ITO, Ward 3(4), Pune V. Gammon Progressive Joint Venture, Pune

ITA 2117/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72311 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 29-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A K MODI
• Keywords: Advance ruling
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.2117/PN/2012 A.Y. 2009-10 INCOME TAX OFFICER, WARD 3(4), PUNE APPELLANT VS. GAMMON PROGRESSIVE JOINT VENTURE, SOMA HEIGHTS, 3, SIDDHIVINAYAK SOCIETY, KARVE ROAD, KARVE PUTALA, PUNE 411038 PAN: AAAAG1428R RESPONDENT APPELLANT BY : SHRI SANKET JOSHI RESPONDENT BY : SHRI A.K . MODI DATE OF HEARING: 31.10.2013 DATE OF ORDER : 31.10.2013 ORDER PER SHAILENDRA KUMAR YADAV, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-II [(IN SHO RT CIT(A)-II], PUNE, DATED 29-06-2012 FOR A.Y. 2009-10 ON THE FOLL OWING GROUNDS: 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEA LS) ERRED IN HOLDING THAT NO INCOME ATTRIBUTABLE ON CON TRACT RECEIPTS COULD BE TAXED IN THE STATUS OF THE AOP. 2 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN IGNORING THAT THE ASSESSEE, BEING A SEPARATE ENT ITY U/S 2(31) OF THE INCOME-TAX ACT, 1961, AND HAVING A PER MANENT ACCOUNT NUMBER SHOULD HAVE PREPARED ITS OWN PROFIT & LOSS ACCOUNT AS WELL AS THE BALANCE SHEET REFLECTIN G THE FULL TRANSACTIONS UNDERTAKEN BY IT AND NOT JUST SHOWING APPORTIONMENT OF RECEIPTS/ PAYMENTS AND ASSETS/ LIA BILITIES BETWEEN ITS MEMBERS. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN FAILING TO APPRECIATE THAT THE WORK CONTRACT ORD ERS ISSUED TO THE ASSESSEE BY THE CONTRACTEE WERE IN ITS NAME AND SO ALSO THE PAYMENTS WERE CREDITED TO THE ASSESSEE'S A CCOUNT. AS SUCH, RE-ALLOCATION OF THESE CONTRACTS AMONG THE MEMBERS OF THE ASSESSEE AMOUNTS TO SUB-CONTRACTING. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN FAILING TO APPRECIATE THAT AS THE PAYMENTS MADE BY THE ASSESSEE TO MEMBERS WERE CLEARLY TOWARDS SUB-CONTRA CT, TAX WAS DEDUCTIBLE FROM SUCH PAYMENTS U/S 194C AND IN V IEW OF THE ASSESSEE'S FAILURE TO DO SO, THE ASSESSING O FFICER WAS PERFECTLY JUSTIFIED IN APPLYING THE PROVISIONS OF S EC. 40(A)(IA) OF THE INCOME-TAX ACT, 1961. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN IGNORING THE FACT THAT THE ASSESSEE AOP WAS IN F ULL CONTROL OF THE CONTRACT AND IT WAS THE RESPONSIBILI TY OF THE ASSESSEE TO SUBMIT THE BILLS TO AND RECEIVE PAYMENT S FROM THE CONTRACTEE WHICH IN TURN WAS PASSED ON BY THE A SSESSEE TO THE CO-VENTURERS. 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN NOT CONSIDERING THE LANDMARK JUDGMENT OF THE HON 'BLE 3 SUPREME COURT IN THE CASE OF CH. ACHAIAH (1996) 218 ITR 239 WHEREIN IT WAS HELD THAT IF THE SHARE OF PROFIT IS DETERMINED IN THE JOINT VENTURE AGREEMENT, IT CANNO T BE ANYTHING BUT AOP, AND WHERE THE CHARGE IS ON THE IN COME OF THE AOP, IN SUCH STATUS, THE ASSESSING OFFICER HAS NO CHOICE BUT TO TAX IT, IRRESPECTIVE OF THE FACT AS TO WHETH ER SUCH SHARE OF PROFIT HAS BEEN OFFERED TO TAX OR TAXED IN THE HANDS OF MEMBERS OR NOT. 7. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN ACCEPTING THE ASSESSEE'S STAND THAT THE FACTS OF ITS CASE ARE DISTINGUISHABLE FROM THE CASE OF GEOCONSULTANT ZT GMBH DECIDED BY THE HON'BLE AUTHORITY FOR ADVANCE RULINGS IN RE(2008) 304 ITR 283 WHEREIN THE JOINT V ENTURE WAS HELD TO BE AOP, FOLLOWING THE DECISION OF THE H ON'BLE SUPREME COURT DECISION IN THE CASE OF CH. ACHAIAH 8. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URG ED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT ( APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. AT THE OUTSET OF HEARING, LEARNED AUTHORIZED REP RESENTATIVE POINTED OUT THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE ORDER OF ITAT IN ASSESSEES OWN CASE IN ITA NO.65/P N/2011. A.Y. 2007-08, WHEREIN THE TRIBUNAL HAD DECIDED THE SAME ISSUE AS UNDER: IN VIEW OF THE ABOVE DISCUSSION, CIT(A) WAS JUSTIF IED IN HOLDING THAT IN ABSENCE OF ANY CONTRACT OR SUB-CONT RACT WORK BY JOINT VENTURE TO ITS MEMBER COMPANIES, PROV ISIONS OF SECTION 194C WERE NOT APPLICABLE FOR THE PURPOSE OF TDS. THE TWO CORPORATE ENTITIES FORMING JOINT VENTURE WE RE 4 ALREADY BEING ASSESSED SINCE A.Y. 2000-01 ONWARDS O N THEIR RESPECTIVE SHARES AND TDS APPORTIONMENT CERTIFICATE S WERE ALSO ISSUED BY THE ASSESSING OFFICER EVERY YEAR FOR THESE EIGHT YEARS INCLUDING THE CURRENT ASSESSMENT YEAR T O ENABLE THEM TO CLAIM THE SAME IN THEIR OWN CASES. MOREOVE R, THERE WAS NO PROFIT AND LOSS ACCOUNT IN THE ASSESSEES CA SE AND THERE WAS NO CLAIM OF ANY EXPENDITURE. THEREFORE, THERE WAS NO QUESTION OF ANY DISALLOWANCE UNDER THE PROVI SIONS OF SECTION 40(A)(IA) OF THE ACT. MOREOVER, DISALLOWAN CE U/S. 40(A)(IA) MADE BY THE ASSESSING OFFICER CANNOT BE S USTAINED. IN EFFECT, THE METHOD ADOPTED BY THE ASSESSING OFFI CER WILL ALSO RESULT IN DOUBLE TAXATION OF THE SAME CONTRACT REVENUE WHICH IS IN VIOLATION OF THE KARNATAKA HIGH COURT D ECISION REPORTED IN 197 ITR 321 (KAR.). THIS VIEW IS FORTI FIED BY THE DECISION OF THE ITAT PUNE BENCH IN ITO VS. RAJDEEP & PMCC INFRASTRUCTURE, WHEREIN THE TRIBUNAL HAS OBSER VED 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 MER E 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 AUTHORIT Y 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 CARRYING OUT NEATLY IDENTIFIED SEPARATE WORK WHICH WAS A PART OF COMPOSITE CONTRACT AWARDED TO THE AOP, BU T THE TAXABILITY OF INCOME FROM SUCH CONTRACT WAS HEL D TO BE TAXABLE IN THE HANDS OF THE RESPECTIVE CONTRACTO RS. 5 WHILE HOLDING SO HON'BLE AUTHORITY FOR ADVANCE RULI NG 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 PROFITS 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 THAT THE APPLICANT CANNOT 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 PURPOSE OR COMMON ACTION AND THE OBJECT OF THE ASSOCIATION MUST BE TO PRODUCE INCOME JOINTLY. IT I S 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 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 T HE CONTRACT WILL BE EXECUTED BY HCC. THE TOTAL VALUE OF THE CON TRACT WAS RS. 2,62,01,03,120. THE APPLICANT'S SHARE OF WORK W AS VALUED AT RS. 44,52,78,920 (17 PER CENT OF TOTAL VA LUE). 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 W ORK AND INCOME ARISING THEREFROM WAS QUITE SEPARATE AND INDEPENDENT OF THE APPLICANT'S WORK AND INCOME. IF THE COST 6 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 MUT UAL BENEFIT BUT SUCH ASSOCIATION WILL NOT MAKE THEM A S INGLE ASSESSABLE UNIT AND LIABLE TO TAX AS AN AOP. FOR EX AMPLE, A BUILDING CONTRACTOR MAY ASSOCIATE WITH A PLUMBER AN D AN ELECTRICIAN TO EXECUTE A BUILDING PROJECT. ALL THES E PERSONS ARE DRIVEN BY PROFIT-MAKING MOTIVE. BUT THAT BY ITS ELF WILL NOT MAKE THE THREE PERSONS LIABLE TO BE TAXED AS AN AOP IF EACH ONE HAS A DESIGNED AND INDEPENDENT ROLE TO PLA Y IN THE BUILDING PROJECT. IN THE INSTANT CASE, THE APPLICAN T 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 T HE 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 T AXED 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, RESPECT FULLY FOLLOWING 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 DIRE CTED THE ASSESSING OFFICER TO DELETE THE ADDITION. THE SAME IS UPHELD. 7 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE. FAC TS BEING SIMILAR, SO FOLLOWING SAME REASONING WE ARE NOT INC LINED TO INTERFERE IN THE FINDING OF CIT(A) WHO HAS HELD THA T NO INCOME ATTRIBUTABLE ON CONTRACT RECEIPTS COULD BE TAXED IN THE STATUS OF THE AOP. ACCORDING TO CIT(A) WAS JUSTIFIED IN DELE TING THE ADDITION IN QUESTION. WE UPHELD THE SAME. 3. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THE DAY OF 31 ST OCTOBER 2013. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 31 ST OCTOBER 2013 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-II, PUNE 4) THE CIT-II, PUNE 5) THE DR, B BENCH, I.T.A.T., PUNE. 6) GUARD FILE //TRUE COPY// BY ORDER SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE