ITO, Ward 3(1), Pune V. P. Venku Reddy & Avinash Construction Joint Venture, Pune

ITA 2121/PUN/2012

• Counselvise Citation: 212124514 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 29-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VERMA
• Assessee Lawyers: SAN TOSH JOSHI
• Keywords: Rule of consistency; Advance ruling; Relationship of principal and agent
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.2121/PN/2012 A.Y. 2009-10 ITO, WARD 3(1), PUNE APPELLANT VS. P. VENKU REDDY & AVINASH CONSTRUCTION JOINT VENTURE, SHARADA, PLOT NO.18, S.NO.125/1A/B, PAUD ROAD, PUNE - 411018 PAN: AAAAP2179C RESPONDENT APPELLANT BY : SMT. M.S. V ERMA RESPONDENT BY : SHRI SAN TOSH JOSHI DATE OF HEARING: 12.12.2013 DATE OF ORDER : 27.12.2013 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL)-II, [SHORT C IT(A)-II] PUNE, DATED 25.06.2012 FOR A.Y. 2009-10 ON THE FOLLOWING GROUNDS. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN HOLDING THAT NO INCOME ATTRIBUTABL E ON CONTRACT RECEIPTS COULD BE TAXED IN THE STATUS OF T HE AOP. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN IGNORING THAT THE ASSESSEE, BEING A SEPARATE ENTITY U/S 2(31) OF THE INCOME-TAX ACT, 1961, AND H AVING A PERMANENT ACCOUNT NUMBER SHOULD HAVE PREPARED ITS O WN PROFIT & LOSS ACCOUNT AS WELL AS THE BALANCE SHEET REFLECTING THE FULL TRANSACTIONS UNDERTAKEN BY IT AND NOT JUST 2 SHOWING APPORTIONMENT OF RECEIPTS/ PAYMENTS AND AS SETS/ LIABILITIES BETWEEN ITS MEMBERS. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN FAILING TO APPRECIATE THAT THE WOR K CONTRACT ORDERS ISSUED TO THE ASSESSEE BY THE CONTRACTEE WER E IN ITS NAME AND SO ALSO THE PAYMENTS WERE CREDITED TO THE ASSESSEE'S ACCOUNT. AS SUCH, RE-ALLOCATION OF THESE CONTRACTS AMONG THE MEMBERS OF THE ASSESSEE AMOUNTS TO SUB CONTRACTING. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN FAILING TO APPRECIATE THAT AS THE PAYMENTS MADE BY THE ASSESSEE TO MEMBERS WERE CLEARLY TOWARD S SUB CONTRACT, TAX WAS DEDUCTIBLE FROM SUCH PAYMENTS U/S 1 94C AND IN VIEW OF THE ASSESSEE'S FAILURE TO DO SO, THE ASSESSING OFFICER WAS PERFECTLY JUSTIFIED IN APPLYING THE PRO VISIONS OF SEC, 40(A)(IA) OF THE INCOME-TAX ACT, 1961 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN IGNORING THE FACT THAT THE ASSESSE E AOP WAS IN FULL CONTROL OF THE CONTRACT AND IT WAS THE RESP ONSIBILITY OF THE ASSESSEE TO SUBMIT THE BILLS TO AND RECEIVE PAY MENTS FROM THE CONTRACTEE WHICH IN TURN WAS PASSED ON BY THE ASSESSEE TO THE CO-VENTURERS. 7. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN NOT CONSIDERING THE LANDMARK JUDGE MENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CH. ACHAIA H (1996) 218 ITR 239 WHEREIN IT WAS HELD THAT IF THE SHARE OF PROFIT IS DETERMINED IN THE JOINT VENTURE AGREEMENT , IT CANNOT BE ANYTHING BUT AOP, AND WHERE 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 FA CT AS TO WHETHER SUCH SHARE OF PROFIT HAS BEEN OFFERED TO TA X OR TAXED IN THE HANDS OF MEMBERS OR NOT. 8. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN ACCEPTING THE ASSESSEE'S STAND THA T THE FACTS OF ITS CASE ARE DISTINGUISHABLE FROM THE CASE OF GEOCONSULTANT ZT GMBH DECIDED BY THE HON'BLE AUTHOR ITY FOR ADVANCE RULINGS IN RE(2008) 304 ITR 283 WHEREIN THE JOINT VENTURE WAS HELD TO BE AOP, FOLLOWING THE DEC ISION OF THE HON'BLE SUPREME COURT DECISION IN THE CASE OF C H. ACHAIAH 9. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT ( APPEALS) 3 MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 10. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A NY OR ALL THE GROUNDS OF APPEAL. 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, PUNE IN ASSESSEES OWN CASE FOR A.Y. 2008-09, WHEREIN, THE SIMILAR ISSUE HAS BEEN DECIDED IN FAVO UR 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 ASSESSEE BY ITAT, PUNE BENCH, IN ITA.NO.65/PN/2011 FOR A.Y. 2006-07 DATED 22ND AUGUST 2012 IN THE CASE OF ITO VS. GAMMON PROGRESSIVE-JV, WHEREIN VIDE PARAS 5 TO 9 THE TRIBUNAL DECIDED SIMILAR ISSUE IN FAVOUR OF THE ASS ESSEE BY DISMISSING THE APPEAL OF THE REVENUE, BY OBSERVING AS UNDER: 5. AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT THE FIRST ISSUE IS REGARDING STATUS OF THE ASSESSEE. THE ASSESSING OF FICER 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 IN COME SINCE BEGINNING TILL THE A.Y. 2006-07, THE STATUS W AS MENTIONED AS AOP ONLY, I.E., WHEN THE RETURNS WERE FILED MANUALLY. HOWEVER, FROM A.Y. 2007-08, WHEN ELECTRONIC FILING HAD TO BE DONE, DUE TO COMPUTER E RROR 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. THEREFORE, TH IS ERROR MIGHT HAVE OCCURRED. THE ASSESSEE HAS ALSO F ILED 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 EVEN IN THE APPLICATION FORM FOR ALLOTMENT OF PAN I T WAS SHOWN AS AOP. THE CIT(A) NOTICED FROM THE RECORD THAT STATUS WAS SHOWN AS AOP. HOWEVER, IT WAS NOT VERY MUCH RELEVANT FOR THE PURPOSE OF APPLICABILITY OF PROVISIONS OF SECTION 194C SINCE TDS PROVISIONS ARE APPLICABLE TO ALL ENTITIES EXCEPT INDIVIDUALS AND H UF 4 HAVING GROSS RECEIPTS OR TURNOVER 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 PAYMENT, WHICH WAS IMMEDIATELY DISTRIBUTED IN THE RATIO OF THE SHA RE OF THE WORK DONE. THE ACTUAL SHARE IN THE JOINT VENTU RE OF THE TOTAL WORK ALLOCATED WAS 60% FOR M/S.GAMMON INDIA LTD. AND 40% FOR M/S.PROGRESSIVE CONTRACTION LTD. IN THIS BACKGROUND IT WAS EXPLAINED THAT THE CONTRACT ACCOUNT AND THE BALANCE SHEET OF THE JOIN T 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 NOR ANY PROFIT AND LOSS ACCOUNT PREPARED FO R THE PURPOSE SINCE THERE DID NOT ARISE ANY PROFIT OR LOSS TO THE ASSESSEE PER SE. THE JOINT VENTURE TRANSFER RED NOT ONLY THE GROSS REVENUE BUT ALSO THE CORRESPONDI NG 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 RELATIONSHIP OF CONTRACTOR AND SUB- CONTRACTOR BETWEEN THE JOINT VENTURE AND ITS TWO MEMBERS. THEREFORE, THERE WAS NO QUESTION OF APPLICABILITY OF TDS PROVISIONS U/S.194C OF THE ACT . THE ASSESSEE ALSO EXPLAINED WHY A RETURNS WERE FILE