ITD PRATIBHA CONSTRTIUM, MUMBAI V. ITO 17(2)(1), MUMBAI

ITA 1925/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4452 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 17-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA LD
• Assessee Lawyers: AMAR SANGHAVI LD ARS
• Keywords: Commercial expediency
• Section: 37(1)

Judgement Text

ITA.NO.1925/MUM/2017 ITD PRATIBHA CONSORTIUM ASSESSMENT YEAR-2012-13 - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.1925/MUM/2017 ( / ASSESSMENT YEAR: 2012-13) ITD PRATIBHA CONSORTIUM C/O JAYESH SANGHRAJAKA & CO LLP CHARTERED ACCOUNTANTS UNIT NO.405 HIND RAJASTHAN CENTRE, D.S.PHALKE ROAD, DADAR(E) MUMBAI 400 072 / VS. INCOME TAX OFFICER - 17 ( 2 )( 1 ) AAYKAR BHAVAN M.K.ROAD MUMBAI- 400 020 ! ./ ./PAN/GIR NO. AAAAI-1654-D ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) ASSESSEE BY : MARGAV SHUKLA & AMAR SANGHAVI, LD.ARS REVENUE BY : N. HEMALATHA, LD. DR / DATE OF HEARING : 21/05/2018 / DATE OF PRONOUNCEMENT : 10/08/2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2012-13 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-28 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-28/IT-413/ITO-17(2)(1)/2015-16 DATED 06/12/2016 QUA CONFIRMATION OF CERTAIN ADDITIONS ON ACCOUNT OF ITA.NO.1925/MUM/2017 ITD PRATIBHA CONSORTIUM ASSESSMENT YEAR-2012-13 2 PROFESSIONAL FEES PAID TO A MEMBER OF THE ASSESSEE ASSOCIATION OF PERSON [AOP]. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. INCOME TAX OFFICER -17(2)(1), MUMBAI [AO] U/S 143(3 ) OF THE INCOME TAX ACT,1961 ON 30/03/2015 WHEREIN THE INCOME OF THE ASSESSEE W AS DETERMINED AT RS.48.48 LACS AFTER SOLE ADDITION OF RS.46.24 LACS AS AGAINST RETURNED INCOME OF RS.2.23 LACS FILED BY THE ASSESSEE ON 25/09/2012. THE ASSESSEE HAS BEEN ASSESSED AS ASSOCIATION OF PERSON [AOP] AND WAS ENGAGED IN THE BUSINESS OF CARRYING OUT CONSTRUCTION PROJECT. THE SOLE ADDITION OF RS.46.24 LACS AS MADE BY LD. AO IS THE SOLE SUBJECT MATTER OF THIS APPEAL. 2. THE MATERIAL ON RECORD REVEALS THAT THE ASSESSEE AOP IS CONSORTIUM / JOINT VENTURE BETWEEN M/S PRATIBHA INDUSTRIES LIMITED [IN SHORT PRATIBHA] & M/S ITALIAN-THAI DEVELOPMENT PUBLIC COMPANY LIMITED, [A COMPANY INCORPORATED IN THAILAND] [IN S HORT ITD] VIDE DEED OF AGREEMENT DATED 14/01/2007. THE JOINT VENTURE HAS U NDERTAKEN CONTRACT WORK FROM AIRPORT AUTHORITY OF INDIA [AAI] VIDE AGREEMENT DATED 31/03/2008. THE CONTRACT WAS AWARDED BY AAI TO THE ASSESSEE VIDE ACCEPTANCE LETTER DATED 02/02/2007 AND CONTRACT AGR EEMENT DATED 08/02/2007. THE CONTRACT WAS RELATED WITH CONSTRUCT ION OF NEW INTERNATIONAL TERMINAL BUILDING AT AHMEDABAD AIRPOR T. 3. IN TERMS OF INTERNAL CONSORTIUM AGREEMENT DATED 14/01/2007, A COPY OF WHICH IS ON RECORD, ITD WAS TO ACT AS LEAD MEMBER OF THE CONSORTIUM FOR BIDDING AND EXECUTION OF THE PROJECT WHEREAS PRATIBHA WAS TO EXECUTE ALL WORK UNDER THE CONTRACT AND WAS TO UNDERTAKE ALL CONTRACTUAL OBLIGATIONS AND LIABILITIES ARISING OUT OF THE AFORESAID CONTRACT SUBJECT TO OVERALL SUPERINTENDENCE AND MONITORING O F THE PROJECT BY ITD . ITA.NO.1925/MUM/2017 ITD PRATIBHA CONSORTIUM ASSESSMENT YEAR-2012-13 3 FURTHER, PRATIBHA WAS REQUIRED TO PROVIDE ALL THE REQUIRED RESOURCES FOR THE EXECUTION OF THE PROJECT AND ALL THE PROJECT CO ST AND RESOURCES WERE TO BE AT THE ENTIRE RISK AND COST OF PRATIBHA. IN TERMS OF CLAUSES 6 & 7 OF THE AFORESAID DOCUMENT, THE CONTRACT RECEIPTS WERE TO BE DISBURSED IN THE FOLLOWING RATIOS:- NO. NAME OF THE PARTY SHARE REMARKS 1. ITD 3.5% LEADERSHIP FEES 2. PRATIBHA 1.17% FEES FOR PRATIBHA 3. PRATIBHA 95.33% FOR PERFORMANCE OF CONTRACT TOTAL 100% THE DEDUCTIBILITY OF PAYMENT OF LEADERSHIP FEES @3. 5% AS AFORESAID IS THE SOLE SUBJECT OF APPEAL BEFORE US. 4. THE QUANTUM OF SUCH PAYMENT MADE BY THE ASSESSEE IN THE IMPUGNED AY IS RS.46.24 LACS AND THE ASSESSEE, DURI NG ASSESSMENT PROCEEDINGS, DEFENDED THE SAME BEFORE LD. AO ON THE PLEA OF BUSINESS EXPEDIENCY. AT THE SAME TIME, THE ASSESSEE SOUGHT DIRECTION OF LD. JCIT-17(2) IN TERMS OF SECTION-144A WHEREIN LD. JCIT, INTER-ALIA, CONCLUDED THAT THE PROFITS, IF ANY, SHOULD BE DISTR IBUTED TO THE MEMBERS OF AOP ONLY AFTER THE PAYMENT OF TAXES AND FURTHER NO PAYMENT SHOULD BE MADE TO THE MEMBERS BEFORE PAYMENT OF TAX IF NO SER VICES FOR THE SAME HAS BEEN RENDERED BY ITS MEMBERS. THE ASSESSEE DEFE NDED THE SAME BY RAISING VARIOUS CONTENTIONS, WHICH HAVE BEEN EXT RACTED IN THE QUANTUM ASSESSMENT ORDER. HOWEVER, NOT CONVINCED, L D. AO DISALLOWED THE SAME IN TERMS OF SECTION 37(1) AND ADDED IT TO THE INCOME OF THE ASSESSEE. 5. THE ASSESSEE REITERATED THE SUBMISSIONS BEFORE L D. CIT(A) WHEREIN LD. CIT(A) CONCLUDED THAT THE INCOME WAS TR ANSFERRED WITHOUT ITA.NO.1925/MUM/2017 ITD PRATIBHA CONSORTIUM ASSESSMENT YEAR-2012-13 4 ACTUAL RECEIPT OF ANY SERVICES AND ITD WAS MERELY NAME LENDING ENTITY AND THEREFORE THE PAYMENTS UNDER QUESTION WERE MERE APPROPRIATION OF PROFITS. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPE AL BEFORE US. 6. THE LD. AUHTORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI MARGAV SHUKLA, JUSTIFIED THE PAYMENT ON THE GROUND OF COMMERCIAL E XPEDIENCY. OUR ATTENTION IS DRAWN TO THE FACT THAT NO SUCH ADD ITIONS WERE MADE IN EARLIER YEARS AND THEREFORE THE ADDITIONS WERE NOT JUSTIFIED. THE SAME HAS BEEN CONTROVERTED BY LD. DEPARTMENTAL REPRESENT ATIVE [DR], MS. N.HEMALATHA, WHO SUBMITTED THAT THE PAYMENT WAS MERE APPROPRIAT ION OF PROFITS AND THEREFORE, THE SAME COULD NOT BE ALL OWED WITHOUT ACTUAL RECEIPT OF SERVICES. IT WAS ALSO SUBMITTED THAT EAC H AY WAS INDEPENDENT UNIT OF ASSESSMENT AND THE PRINCIPLE OF RES-JUDICATA WERE NOT APPLICABLE TO INCOME TAX PROCEEDINGS. 7. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING THE CONSORTIUM AGREEME NT ENTERED BY THE TWO ENTITIES. THE MATERIAL FACTS ARE NOT IN DISPUTE . UPON PERUSAL OF DOCUMENTS ON RECORD, WE FIND THAT THE ENTITY NAMELY ITD WAS MERELY A NAME LENDING ENTITY WHOSE ASSOCIATION WAS VITAL TO THE AWARD OF THE CONTRACT. THE WHOLE RESPONSIBILITY / OBLIGATIONS AR ISING OUT OF THE CONTRACT LAY ON THE OTHER ENTITY, WHICH IS ALSO NOT IN DISPU TE. NO MATERIAL HAS BEEN PLACED ON RECORD TO SUGGEST THAT ITD HAS PROVIDED ANY REAL SERVICES UNDER THE CONTRACT EXCEPT LENDING ITS ASSOCIATION / NAME AGAINST WHICH IT HAS BEEN PAID IMPUGNED LEADERSHIP FEES @3.5%. THE ASSESSEE, ALL ALONG HAS JUSTIFIED THE SAME ON THE GROUND OF COMMERCIAL EXPEDIENCY. HOWEVER, WE FIND THAT THE ASSESSEE WAS AN AOP AND THE PROVISIONS OF SECTION 40(BA) SPECIFICALLY DISALLOW PAYMENT MADE B Y AOP TO ITS ITA.NO.1925/MUM/2017 ITD PRATIBHA CONSORTIUM ASSESSMENT YEAR-2012-13 5 MEMBER ON ACCOUNT OF INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION, BY WHATEVER NAME CALLED. SECONDLY, UPON CAREFUL CONSIDERATION OF THE FACTUAL MATRIX, WE FIND THAT T HE IMPUGNED PAYMENT WERE MERE APPROPRIATION OF PROFITS AND COULD NOT BE ALLOWED AS A DEDUCTIBLE EXPENDITURE. THE SHARE OF THE CONTRACT R ECEIPTS WAS PRE- DETERMINED AND THE SAME WAS NOTHING BUT THE PROFIT SHARING RATIO ONLY. 8. SO FAR AS THE CONTENTIONS THAT NO SUCH ADDITIONS HAVE BEEN MADE IN EARLIER AYS, WE FIND NO STRENGTH IN THE SAME SINCE EACH AY WAS INDEPENDENT UNIT OF ASSESSMENT AND THE PRINCIPLE OF RES-JUDICATA WERE NOT APPLICABLE TO INCOME TAX PROCEEDINGS. 9. VIEWED FROM DIFFERENT ANGLES, WE FIND NO REASON TO INTERFERE WITH THE STAND OF LOWER AUTHORITIES. GROUND NUMBERS 1 TO 3 S TANDS DISMISSED. GROUND NO. 4 IS LEGAL GROUND WHICH CONTEST THE DIRE CTIONS ISSUED BY LD. CIT(A) TO LD. AO TO REOPEN ASSESSMENT FOR THREE PRE CEDING YEARS. THE SAME MAY BE AGITATED BY THE ASSESSEE, AT AN APPROPR IATE TIME AND THEREFORE, NOT DEALT WITH. GROUND NUMBER 5 HAS NOT BEEN PRESSED BEFORE US WHEREAS GROUND NUMBER 6 IS GENERAL IN NATURE. 10. IN NUTSHELL, THE APPEAL STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST, 2018 SD/- S D/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 10.08.2018 SR.PS:- THIRUMALESH ITA.NO.1925/MUM/2017 ITD PRATIBHA CONSORTIUM ASSESSMENT YEAR-2012-13 6 ! / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. + ,$ - , - , / DR, ITAT, MUMBAI 6. , ./0 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI