Income-tax Officer, V. M/s. Shraddha & IHP Joint Venture, Pune

ITA 2201/PUN/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0638 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-09-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 10-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDEEP GARG
• Keywords: Rule of consistency; Advance ruling; Relationship of principal and agent
• Section: 143(3); 194C

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , ! ' , $ % BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURV EDI, AM ITA NOS.2200 & 2201/PN/2014 ASSESSMENT YEARS : 2010-11 & 2011-12 THE INCOME TAX OFFICER, WARD 3(1), PUNE. . APPELLANT VS. M/S SHRADDHA & IHP JOINT VENTURE, PADMALAYA PROJECT, CTS NO.1206A/1, PLOT NO.887A, SHRADDHA HOUSE, SHIROLE ROAD, PUNE 411 004. PAN : AACAS5182L . RESPONDENT / APPELLANT BY : SHRI SANDEEP GARG (CIT) / RESPONDENT BY : SHRI KISHOR PHADKE / DATE OF HEARING : 26.09.2016 / DATE OF PRONOUNCEMENT: 07.10.2016 & / ORDER PER ANIL CHATURVEDI, AM : BOTH THE APPEALS BY THE REVENUE ARE DIRECTED AGAINS T THE CONSOLIDATED ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-II, PUNE, D ATED 30.09.2014 FOR THE ASSESSMENT YEARS 2010-11 & 2011-12. 2. BOTH THE APPEALS RELATING TO THE SAME ASSESSEE O N SIMILAR ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLID ATED ORDER FOR THE SAKE OF CONVENIENCE. HOWEVER, REFERENCE IS BEING MADE TO T HE FACTS IN ITA NO.2200/PN/2014 IN ORDER TO ADJUDICATE THE ISSUE. 2 ITA NOS.2200 & 2201/PN/2014 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER :- 3.1 ASSESSEE IS AN AOP JOINT VENTURE OF M/S SHRADDH A ENERGY & INFRAPROJECTS PVT. LTD. AND INDIAN HUME PIPE CO. LTD. AND IS ENGA GED IN THE BUSINESS OF CIVIL CONSTRUCTIONS. THE ASSESSEE FILED ITS RETURN OF IN COME FOR ASSESSMENT YEAR 2010-11 ON 01.10.2010 DECLARING TOTAL TAXABLE INCOM E AT NIL. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE A CT) VIDE ORDER DATED 03.01.2013 AND THE TOTAL INCOME WAS DETERMINED AT RS.15,55,39, 150/-. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A), WHO VIDE CONSOLIDATED ORDER DATED 30.09.2014 (IN APPEAL NO.PN/CIT(A)-II/ITO WD- 3(1)/218/2013-14 & PN/CIT(A)-II/ITO WD.3(1)/554/201 3-14/98) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUN DS :- 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT(A) ERRED IN HOLDING THAT IN ABSENCE OF ANY CONTRACT OR SUB- CONTRACT WORK BY THE JOINT VENTURE TO ITS MEMBERS, PROVISIONS OF SECTION 194C WERE NOT APPLICABLE FOR THE PURPOSE OF TDS WIT HOUT APPRECIATING THE FACT THAT THE WORK CONTRACT ORDER WAS ISSUED IN THE NAME OF THE ASSESSEE (JV) AND PAYMENTS WERE ALSO CREDITED TO THE ASSESSEE'S A CCOUNT AND HENCEFORTH RE- ALLOCATION OF THE CONTRACT BETWEEN THE MEMBERS OF T HE JV WOULD AMOUNT TO SUB-CONTRACTING. 3. THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT TH E ASSESSEE JOINT VENTURE WAS IN FULL CONTROL OF THE CONTRACT, RESPONSIBLE FO R ITS COMPLETION, SUBMITTING BILLS, RECEIVING PAYMENTS AND MAKING THOSE PAYMENTS TO ITS MEMBERS TOWARDS SUB-CONTRACT ON WHICH TAX WAS DEDUCTIBLE U/ S 194C. 4. THE LD. CIT(A) ERRED IN CONSIDERING THAT IF THE SHARE OF PROFIT IS DETERMINED IN THE JOINT VENTURE AGREEMENT, THEN IT CANNOT BE A NYTHING BY AOP AND WHERE THE CHARGE IS ON THE INCOME OF THE AOP, IN SU CH STATUS, THE AO 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 HANDS OF ME MBERS OR NOT. RELIANCE IS PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT 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. 3 ITA NOS.2200 & 2201/PN/2014 5. THE LD. CIT(A) OUGHT TO HAVE DISMISSED THE APPEA L OF THE ASSESSEE AND ALLOWED THE APPEAL OF THE REVENUE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF APPELLATE PR OCEEDINGS. 4. BEFORE US, AT THE OUTSET, LD. DR SUBMITTED THAT THOUGH THE REVENUE HAS RAISED VARIOUS GROUNDS BUT THE SOLITARY ISSUE WHICH IS TO BE DECIDED IS WITH RESPECT TO INCOME OF JOINT VENTURE (JV). 4.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER NOTICED THAT ASSESSEE HAD RECEIVED GROSS CONTRACT RECEIPT O F RS.15,55,39,153/- ON ACCOUNT OF CONSTRUCTION OF DAM AND THE ENTIRE CONTRACT WAS GIVEN TO M/S SHRADDHA ENERGY & INFRAPROJECTS PVT. LTD. FOR EXECUTION OF THE WORK. BEFORE THE ASSESSING OFFICER, IT WAS SUBMITTED THAT ASSESSEE DID NOT EXECUTE ANY CON TRACT BUT IT WAS CONDUIT FOR OBTAINING WORK, RECEIVING PAYMENTS AGAINST WORK DON E BY THE INDIVIDUAL CONSTITUENTS AND DISTRIBUTION OF AMOUNTS IN THEIR I NDIVIDUAL SHARES AS PER AGREED RATIO AND THAT THE ENTIRE CONTRACT WAS GIVEN TO ITS MEMBERS. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD GIVEN THE CONTRACT WORK T O AOP WITHOUT DEDUCTION OF TAX IN TERMS OF PROVISIONS OF SECTION 194C OF THE ACT. HE WAS OF THE VIEW THAT SINCE ASSESSEE HAS NOT DEDUCTED TAX, THE AMOUNT WHICH HAS BEEN PAID BY THE ASSESSEE WAS LIABLE FOR DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. THE ASSESSING OFFICER WAS FURTHER OF THE VIEW THAT EXECUTION OF C ONTRACT WAS THE RESPONSIBILITY OF ASSESSEE AND THIS SUB-CONTRACTING OF THE WORK TO ON E OF THE MEMBERS OF THE AOP CANNOT BE CONSIDERED AS REVENUE SHARING ARRANGEMENT . ACCORDING TO HIM, THE ARRANGEMENT BETWEEN THE ASSESSEE AND ITS MEMBERS WA S A SUB-CONTRACT AND IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA), THE PA YMENT MADE BY AOP TO THE SUB- CONTRACTORS WITHOUT THE DEDUCTION OF TAX WAS LIABLE TO BE TAXED IN THE HANDS OF THE ASSESSEE BY DISALLOWING THE PAYMENT UNDER SECTION 4 0(A)(IA) OF THE ACT. HE 4 ITA NOS.2200 & 2201/PN/2014 ACCORDINGLY MADE ADDITION OF RS.15,55,39,150/-. AG GRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESSES CARRIED THE MATTER BEFO RE LD. CIT(A), WHO DELETED THE ADDITION BY HOLDING AS UNDER :- 3.4 I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE APPELLANT HAS REL IED ON ORDER IN THE CASE OF SWAPNALI RDS JOINT VENTURE DECIDED BY MY PREDECESSO R, FOR THE PROPOSITION THAT THE FACTS OF APPELLANT'S CASE AND THE VARIOUS JUDGE MENTS CITED WERE IDENTICAL. IT HAS BEEN POINTED OUT THAT THIS CASE IS COVERED IN F AVOUR OF THE APPELLANT WHEREIN VIDE PARAS 3.4 TO 3.14 THE CIT (APPEALS)-II, HAS DE CIDED SIMILAR ISSUE IN FAVOUR OF THE ABOVE ASSESSEE. THE ISSUE AT HAND HAS BEEN ELAB ORATELY DISCUSSED BY MY PREDECESSOR AND THE FINDING GIVEN IN THE APPELLATE ORDER NO. PN/CIT(A)-II/ITO WD 3(1 ).PN/247/2010-11 DATED 17.03.2011 IN THE ABOVE CASE I.E. SWAPNALI RDS JV IS REPRODUCED BELOW WHICH WAS ALSO FOLLOWED BY THE UND ERSIGNED WHILE ADJUDICATING SIMILAR ISSUE IN APPELLANT'S CASE FOR A.Y. 2009-10 VIDE APPELLATE ORDER NO PN/CIT(A)-II/ITO WD-3(1),PN/240/2011-12 DATED 31 .12.2012. 3.4 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT AND THE MATERIAL AVAILABLE ON RECORD. IT HAS BEEN EXPLAINED BY THE APPELLANT THAT THE JOINT VENTURE AS SUCH DOES NOT EXECUTE ANY CONTRACT WORK BUT WAS MERELY FORMED FOR OBTAINING THE CONTRACT WORK AND RECEIVE THE PAYMENT, WHICH WAS IMMEDIATELY DISTRIBUTED IN THE RATIO OF THE SHARE O F THE WORK DONE FOR THE PARTICULAR YEAR. THE ACTUAL SHARE IN THE JOINT VENT URE OF THE TOTAL WORK ALLOCATED WAS 50% FOR SWAPNALI CONSTRUCTION AND 50% FOR RDS CONSTRUCTION CO. IT WAS, THEREFORE, CLARIFIED THAT THE CONTRACT ACCOUNT AND THE BALANCE SHEET OF THE JOINT VENTURE SHOWED NOTHING B UT APPORTIONMENT OF CONTRACT RECEIPTS, ASSETS AND LIABILITIES BETWEEN T HE MEMBERS. THERE WAS NO EXPENDITURE BOOKED IN THE CONTRACT ACCOUNT NOR ANY PROFIT AND LOSS ACCOUNT PREPARED FOR THE PURPOSE SINCE THERE DID NOT ARISE ANY PROFIT OR LOSS TO THE APPELLANT PER SE. THEREFORE, THE JOINT VENTURE TRAN SFERRED NOT ONLY THE GROSS REVENUE BUT ALSO THE CORRESPONDING TDS TO ITS MEMBE RS IN THE RATIO OF THEIR WORK DONE BY THE INDIVIDUAL MEMBERS, FOR WHICH THE APPORTIONMENT CERTIFICATE WAS DULY ISSUED EVERY YEAR BY THE ASSES SING OFFICER. IT IS EXPLAINED THAT IT WAS DONE TO PASS ON THE CREDIT OF TDS TO THE MEMBERS WHO HAVE ACCOUNTED FOR THE CORRESPONDING CONTRACT REVEN UE IN THEIR RESPECTIVE RETURNS. IT IS THUS AVERRED THAT IN VIEW OF THE FAC TS AND CIRCUMSTANCES OF THE CASE, THERE WAS NO RELATIONSHIP OF CONTRACTOR AND S UBCONTRACTOR BETWEEN THE JOINT VENTURE AND ITS THREE MEMBERS. THEREFORE, THE RE WAS NO QUESTION OF APPLICABILITY OF TDS PROVISIONS U/S. 194C OF THE AC T. IT IS ALSO STATED THAT SECTION 40(A)(IA) COULD BE APPLIED ONLY WHEN ANY EX PENDITURE IS INCURRED BY AN ASSESSEE; WHEREAS HERE THERE WAS NO EXPENDITURE INCURRED BY THE APPELLANT AOP. THE PROFIT AND LOSS INFACT OCCUR RED TO THE INDIVIDUAL MEMBERS, WHO HAVE ACCOUNTED FOR THE SAME IN THEIR R ESPECTIVE BOOKS OF ACCOUNT. 3.5 .. 3.6 .. 3.7 .. 3.8 .. 5 ITA NOS.2200 & 2201/PN/2014 3.9 THE APPELLANT AOP HAS ALSO GOT SIMILAR FEATURES . HERE ALSO THE JOINT VENTURE HAS BEEN FORMED ONLY FOR THE PURPOSE OF OBT AINING THE CONTRACT AND IT IS MERELY A CONDUIT FOR RECEIVING THE PAYMENT FO R THE CARRIED OUT CONTRACT. IMMEDIATELY, THE ENTIRE REVENUE IS TRANSFERRED TO T HE TWO MEMBERS FORMING THE JOINT VENTURE WITHOUT DEDUCTING ANYTHING FROM T HE SAME, IN ACCORDANCE WITH THE WORK CARRIED OUT. THERE IS NO PROFIT OR LO SS ACCRUING TO THE APPELLANT JOINT VENTURE, NOR THERE WAS ANY EXPENDITURE BOOKED IN THE CONTRACT ACCOUNT AS SUCH. THE JOINT VENTURE ALSO DOES NOT RETAIN ANY PROFIT WITH ITSELF THERE DOES NOT EXIST ANY SUBCONTRACT AGREEMENT BETWEEN TH E JOINT VENTURE AND THE TWO MEMBERS. IN THE ABOVE JUDGMENT GIVEN BY THE HIMACHAL PRADESH HIGH COURT, IT WAS OBSERVED BY THE HON'BLE COURT TH AT THE HEADING AND WORDINGS OF THE SECTION 194C AND SECTION 194C(2) CL EARLY INDICATE THAT THE PAYMENT SHOULD BE MADE TO A RESIDENT WHO WAS A SUB- CONTRACTOR, AND THE CONCEPT OF THE 'SUB-CONTRACT' WAS INTRINSICALLY LIN KED WITH SECTION 194C(2). THE HON'BLE HIGH COURT HELD THAT IF THERE WAS NO SU B-CONTRACT THEN THE PERSON WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM THE PAYMENT MADE TO A RESIDENT. A PERUSAL OF THE WORDINGS OF A SECTION 19 4C(2) SHOWS THAT THE TDS WAS TO BE MADE WHEN THE CONTRACTOR WAS RESPONSIBLE FOR PAYING ANY SUM TO THE SUB-CONTRACTOR IN PURSUANCE OF A CONTRACT WITH THE SUB-CONTRACTOR FOR CARRYING OUT OF ANY WORK OR FOR SUPPLY OF THE LABOU R FOR CARRYING OUT THE WHOLE OR ANY PART OF THE WORK UNDERTAKEN BY THE CONTRACTO R ETC. BUT HERE, NO SUCH EXISTENCE OF SUCH A CONTRACT BETWEEN THE JOINT VENT URE AND ITS MEMBERS HAS BEEN FOUND WHICH WOULD BE TERMED AS A SUB-CONTRACT AGREEMENT. UNDER THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, TH EREFORE, IT BECOMES APPARENT THAT IN THE ABSENCE OF ANY SUB-CONTRACT, T HERE CANNOT BE A CASE OF APPLICABILITY OF SECTION 194C(2) WHEN THE ENTIRE CO NTRACT RECEIPTS OF THE JOINT VENTURE WAS DIRECTLY BEING APPORTIONED BETWEEN THE TWO MEMBERS OF THE JOINT VENTURE. 3.10 IN ANOTHER JUDGMENT OF THE HIMACHAL PRADESH HI GH COURT IN THE CASE OF ITO VS. RAMANAND & CO. AND OTHERS, 163 ITR 702 ( HP) THE HIGH COURT HAD STATED THAT A 'CONTRACTOR' FOR THE PURPOSES OF SECTION 194C(2) WOULD BE ANY PERSON WHO ENTERS INTO A CONTRACT WITH THE CENT RAL OR STATE GOVERNMENT OR ANY LOCAL AUTHORITY, CORPORATION ETC.; WHEREAS A 'SUB-CONTRACTOR' WOULD MEAN ANY PERSON WHO ENTERS INTO A CONTRACT WITH THE CONTRACTOR FOR CARRYING OUT SUCH WORK OR SUPPLY OF LABOUR FOR CARRYING OUT WHOLE OR PART OF SUCH WORK UNDERTAKEN BY THE CONTRACTOR UNDER THIS CONTRACT. T HIS FEATURE FOR A SUB- CONTRACTOR IS NOT FOUND TO BE IN EXISTENCE HERE, SI NCE AS IN THE EARLIER CITED JUDGMENT OF THE HIMACHAL PRADESH HIGH COURT, THE JO INT VENTURE WAS NOTHING BUT A COLLECTIVE NAME FOR ITS MEMBERS ITSEL F WHO HAD COME TOGETHER FOR OBTAINING THE CONTRACT FOR THE BENEFIT OF THE C ONSTITUENT MEMBERS. IN THE WRITTEN SUBMISSION DATED 9-3-2011 THE APPELLANT HAS CITED ANOTHER DECISION, GIVEN BY THE AUTHORITY FOR ADVANCE RULING (AAR) IN THE CASE OF HYUNDAI ROTEM CO., IN RE (2010) 323 ITR 277 (AAR). IN THAT CASE, IT WAS AN ISSUE OF STATUS; I.E., WHETHER A CONSORTIUM FORMED BY FOU R COMPANIES TO BID FOR AND EXECUTE A CONTRACT FOR THE DELHI METRO RAIL CORPORA TION (DMRC), FOR THE PURPOSE OF DESIGN, TRAINING, MANUFACTURE, SUPPLY TE STING, COMMISSIONING, ETC. WAS TO BE TREATED AS AN AOP FOR THE PURPOSES O F INCOME-TAX ASSESSMENT. IT WAS HELD THAT MERELY COMING TOGETHER AND ACTING IN COOPERATION WITH EACH OTHER FOR THE PURPOSE OF OBTA INING WORK AND EXECUTING THE CONTRACT, WHILE EACH MEMBER CARRIES OUT ITS OWN WORK INDEPENDENTLY, DOES NOT LEAD TO THE CONCLUSION THAT AN AOP FOR THE PURPOSES OF ASSESSMENT WAS FORMED. FURTHER, THAT THE CONSORTIUM CANNOT BE TREATED AS AN AOP FOR INCOME TAX PURPOSE AND THE MEMBERS WERE LIABLE TO B E TAXED ON THE BASIS THAT THEY WERE SEPARATE TAXABLE ENTITIES. IN THIS J UDGMENT IT WAS NOTICED THAT THE CONSORTIUM MEMBERS DO NOT ACT AS AN AGENT OF ON E ANOTHER AND THE MEMBERS WERE JOINTLY AND SEVERALLY LIABLE TOWARDS T HE EMPLOYER (DMRC), THE PROFIT AND LOSS WERE APPORTIONED BY THE INDIVID UAL MEMBERS THEMSELVES, 6 ITA NOS.2200 & 2201/PN/2014 AND THE COMMON EXPENDITURE WERE NOT BEING INCURRED BY THEM. SIMILAR WAS THE CASE WITH THE APPELLANT. THEREFORE, THE RATIO O F THIS DECISION GIVEN BY THE AAR WAS APPLICABLE HERE ALSO, THOUGH HERE THE APPEL LANT HAD ITSELF FILED ITS RETURNS IN THE STATUS OF AOP. HOWEVER, AS DISCUSSED ABOVE, THIS WAS FOR A SPECIFIC PURPOSE. EFFECTIVELY, SINCE REVENUE AS WEL L AS THE TDS CREDITS WERE APPORTIONED BETWEEN THE TWO MEMBERS OF THE JOINT VE NTURE, AND THE TWO MEMBER COMPANIES WERE INCLUDING THESE RECEIPTS IN T HEIR TURNOVER AND ALSO CLAIMING TDS CREDITS THEREON; THE APPELLANT AOP WAS NOT BOOKING ANY REVENUE OR EXPENDITURE WHICH IS IN LINE WITH THIS D ECISION OF THE AAR. 3.11 IN THE CASE OF VAN OORD ACZ. BV, IN RE (2001) 248 ITR 399 (AAR) IT WAS A CASE WHEN THE ASSESSEE, A FOREIGN CO MPANY UNDERTOOK A CONSTRUCTION CONTRACT IN JOINT VENTURE WITH HCC, AN INDIAN COMPANY. BOTH THESE JV PARTNERS AGREED TO BEAR THE RESPECTIVE LOS SES AND RETAIN THE RESPECTIVE LOSSES AND RETAIN THE RESPECTIVE PROFITS SEPARATELY, WITH EACH OF THE PARTNERS AGREEING TO EXECUTE SPECIFIC PART OF T HE JOBS ASSIGNED TO THEM. THIS FORMATION OF JOINT VENTURE WAS FOR OBTAINING T HE CONTRACT AND COORDINATING AND EXECUTING THE CONTRACT. IN SUCH CA SE, IT WAS HELD THAT THE JOINT VENTURE BETWEEN THE ASSESSEE AND HCC COULD NO T BE ASSESSED AS AN AOP, BUT BOTH WERE LIABLE TO BE ASSESSED AS SEPARAT E AND INDEPENDENT ENTITIES. THE RATIO OF THIS DECISION WAS SIMILAR TO THE DECISION OF HYUNDAI ROTEM CO. CITED ABOVE, AND LEADS TO THE SIMILAR CON CLUSION. IN SUCH A SITUATION THIS WAS AN ADDITIONAL ARGUMENT THAT THER E WAS NO CASE OF APPLICABILITY OF TDS PROVISIONS BETWEEN THE JOINT V ENTURE FORMED FOR THE PURPOSE OF OBTAINING THE CONTRACT AND COORDINATING THE EXECUTION; AND ITS TWO MEMBER COMPANIES FORMING IT, WHO WERE INDEPENDENTLY RESPONSIBLE FOR EXECUTION, AND WERE BOOKING THE CORRESPONDING INCOM E / EXPENDITURE IN THEIR OWN CASES. THIS WAS THE ADDITIONAL ARGUMENT IN ADDI TION TO THE PRIMARY REASON THAT THERE WAS NO CONTRACT AGREEMENT BETWEEN THE AOP AND ITS TWO CONSTITUENT COMPANIES I.E. SWAPNALI CONSTRUCTION AN D RDS CONSTRUCTION FOR SUB-CONTRACTING THE WORK TO THEM. THERE WAS NO CONT RACTOR-SUB-CONTRACTOR RELATIONSHIP EXISTING BETWEEN THE JOINT VENTURE AND ITS PARTNERS AND THEREFORE, THERE WAS NO APPLICABILITY OF SECTION 19 4C(2) OF THE ACT. 3.12 THE APPELLANT HAS PRIMARILY PLACED RELIANCE ON THE RULING OF THE AAR IN THE CASE OF HYUNDAI ROTEM CO., IN RE (2010) 323 ITR 277 (AAR) AND VAN OORD ACZ.BV, IN RE (2001) 248 ITR 399 (AAR) IN SUPPORT OF ITS CONTENTION. THERE WAS ANOTHER AAR RULING IN THE CAS E OF GEOCONSULT ZT GMBH IN RE (2008) 304 ITR 283, FOR WHICH THE APPELL ANT HAS EXPLAINED THAT THE SAME WAS DISTINGUISHABLE ON FACTS. THE APPELLAN T HAS COMPARED THE FACTS AND RATIO OF THIS AAR RULING WITH THE OTHER T WO RULINGS OF THE AAR IN THE CASES OF HYUNDAI ROTEM CO. AND VAN OORD ACZBV, MENT IONED ABOVE. IT HAS BEEN CLARIFIED THAT RELIANCE HAS BEEN CORRECTLY PLACED ON THE CASE