D BY THE JOINT VENTURE AS AOP. IT WAS EXPLAINED THAT IT WAS DONE TO PASS ON THE CREDIT OF TDS TO THE MEMBER S ON THE BASIS OF TAX APPORTIONMENT CERTIFICATES WHO HAVE ACCOUNTED FOR THE CORRESPONDING CONTRACT REVEN UE 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 ANY PROFIT/INCOME ARISING FROM THE CONTRA CT 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 ARRANGEMENT ENTERED INTO BY THE JOI NT VENTURE VIS-A-VIS SUB-CONTRACT. IT WAS EXPLAINED O N 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 SUB- CONTRACTING, THE CONTRACTOR RETAINS HIS SHARE OF PR OFIT ALONGWITH THE TDS AND ONLY THE BALANCE IS PASSED ON TO SUB-CONTRACTOR. BUT IN JOINT VENTURE, ASSESSEES DID 5 NOT RETAIN ANY SHARE IN THE REVENUE WITH IT AND HAS PASSED THE ENTIRE GROSS REVENUE ALONGWITH TDS APPORTIONED FOR THEM. IT WAS SUBMITTED 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 RESPECTIVE CASES. EVEN IN THE CURRENT ASSESS MENT YEAR, IT WAS NOTICED THAT TAX APPORTIONMENT CERTIFI CATE WAS ISSUED BY THE DEPARTMENT VIDE LETTER NO.PN/WD.3(4)/TC/07-08 DATED 26.11.2008 OF THE ASSESSING OFFICER IN WHICH THE ASSESSING OFFICER HA S ALLOWED APPORTIONMENT OF ENTIRE TDS OF RS.9,26,588/ - DURING THE YEAR TO M/S.GAMMON INDIA LTD., SINCE ENTIRE WORK DURING THE YEAR WAS CARRIED OUT BY IT. SIMILARLY, THERE HAS BEEN APPORTIONMENT TO EITHER O F THE TWO COMPANIES OR TO BOTH THE COMPANIES IN THE EARLIER YEARS ALSO BY THE ASSESSING OFFICER FOR ENA BLING THEM TO CLAIM TDS IN RESPECTIVE CASES. THE ASSESSE E, VIDE ITS SUBMISSION DATED 22.04.2010, FURNISHED THE DETAILS WHICH REVEALED THAT GROSS REVENUE FROM THIS CONTRACT RECEIPTS BY JOINT VENTURE WAS ACCOUNTED FO R IN CASE OF EITHER OR BOTH OF THE TWO COMPANIES WHO WER E MEMBERS OF THE JOINT VENTURE IN ALL ASSESSMENT YEAR S 2001-02 TO 2008-09. IT WAS FURTHER EXPLAINED BY TH E 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 DIFFEREN CE 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 MANGU TRANSPORT COOPERATIVE SOCIETY (2009) 227 CTR 299 (HP). 7. IN THE BACKGROUND OF THE TAX APPORTIONMENT CERTIFICATES ISSUED BY THE ASSESSING OFFICER, IT WA S STATED ON BEHALF OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS MARKED COPY OF THIS CERTIFICATE TO THE MEMBERS OF THE JOINT VENTURE AS WELL AS TO THEIR RESPECTIVE ASSESSING OFFICERS, WHICH SHOWS THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND AND CONSCIOUSLY ACCEPTED THE FACT THAT THE JOINT VENTUR E AOP WAS FOR THE DISTRIBUTION OF RECEIPTS AMONGST IT S CONSTITUENTS IN PROPORTION OF THEIR WORK SHARING. 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 6 APPLICABLE TO DOMESTIC COMPANIES, BEING JOINT VENTU RE PARTNER IN THEIR INDIVIDUAL CAPACITY AND THE TAX RA TES APPLICABLE TO THE AOP. HOWEVER, IN SUBMISSION DATE D 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 APPLICABILITY OF SEC TION 167B OF THE ACT. THE ASSESSEE ALSO FILED DETAILS O F THE RETURNS OF INCOME OF THE TWO CORPORATE ENTITIES BEI NG JOINT VENTURE MEMBERS, ALONGWITH ACKNOWLEDGEMENTS OF THEIR I.T. RETURNS, WHICH REVEALED THAT BOTH OF THEM HAD HUGE POSITIVE RETURNED INCOMES EVERY YEAR. FOR THIS PAYMENT THE STAND OF THE ASSESSEE WAS THAT THE METHOD OF APPORTIONMENT OF REVENUE TO THE MEMBERS WAS NOT TO TAKE ANY UNDUE BENEFIT OF LOSSES INCURRE D BY THEM. THEREFORE, IT WAS STATED THAT THERE WAS N O LOSS TO THE REVENUE AS A RESULT OF THIS METHOD ADOP TED BY THE ASSESSEE OF SHARING THE GROSS REVENUE BY ITS MEMBERS, WHICH WAS TAXED IN THEIR HANDS. HOWEVER, THIS EXPLANATION OF THE ASSESSEE DID NOT FIND FAVOU R FROM THE ASSESSING OFFICER. THE ASSESSEE HAS ALSO RAISED THE ISSUE OF CONSISTENCY STATING THAT THE SA ME 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. I T 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. AUTHORISED 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 OF RADHASOAMI SATSANG VS. CIT (1992) 193 ITR 321 (SC) WHEREIN IT WAS OBSERVED THAT STRICTLY SPEAKING THE PRINCIPLE OF RES JUDICATA DOES NOT APP LY TO INCOME TAX PROCEEDINGS SINCE EACH ASSESSMENT YEAR WAS A SEPARATE UNIT IN ITSELF AND WHAT IS DECIDED I N ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR. IT WAS FURTHER CONTENDED THAT WHERE A FUNDAMENTAL ASPECT 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 CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. IT WAS ALSO CONTENDED THAT HON'BL E KERALA HIGH COURT IN THE CASE OF MANJUNATH MOTOR SERVICE AND CANARA PUBLIC CONVEYANCES, 197 ITR 321 (KAR.) OBSERVED THAT METHOD ADOPTED BY THE ASSESSIN G OFFICER WOULD RESULT IN DOUBLE TAXATION OF THE SAME INCOME SINCE GROSS RECEIPTS DISTRIBUTED AMONGST THE 7 TWO JOINT VENTURE PARTNERS WAS INCLUDED AS RECEIPTS IN THEIR RESPECTIVE CASES AND THE JOINT VENTURE PARTNE RS HAD ALSO UTILISED THE TDS CREDITS ON THE BASIS OF APPORTIONMENT CERTIFICATE ISSUED BY THE ASSESSING OFFICER. IN VIEW OF THE ABOVE DISCUSSION, CIT(A) W AS JUSTIFIED IN HOLDING THAT IN ABSENCE OF ANY CONTRAC T OR SUB-CONTRACT WORK BY JOINT VENTURE TO ITS MEMBER COMPANIES, PROVISIONS OF SECTION 194C WERE NOT APPLICABLE FOR THE PURPOSE OF TDS. THE TWO CORPORA TE ENTITIES FORMING JOINT VENTURE WERE ALREADY BEING ASSESSED SINCE A.Y. 2000-01 ONWARDS ON THEIR RESPECTIVE SHARES AND TDS APPORTIONMENT CERTIFICATE S WERE ALSO ISSUED BY THE ASSESSING OFFICER EVERY YEA R 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 ACCO UNT IN THE ASSESSEES CASE AND THERE WAS NO CLAIM OF AN Y EXPENDITURE. THEREFORE, THERE WAS NO QUESTION OF A NY DISALLOWANCE UNDER THE PROVISIONS OF 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 TAXATION OF THE SAME CONTRACT REVENUE WHICH IS IN VIOLATION OF THE KARNATAKA HIGH COURT DECISION REPORTED IN 197 ITR 321 (KAR.). THI S VIEW IS FORTIFIED BY THE DECISION OF THE ITAT PUNE BENCH IN ITO VS. RAJDEEP & PMCC INFRASTRUCTURE, WHEREIN T HE TRIBUNAL HAS OBSERVED AS UNDER: 6. WE HAVE NOTED THAT IT IS AN ADMITTED POSITION THAT 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 SEPAR ATE, AND NEATLY IDENTIFIED, WORK AREAS ARE CONCERNED. A MERE EXISTENCE OF AN AOP CANNOT LEAD TO TAXABILITY IN THE HANDS OF THE AOP UNLESS THE AOP RECEIVES MONIES IN ITS OWN RIGHT. WE HAVE NOTED THAT HON'BLE AUTHO RITY OF ADVANCE RULINGS WAS IN SEISIN OF A MATERIALLY IDENTICAL SITUATION IN THE CASE OF VAN OORD ACZ BV IN RE(248 ITR 399) IN WHICH TWO CONTRACTORS JOINED HAN DS FOR CARRYING OUT NEATLY IDENTIFIED SEPARATE WORK WH ICH WAS A PART OF COMPOSITE CONTRACT AWARDED TO THE AOP , BUT THE TAXABILITY OF INCOME FROM SUCH CONTRACT WAS HELD TO BE TAXABLE IN THE HANDS OF THE RESPECTIVE CONTRACTORS. WHILE HOLDING SO HON'BLE AUTHORITY FO R ADVANCE RULING OBSERVED AS FOLLOWS: '7. SO FAR AS QUESTION NOS. 1 AND 2 ARE CONCERNED THE PARTIES HAVE SPECIFICALLY RULED OUT CONSTITUTIO N OF 8 ANY PARTNERSHIP BETWEEN THEM. THERE IS NO SHARING O F 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 BE TTER CO-OPERATION IN THEIR RELATIONSHIP WITH THE CHENNAI PORT TRUST. THE INTENTION WAS NOT TO CARRY OUT ANY BUSINESS IN COMMON, ONLY A PART OF THE JOB WILL BE 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 WA S 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 OBJEC T 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 PART Y WILL HAVE TO BEAR ITS LOSS WITHOUT ANY ADJUSTMENT F ROM 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 CONTRACTOR MAY ASSOCIATE WITH A PLUMBER AND AN ELECTRICIAN TO EXECUTE A BUILDING 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 HA S A DESIGNED AND INDEPENDENT ROLE TO PLAY IN THE BUILDI NG PROJECT. IN THE INSTANT CASE, THE APPLICANT HAS STA TED THAT THE APPLICANT HAS MADE ITS OWN ARRANGEMENT FOR EXECUTION OF WORK INDEPENDENT FROM THAT OF HCC. THERE IS NO CONTROL OR CONNECTION BETWEEN THE WORK DONE BY THE APPLICANT AND HCC.' 9 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, RESPECTFULLY FOLLOWING THE SAME, APPROVE THE CONCLU SION ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE I N THE MATTER. 8. IN VIEW OF THE ABOVE DISCUSSION, WE ARE NOT INCLINED TO INTERFERE IN THE FINDING OF THE CIT(A) WHO HAS DIRECTED 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 FOLLOWIN G SAME REASONING WE ARE NOT INCLINED TO INTERFERE WITH THE FINDING OF THE CIT(A) WHO HAS RIGHTLY HELD THAT THERE IS NO QU ESTION OF DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT IN ALL THESE CASES. SAME IS UPHELD. EVEN BEFORE US NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE. FACTS BEING SIMILAR, SO FOLLOWING THE S AME REASONING, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF CIT(A), WHO HAS RIGHTLY HELD THAT THERE IS NO QUESTION OF DISAL LOWANCE MADE UNDER SEC. 40(A)(IA) OF IT ACT IN THIS CASE. THE S AME IS UPHELD. 3. IN THE RESULT, APPEAL FILED BY REVENUE IS DISMIS SED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 27 TH OF DECEMBER, 2013. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 27 TH DECEMBER 2013 GCVSR 10 COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-II, PUNE 4) THE CIT-II, PUNE 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE