ACIT, Circle-7(1), Hyderabad, Hyderabad V. CR 18G IVRCL JV, Hyd, Hyderabad

ITA 183/HYD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5967 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-12-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 27-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Assessee Lawyers: V RAGHAVENDRA RAO

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI V.DURGA RAO, JUDICIAL MEMBER A ND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.182/HYD/2015 : ASSESSMENT YEARS 2011-1 2 ASST COMMISSIONER OF INCOME - TAX CIRCLE 7(1), HYDERABAD V/S M/S.IVRCL CR 18G CONSORTIUM, HYDERABAD (PAN - AACFI 6918 B ) (APPELLANT) (RESPONDENT) ITA NO.183/HYD/2015 : ASSESSMENT YEARS 2011-1 2 ASST COMMISSIONER OF INCOME - TAX CIRCLE 7(1), HYDERABAD V/S M/S. CR 18G IVRCL JV, HYDERABAD (PAN - AAGEC 1608 L ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.KURMI NAIDU DR RESPONDENT BY : SHRI V.RAGHAVENDRA RAO DATE OF HEARING 10.3.2016 DATE OF PRONOUNCEMENT 11 .3.2016 O R D E R PER V.DURGA RAO, JUDICIAL MEMBER : THESE APPEALS FILED BY THE REVENUE ARE DIRECTED A GAINST SIMILAR BUT SEPARATE ORDERS OF THE COMMISSIONER OF INCOME- TAX(APPEALS)-3, HYDERABAD, BOTH DATED 19.12.2014, F OR THE ASSESSMENT YEAR 2011-12. SINCE A COMMON ISSUE IS I NVOLVED IN BOTH THESE APPEALS CONCERNING TWO ASSESSEES, WHO ARE PAR TNERS OF A JOINT VENTURE, THESE APPEALS ARE BEING DISPOSED OF BY TH IS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ONLY COMMON ISSUE INVOLVED IN THESE APPEALS RELATES TO DISALLOWANCE OF TDS CREDIT BY THE ASSESSING OFFICER , AND THE GRIEVANCE ITA NO.182 & 183/HYD/2015 M/S.IVRCL CR 18G CONSORTIUM & ANR. HYDERABAD 2 OF THE REVENUE IS AGAINST DIRECTION OF THE CIT(A) T O THE AO TO ALLOW TDS CREDIT TO THE ASSESSEES. 3. FACTS OF THE CASE, COMMON FOR BOTH THESE APPEAL S, AS TAKEN FROM THE APPEAL ITA NO.182/HYD/2015 CONCERNIN G IVRCL CR 18G CONSORTIUM, IN BRIEF, ARE THAT THE ASSESSEE IS A JO INT VENTURE CREATED BY AN AGREEMENT DATED 19.8.2008 BETWEEN IVRCL INFRA STRUCTURE AND PROJECTS LTD. (IVRCLL) AND CHINA RAILWAY 18 TH BUREAU(GROUP) COMPANY LTD. (CR 18G) FOR THE PURPOSE OF PARTICIPATING IN T WO TENDERS OF BANGALORE METRO RAILWAY CORPORATION LTD. FOR RS.92. 5 CRORES AND RS.71.52 CRORES RESPECTIVELY. ON BEING AWARDED THE SE CONTRACTS, THE MEMBERS OF THE CONSORTIUM ENTERED INTO INTERNAL MOU S (DATED 30.9.2008 AND 30.10.2008) UNDER WHICH IT WAS AGREED THAT COMPENSATION FEE OF 2% OF THE PROJECT VALUE COULD B E PAID TO CR18G AND THAT IVRCL WOULD BE FULLY RESPONSIBLE FOR EXECU TION OF THE PROJECTS AND PERFORM AND COMPLETE THE PROJECTS. THE ENTIRE PROJECT WAS AWARDED TO IVRCL ON BACK-TO-BACK SUB-CONTRACT WITHO UT ANY MARGIN BY THE APPELLANT. 4. THE ASSESSEE HAD RECEIVED CONTRACT RECEIPTS OF RS.69,97,50,617 AND INTEREST OF RS.1,32,373 DURING THE YEAR. THE ASSESSEE TRANSFERRED RS.68,57,73,067 TO IVRCL, RETA INING 2% OF THE RECEIPTS WHICH WAS PAID TO CR18G AS COMPENSATION FE E. THE ASSESSEE CLAIMED CREDIT FOR TDS OF RS.1,20,78,619. 5. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE H AS NOT EXECUTED ANY WORK AND THE ENTIRE PROJECT HAS BEEN G IVEN TO IVRCL ON BACK TO BACK BASIS; THAT INCOME OFFERED BY THE ASSE SSEE WAS ONLY THE COMPENSATION FEE PAID TO ONE OF THE MEMBERS OF THE CONSORTIUM; AND THAT NO INCOME HAD BEEN OFFERED OUT OF CONTRACT REC EIPTS, AS NO WORK HAS BEEN EXECUTED BY THE ASSESSEE. FOR THESE REASON S AND BY RELYING ITA NO.182 & 183/HYD/2015 M/S.IVRCL CR 18G CONSORTIUM & ANR. HYDERABAD 3 ON RULE 37BA(2)(I) OF THE IT RULES, THE CLAIM OF TH E ASSESSEE FOR TDS CREDIT WAS REJECTED BY THE ASSESSING OFFICER. 6. ON APPEAL, THE LEARNED CIT(A) DIRECTED THE ASSE SSING OFFICER TO GIVE CREDIT FOR THE TDS AND ALLOWED THE APPEAL FILED BY THE ASSESSEES. THE RELEVANT PORTION OF THE ORDER OF THE CIT(A) IS EXTRACTED HEREUNDER- 7. I HAVE CONSIDERED THE FACTS ON RECORD AND THE S UBMISSIONS OF THE AR. SEC.199 (1) OF THE ACT PROVIDES THAT ANY DE DUCTION OF TAX MADE IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII OF T HE ACT AND PAID TO THE CENTRAL GOVERNMENT SHALL BE TREATED AS A PAYMENT OF TAX ON BEHALF OF THE PERSON FROM WHOSE INCOME THE DEDUCTION WAS MADE. UN DER SUB SECTION (3) OF SECTION 199, THE CBDT MAY, FOR THE PURPOSE OF GIVIN G CREDIT IN RESPECT OF TAX DEDUCTED AT SOURCE OR ' PAID IN TERMS OF THE PROVISIONS OF CHAPTER XVII OF THE ACT, MAKE SUCH RULES AS MAY BE NECESSARY, INCLUDING THE RULES FOR THE PURPOSE OF GIVING CREDIT TO A PERSON OTHER THA N THOSE REFERRED TO IN SUB SECTION (1) AND SUB SECTION (2) AND A L SO THE ASSESS MENT YEA R FOR WHICH SUCH CREDIT MAY BE GIVEN 8 . RULE 37BA OF THE RULES FRAMED UNDER SECT I ON 199(3 ) OF THE ACT (INTRODUCED WITH EFFECT FROM 01-04-2009 BY INCO ME T A X (SIXTH AMENDMENT) RULES, 2009 BY THE CBDT) IS AS FOLLOWS: 'CRED I T FOR TA X DEDUCTED AT SOURCE FOR THE PURPOSES O F SECTION 199 . 37BA . (1) CREDIT FOR TAX DEDUCTED AT SOURCE AND PA ID TO THE CENTRAL GOVERNMENT IN ACCORDANCE WITH THE PROV I S IONS 0F CHAPTER XVII, SHALL BE GIVEN TO THE PE RS O N TO W H OM P A YMENT HAS BEEN MADE OR CREDIT HAS BEEN GIVEN (HEREINAFTER REF ERR ED TO AS DEDUCTEE) ON THE BASIS OF INFORMATION RELA TING TO DEDUCTION OF TAX FURNISHED BY THE DEDUCTOR TO THE INC O M E -TAX AUTHORITY OR THE PERSON AUTHORISED BY SUCH AUTHOR I TY . (2) (I) IF THE INCOME ON WHICH TAX HAS BEEN DEDUCTE D A SOURCE IS ASSESSABLE IN THE HANDS OF A PERSON OTHER THAN THE DEDUCTEE, CREDIT FOR TAX DEDUCTED AT SOURCE SHALL B E GIVE N TO THE OTHER PERSON IN CASES WHERE- (A) THE INCOME OF THE DEDUCTEE IS INCLUDED I N THE TOTAL INCO ME . OF ANOTHER PERSON UNDER THE PROVISIONS OF S E CTION 60, SECTI ON 61, SECTION 64, SECTION 93 OR SECTION 94 ; (B) THE INCOME OF A DEDUCTEE BEING AN ASSO C IAT ION OF PERSON OR A TRUST IS ASSESSABLE IN THE HANDS OF MEMBE RS OF THE ASSOCIATION OF PERSONS, OR IN THE HANDS OF T RU ST E ES, AS THE ITA NO.182 & 183/HYD/2015 M/S.IVRCL CR 18G CONSORTIUM & ANR. HYDERABAD 4 CASE MAY BE; (C) THE INCOME FROM AN ASSET HELD IN THE NAME O F A DE DUCTEE BEING A PARTNER OF A FIRM O R A KARTA OF A H I NDU U N D IVID ED . FAMILY, IS ASSESSABLE AS THE INCOME OF THE FIRM , O R H IND UNDIVIDED FAMILY, AS THE CASE MAY BE; (D) THE INCOME FROM A PROPERTY, DEPOSIT, SECURITY, UNIT OR SHARE HELD IN THE NAME OF A DEDUCTEE IS OWNED JOINT LY BY THE DEDUCTEE AND OTHER PERSONS AND THE INCOME IS ASSESS ABLE IN THEIR HANDS IN THE SAME PROPORTION AS THEIR OWNE RSHIP OF THE ASSET: PROVIDED THAT THE DEDUCTEE FILES A DECLARATION WITH THE DEDUCTOR AND THE DEDUCTOR REPORTS THE TAX DEDUCTION IN THE NAME OF THE OTHER PERSON IN THE INFORMATION RELATIN G TO DEDUCTION OF TAX REFERRED TO IN SUB-RULE (1). (II) THE DECLARATION FILED BY THE DEDUCTEE UNDER CL AUSE (I) SHALL CONTAIN THE NAME, ADDRESS, PERMANENT ACCOUNT NUMBER OF THE PERSON TO WHOM CREDIT IS TO BE GIVEN, PAYMENT OR CR EDIT IN RELATION TO WHICH CREDIT IS TO BE GIVEN AND REASONS FOR GIVING CREDIT TO SUCH PERSON. (III) THE DEDUCTOR SHALL ISSUE THE CERTIFICATE FOR DECUCTION OF TAX AT SOURCE IN THE NAME OF THE PERSON IN WHOSE NA ME CREDIT IS SHOWN IN THE INFORMATION RELATING TO DEDUCTION O F TAX REFERRED TO IN SUB-RULE (1) AND SHALL KEEP THE DECLARATION IN HIS SAFE CUSTODY. (3) (I) CREDIT FOR TAX DEDUCTED AT SOURCE AND PAID TO THE CENTRAL GOVERNMENT, SHALL BE GIVEN FOR THE ASSESSME NT YEAR FOR WHICH SUCH INCOME IS ASSESSABLE. (II) WHERE TAX HAS BEEN DEDUCTED AT SOURCE AND PAID TO T HE CENTRAL GOVERNMENT AND THE INCOME IS ASSESSABLE OVE R A NUMBER OF YEARS, CREDIT FOR TAX DEDUCTED AT SOURCE SHALL BE ALLOWED ACROSS THOSE YEARS IN THE SAME PROPORTION I N WHICH THE INCOME IS ASSESSABLE TO TAX. (4) CREDIT FOR TAX DEDUCTED AT SOURCE AND PAID TO T HE ACCOUNT OF THE CENTRAL GOVERNMENT SHALL BE GRANTED ON THE B ASIS OF - (I) THE INFORMATION RELATING TO DEDUCTION OF TAX FU RNISHED BY THE DEDUCTOR TO THE INCOME-TAX AUTHORITY OR THE PER SON AUTHORIZED BY SUCH AUTHORITY: AND (II) THE INFORMATION IN THE RETURN OF INCOME IN RESPECT OF THE CLAIM FOR THE CREDIT SUBJECT TO VERIFICATION IN ACC ORDANCE WITH THE RISK MANAGEMENT STRATEGY FORMULATED BY THE BOAR D FROM TIME TO TIME.' ITA NO.182 & 183/HYD/2015 M/S.IVRCL CR 18G CONSORTIUM & ANR. HYDERABAD 5 9. BY THE INCOME TAX (8TH AMENDMENT) RULES, 2011, T HE CBDT AMENDED RULE 37 BA AND IN SUB RULE (2), FOR CLAUSE (I), THE FOLLOWING CLAUSE WAS SUBSTITUTED: I) WHERE UNDER ANY PROVISIONS OF THE ACT, THE WHOLE OR ANY PART OF THE INCOME ON WHICH TAX HAS BEEN DEDUCTED AT SOURCE IS ASSESSABLE IN THE HANDS OF A PERSON OTHER THAN THE DEDUCTEE, CREDIT FOR THE WHOLE OR ANY PART OF THE TAX DEDUCTED AT SOURCE, AS THE CASE MAY BE, SHALL BE GIVEN TO TH E OTHER PERSON AND NOT TO THE DEDUCTEE' 10. THIS AMENDMENT HAS DONE AWAY WITH THE SPECIFIED FOUR CLAUSES IN THE PRE-AMENDED RULE 37BA WHICH RESTRICT ED THE BENEFIT OF THE RULE ONLY IN FOUR SPECIFIED SITUATIONS. IT HAS THUS WIDENED THE SCOPE OF THE RULE 37 BA THEREBY ENABLING THE CREDIT OF TA XES TO THE ACTUAL PAYEE IN WHOSE HANDS THE INCOME IS ASSESSABLE AND NOT RES TRICTING THIS BENEFIT ONLY TO THE SPECIFIED FOUR SITUATIONS. 11. WHAT IS, THEREFORE, REQUIRED TO BE DETERMINED F OR THE PURPOSE OF DETERMINING WHETHER THE APPELLANT SHOULD BE GIVE N CREDIT FOR THE TDS, IS WHETHER THE INCOME ON WHICH TAX WAS DED UCTED WAS ASSESSABLE IN THE HANDS OF THE APPELLANT . 12. IN THE APPELLANT'S CASE, THE PAYMENT FOR THE CONTRACT WORK WAS MADE TO THE APPELLANT BY BANGALORE METRO RAILWA Y CORPORATION LTD., THE DEDUCTEE. THE APPELLANT RECOR DED THE RECEIPTS OF RS.69,97,5O,617 IN ITS BOOKS AS ITS TUR NOVER. WHAT IS RELEVANT FOR THE PURPOSE OF SEC.199 AND RULE 37BA IS WHETHER THE CONTRACT RECEIPT FORMED PA RT OF THE INCOME COMPUTATION OF THE APPELLANT. THE FACT THAT THE CON TRACT RECEIPTS WERE CREDITED TO THE P&L A/C SHOWS THAT IT WAS. 13. THERE IS NO REQUIREMENT IN THE ACT THAT THE APP ELLANT SHOULD EXECUTE THE WORKS ITSELF. INDEED, IT IS NOT POSSIBL E FOR ANY PERSON, LEAVE ALONE A LEGAL ENTITY LIKE A CONSORTIUM, TO PH YSICALLY EXECUTE A MAMMOTH CONTRACT RUNNING INTO CRORES ON HIS OWN. TH E MERE FACT THAT THE APPELLANT ENGAGED IVRCL TO EXECUTE THE WORKS DO ES NOT TAKE AWAY FROM THE FACT THAT THE CONTRACT RECEIPTS CONST ITUTED ITS TURNOVER AND THE INCOME THEREFROM WAS ASSESSABLE IN THE HAND S OF THE APPELLANT IT IS ALSO IRRELEVANT WHETHER THE PROJECT RESULTED IN A PROFIT FOR THE APPELLANT OR WHETHER THE APPELLANT CHOSE TO SUB-CONTRACT IT TO IVRCL ON A NO-MARGIN BASIS. 14. REFERENCE MAY ALSO BE MADE IN THIS REGARD TO TH E DECISION IN THE CASE OF CIT V BHOORATNAM & CO. [2013] 357 ITR 396 (AP). IN THIS CASE, THE ASSESSEE HAD ENTERED INTO A JV AGREE MENT FOR THE PURPOSES OF PREPARING AND SUBMITTING A TENDER. THE ASSESSING OFFICER REFUSED TO GIVE CREDIT FOR TDS ON THE GROUND THAT S OME OF THE CERTIFICATES BELONGED TO THE JV AND SOME OTHER CERT IFICATES WERE IN THE NAMES OF DIRECTORS AND DID NOT RELATE TO THE ASSESS EE-FIRM/COMPANY. ITA NO.182 & 183/HYD/2015 M/S.IVRCL CR 18G CONSORTIUM & ANR. HYDERABAD 6 THE ITAT ACCEPTED THE CONTENTION OF THE ASSESSEE TH AT THE INCOME INCLUDED IN THE TDS CERTIFICATES HAD BEEN CONSIDERED FOR THE PURPOS E OF DETERMINING THE TOTAL INCOME OF THE ASSESSEE AND THAT ON THE SAME LOGIC, DUE CREDIT SHOULD ALSO BE GIVEN FOR THE TAX DEDUCTED AT SOURCE INVOLVED IN THOSE CERTIFICATES. THE HIGH COURT UPHE LD THIS VIEW AND HELD THAT CREDIT FOR TDS COULD NOT BE DENIED TO THE ASSESSEE WHILE ASSESSING THE CONTRACT RECEIPTS MENTIONED IN THE CE RTIFICATES AS INCOME OF THE ASSESSEE. 15. IN THE APPELLANT'S CASE, THE CREDIT HAS BEEN CL AIMED IN THE HANDS OF THE JV AND NOT THE CONSTITUENT MEMBER. HOW EVER, THE RATIO OF THE ABOVE DECISIONS APPLIES TO THE APPELLANT: CREDI T FOR TDS HAS TO BE GIVEN TO THE APPELLANT SINCE THE PAYMENTS ON WHICH TDS HAD BEEN MADE HAD BEEN TAKEN INTO ACCOUNT WHILE ASSESSING TH E INCOME OF THE APPELLANT. 7. BEING AGGRIEVED, REVENUE CARRIED THE MATTER IN APPEAL BEFORE US. 8. BUT FOR THE AMOUNTS INVOLVED, FACTUAL BACKGROUN D INVOLVED IN THE OTHER APPEAL CONCERNING CR18G IVRCL JV, IS T HE SAME, AND THE TDS INVOLVED FOR WHICH CREDIT WAS CLAIMED BY THE AS SESSEE, BUT DISALLOWED BY THE ASSESSING OFFICER, THEREIN WAS RS .76,90,348. 9. LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER WHEREAS THE LEARNED COUNSE L FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE CIT(A). 