OF HYUNDAI ROTEM CO IN RE (2010) 323 ITR 277, WHICH IS THE MOST RECENT ORDER FROM THE AAR, WHICH HAS, IN TURN, RELIED UPON ON THE EARLIER AAR RULING IN THE CASE OF VAN OORD ACZ.BV (SUPRA). THE APPELLA NT HAS ALSO STATED THAT THE FACTS OF THE CASE OF GEOCONSULTANT ZT GMBH (SUPRA) ARE ALSO DISTINGUISHABLE WITH REFERENCE TO THE APPELLANT'S C ASE. THE APPELLANT HAS EXPLAINED THE FOLLOWING, WHICH IS BEING REPEATED HE RE FOR THE SAKE OF CLARITY : 'AS REGARDS ID AO'S CONTENTION THAT THE DECISION IN THE CASE OF GEOCONSULT ZT GMBH HAS NOT BEEN CONSIDERED BY THE A PPELLATE AUTHORITIES INCLUDING ITAT WE WOULD LIKE TO BRING T O YOUR KIND ATTENTION THE FOLLOWING - I) IN GEOCONSULT ZT GMBH [(2008) 304 ITR 283], THE DECISION IN THE CASE OF VAN OORD ACZ. BV [(2001) 248 ITR 399 (AAR) HAS BEEN DISTINGUISHED; WHEREAS 7 ITA NOS.2200 & 2201/PN/2014 II) IN HYUNDAI ROTEM CO. [(2010) 323 ITR 277] THE D ECISION IN THE CASE OF GEOCONSULT ZT GMBK HAS BEEN DISTINGUISH ED AND THE DECISION IN THE CASE OF VAN OORD ACZ BV [(2 001) 248 ITR 399 (AAR) HAS BEEN FOLLOWED; AND III) THE DECISION IN THE CASE OF HYUNDAI ROTEM CO. IS MORE RECENT THAN THAT IN THE CASE OF GEOCONSULT ZT GMBH. ' IT IS FURTHER CLARIFIED THAT IN THE CASE OF GEOCONS ULT ZT GMBH, THE NATURE OF WORK WAS PROVIDING PROJECT CONSULTANCY SERVICES, WH ICH WAS HOMOGENOUS AND THERE WAS INTERCHANGEABILITY BETWEEN THE PARTNE RS; WHEREAS, IN THE CASE OF HYUNDAI ROTEM CO., VAN OORD ACZ BV, RAJDEEP INFR ASTRUCTURE AND ALSO THE APPELLANT I.E. PROGRESSIVE RAMU DEVELOPERS R. D.S. CONSTRUCTION JV, THE NATURE OF WORK WAS CONSTRUCTION, WHICH WAS NOT INTERCHANGEABLE BUT DIVISIBLE PHYSICALLY BETWEEN THE MEMBERS. THE APPEL LANT HAS COMPARED THE FACTS AND THE DISTINGUISHABLE FEATURES BY A COMPARA TIVE CHART OF THESE FIVE CASES INCLUDING THAT OF THE APPELLANT IN ITS SUBMIS SION DATED 10.03.2011, REPRODUCED IN PARA 3.3 ABOVE. 3.13 I HAVE CAREFULLY PERUSED THIS EXPLANATION AND I AM OF THE CONSIDERED OPINION THAT THE FACTS OF THE APPELLANT'S CASE ARE DISTINGUISHABLE FROM THAT OF THE CASE OF GEOCONSULT ZT GMBH (SUPRA), IN WHICH TH E NATURE OF WORK WAS PROJECT CONSULTANCY SERVICES WHICH WAS HOMOGENOUS A ND THERE WAS INTERCHANGEABILITY. IN PARA 12 OF THE ORDER OF THE AAR IN THE CASE OF HYUNDAI ROTEM CO. (SUPRA), IT HAS CLEARLY DISTINGUISHED ITS FACTS FROM THE CASE OF GEOCONSULT ZT GMBH (SUPRA). THIS HAS BEEN EMPHASISE D BY THE EXPLANATION THAT THE SCOPE OF WORK FOR EACH MEMBER IN THE CASE OF HYUNDAI ROTEM CO. WAS SPECIFICALLY DEFINED, AND IT IS MUTUA LLY EXCLUSIVE TO EACH OTHER, AND THERE WAS NO INTERCHANGEABILITY OR OVERL APPING OF THE WORK TO ANY SUBSTANTIAL EXTENT. ON THE