANDS OF THE AOP UNLESS T HE AOP RECEIVES MONIES IN ITS OWN RIGHT. WE HAVE NOTED THAT HON'BLE AUTHORITY OF ADVANCE RULINGS WAS IN SEISIN OF A MATERIALLY IDENTICAL SIT UATION IN THE CASE OF VAN OORD ACZ BV IN RE(248 ITR 399) IN WHICH TWO CON TRACTORS JOINED HANDS FOR CARRYING OUT NEATLY IDENTIFIED SEPARATE W ORK WHICH WAS A PART OF COMPOSITE CONTRACT AWARDED TO THE AOP, BUT THE T AXABILITY OF INCOME FROM SUCH CONTRACT WAS HELD TO BE TAXABLE IN THE HA NDS 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 PAR TNERSHIP BETWEEN THEM. THERE IS NO SHARING OF PROFITS OR LOS S. THEY HAVE SPECIFICALLY PROVIDED IN THE AGREEMENT THAT EACH PA RTY WILL BEAR ITS OWN LOSS AND RETAIN ITS PROFITS AS AND WHEN SUC H PROFITS OR LOSS ARISE. HAVING REGARD TO THE AGREEMENT WE ARE O F THE VIEW THAT THE APPLICANT CANNOT BE TREATED AS A PARTNERSH IP WHICH CAN ONLY BE CREATED BY AN AGREEMENT. NOR CAN IT BE TREA TED AS AN AOP. IN ORDER TO CONSTITUTE AN AOP THERE WILL HAVE TO BE COMMON PURPOSE OR COMMON ACTION AND THE OBJECT OF THE ASSO CIATION MUST 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 SEPARATELY. BOTH HAVE AGREED TO EXECUTE THE JOB TOGETHER FOR BETTER CO-OPERATION IN THEIR RELATIONSHIP WITH THE CHENNAI PORT TRUST. THE INTEN TION WAS NOT TO CARRY OUT ANY BUSINESS IN COMMON, ONLY A PART OF TH E JOB WILL BE 8 ITA NO. 1502/PN/2014. A.Y. 2010-11 DONE BY VOACZ ACCORDING TO ITS TECHNICAL SKILL AND CAPABILITY. THE OTHER PART OF THE CONTRACT WILL BE EXECUTED BY HCC. THE TOTAL VALUE OF THE CONTRACT WAS RS. 2,62,01,03,120. THE A PPLICANT'S SHARE OF WORK WAS VALUED AT RS. 44,52,78,920 (17 PE R CENT OF TOTAL VALUE). THE ASSOCIATION WITH THE HCC WAS NOT WITH THE 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 AND INCOME. IF THE COST INCURRED BY THE HCC OR THE APPLICANT WAS MORE THAN THEIR INCOME, EACH PARTY WILL HAVE TO BEAR ITS LOSS WITHO UT ANY ADJUSTMENT FROM THE OTHER PARTY. THE ASSOCIATION OF THE PETITIONER COMPANY WITH 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 BUILDING CO NTRACTOR MAY ASSOCIATE WITH A PLUMBER AND AN ELECTRICIAN TO EXEC UTE A BUILDING PROJECT. ALL THESE PERSONS ARE DRIVEN BY PROFIT-MAK ING MOTIVE. BUT THAT BY ITSELF WILL NOT MAKE THE THREE PERSONS LIAB LE TO BE TAXED AS AN AOP IF EACH ONE HAS A DESIGNED AND INDEPENDENT R OLE TO PLAY IN THE BUILDING PROJECT. IN THE INSTANT CASE, THE A PPLICANT HAS STATED THAT THE APPLICANT HAS MADE ITS OWN ARRANGEM ENT FOR EXECUTION OF WORK INDEPENDENT FROM THAT OF HCC. THE RE 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 LEVY OF INCOM E-TAX. THE APPLICANT WILL BE LIABLE TO BE TAXED AS A SEPARATE AND INDEPENDENT ENTITY. THE QUESTION NO.1 IS ANSWERED A CCORDINGLY.' 7. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS SO EXPRESSED BY THE HON'BLE AUTHORITY FOR ADVANCE RULING. WE ADO PT THE REASONING OF THE HON'BLE AAR AND, RESPECTFULLY FOLL OWING THE SAME, APPROVE THE CONCLUSION ARRIVED AT BY THE CIT( A) AND DECLINE TO INTERFERE IN THE MATTER. IN VIEW OF THE ABOVE DISCUSSION, WE ARE NOT INCLINE D TO INTERFERE IN THE FINDING OF THE CIT(A) WHO HAS DIRECTED THE ASSESSIN G OFFICER TO DELETE THE ADDITION. THE SAME IS UPHELD. 6.1 SINCE FACTS OF THE PRESENT APPEAL ARE IDENTICAL TO FACTS OF THE CASE CITED ABOVE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL CITED (SUPRA) AND IN ABSENCE OF ANY CO NTRARY MATERIAL BROUGHT TO OUR NOTICE AGAINST THE ORDER OF THE TRIB UNAL WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE D ISALLOWANCE MADE U/S.40(A)(IA) OF THE I.T. ACT. WE ACCORDINGLY UPHOL D THE SAME. GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY DISMI SSED. 9 ITA NO. 1502/PN/2014. A.Y. 2010-11 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 A PPEAL 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