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND GONE THROUGH THE MATERIAL ON RECORD. WE FIND THAT THE LEARNED CIT(A) BY CONSIDERING INCOME TAX (8 TH AMENDMENT) RULES, 2011, OBSERVED THAT IN THE CASE OF THE ASSESSEE, THE PAYMENT FOR WORK CONTRACT WAS MADE TO THE ASSESSEE BY BANGALORE METRO RAILWAY CORPORAT ION(DEDUCTEE); THE ASSESSEE RECORDED THE RECEIPTS OF RS.69,97,50,6 97 IN ITS BOOKS AS ITS TURNOVER; THAT WHAT IS RELEVANT FOR PURPOSES O F S.199 AND RULE 37B(2)(I) IS WHETHER THE CONTRACT RECEIPTS FORMED P ART OF THE INCOME COMPUTATION OF THE ASSESSEE; AND THAT THE FACT THA T THE CONTRACT ITA NO.182 & 183/HYD/2015 M/S.IVRCL CR 18G CONSORTIUM & ANR. HYDERABAD 7 RECEIPTS WERE GIVEN CREDIT IN THE PROFIT & LOSS ACC OUNT OF THE ASSESSEE. HE FURTHER OBSERVED THAT THERE IS NO REQUIREMENT IN THE LAW THAT THE ASSESSEE ITSELF SHOULD EXECUTE THE WORKS AND IT IS NOT POSSIBLE FOR ANY PERSON, LEAVE ALONE, A LEGAL ENTITY LIKE A CONSORTI UM, TO PHYSICALLY EXECUTE MAMMOTH CONTRACTS RUNNING INTO CORES ON ITS OWN. HE ALSO OBSERVED THAT THE VERY FACT THAT THE ASSESSEE ENGAG ED IVRCL TO EXECUTE THE WORKS DOES NOT TAKE AWAY THE FACT THAT THE CONTRACT RECEIPTS CONSTITUTE ITS TURNOVER AND THE INCOME THE REFROM WAS ASSESSABLE IN THE HANDS OF THE ASSESSEE. IT IS ALS O OBSERVED BY THE LEARNED CIT(A) THAT IT IS IRRELEVANT WHETHER THE PR OJECT RESULTED IN A PROFIT FOR THE ASSESSEE OR WHETHER THE ASSESSEE CHO SE TO SUB-CONTRACT IT TO IVRCL ON A NO-MARGIN BASIS. WITH THESE OBSER VATIONS AND ALSO BY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH C OURT IN THE CASE OF CIT V/S. BHOORATNAM & CO.(357 ITR 396), THE CIT(A) DIRE CTED THE ASSESSING OFFICER TO GIVE CREDIT FOR THE TDS TO THE ASSESSEES. WE CONCUR WITH THE REASONING GIVEN BY THE CIT(A) FOR A LLOWING THE CLAIMS OF THE ASSESSEES FOR TDS CREDIT. IN THIS VIEW OF THE MATTER, AND RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDIC TIONAL HIGH COURT NOTED ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT (A). WE ACCORDINGLY UPHOLD THE SAME, REJECTING THE GROUNDS OF THE REVEN UE IN THESE APPEALS. 11. IN THE RESULT, REVENUES APPEALS ARE DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 11.3.2016 SD/- SD/- (S.RIFAUR RAHMAN) ( V.DURGA RAO ) ACCOUNTANT MEMBER. JUDICIAL MEMBER DT/- 11 TH MARCH, 2016 ITA NO.182 & 183/HYD/2015 M/S.IVRCL CR 18G CONSORTIUM & ANR. HYDERABAD 8 COPY FORWARDED TO: 1. 2. M/S.IVRCL CR 18G CONSORTIUM, M - 22/3RT, H.NO.10 - 3 - 552/B, VIJAYANAGAR COLONY, HYDERABAD M/S. CR 18G IVRCL JV, M-22/3RT, H.NO.10-3-552/B, VIJAYANAGAR COLONY, HYDERABAD 3 . ASST . COMMISSIONER OF INCOME - TAX CIRCLE 7(1) , HYDERABAD 4 . 5 COMMISSIONER OF INCOME - TAX III HYDERABAD COMMISSIONER OF INCOME-TAX 3, HYDERABAD 6 . DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.