OTHER HAND, IN THE CASE OF GEOCONSULT ZT GMBH, IT BEING IN THE NATURE OF PROJECT CONSULTANCY SERVI CES COMPRISING OF PROJECT PREPARATION MANAGEMENT AND DESIGN RESPONSIBILITY EA CH OF THE THREE MEMBERS HAD THE SAME SKILL TO DO THESE SERVICES AND THE WORK WAS ALSO INTERCHANGEABLE BETWEEN THE MEMBERS. THUS, IT IS HE LD THAT THE FACTS OF THE APPELLANT'S CASE WERE IDENTICAL TO THE CASE OF AAR RULING IN THE CASE OF HYUNDAI ROTEM CO. IN WINCH THE RELIANCE WAS ALSO PL ACED ON THE RULING OF VAN OORD ACZ BV; AND WAS DISTINGUISHABLE FROM THE F ACTS IN THE CASE OF GEOCONSULT ZT GMBH. IT IS ALSO NOTICED FROM THE ITA T PUNE BENCH DECISION IN THE CASE OF RAJDEEP & PMCC INFRASTRUCTURE IN ITA NO. 1280/PN/2006 ORDER DATED 25.05.2009 THAT IT WAS AN ADMITTED POSI TION THAT NO WORK WAS CONDUCTED BY THE AOP, AND IT HAD ONLY ACTED AS A CO NDUIT BETWEEN THE MAHARASHTRA STATE ROAD TRANSPORT CORPN. (MSRDC) AND THE TWO MEMBERS OF THE AOP, SO FAR AS THEIR SEPARATE AND NEATLY IDE NTIFIED WORK AREAS WERE CONCERNED. IN SUCH CIRCUMSTANCES, IT WAS HELD THAT IT WILL NOT LEAD TO TAXABILITY IN THE HANDS OF THE AOP. THE TRIBUNAL AL SO PLACED RELIANCE ON THE ADVANCE RULING IN THE CASE OF VAN OORD ACZ BV IN RE (SUPRA) AND REPRODUCED EXTENSIVELY FROM THIS DECISION. THEREFOR E, THIS DECISION OF PUNE BENCH OF ITAT LENDS SUPPORT TO THE APPELLANTS CASE HERE. 3.14 IN VIEW OF THE ABOVE DISCUSSION MADE FROM PARA 3.3 TO 3.13, INCLUDING THE TWO JUDGMENTS OF THE HIMACHAL PRADESH HIGH COURT CITED SUPRA; ALONG WITH THE TWO DECISIONS OF THE AAR; AS ALSO THE CHART DISTINGUISHING BETWEEN THE DECISIONS OF THE AAR IN THE CASE OF GEOCONSULT ZT GMBH, HYUNDAI ROTEM CO. AND VAN OORD ACZ BV VIS- A-VIS THE CASE OF RAJDEEP & PMCC INFRASTRUCTURE AND THE APPELLANT' S OWN CASE; FILED ALONG WITH THE APPELLANT'S SUBMISSION DT. 10-3-2011, IT I S HELD THAT IN THE ABSENCE OF ANY CONTRACT FOR SUB-CONTRACTING THE WORK BY THE JOINT VENTURE TO ITS TWO MEMBER COMPANIES, PROVISIONS OF SECTION 194C(2) WER E NOT APPLICABLE FOR 8 ITA NOS.2200 & 2201/PN/2014 THE PURPOSES OF TDS. THE TWO ENTITIES FORMING THE J OINT VENTURE WERE ALREADY BEING ASSESSED SINCE THE A. Y.2001-02 ONWAR DS ON THEIR RESPECTIVE SHARES, AND TDS APPORTIONMENT CERTIFICATES WERE ALS O ISSUED BY THE ASSESSING OFFICER EVERY YEAR FOR THESE YEARS, TO EN ABLE THEM TO CLAIM THE SAME IN THEIR OWN CASES. MOREOVER, THERE WAS NO PRO FIT AND LOSS ACCOUNT IN THE APPELLANT'S CASE, AND THERE WAS NO CLAIM OF ANY EXPENDITURE. THEREFORE, THERE WAS NO QUESTION OF ANY DISALLOWANCE UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE DISALLOWANCE U/S. 40(A)(I A) MADE BY THE ASSESSING OFFICER, THEREFORE, CANNOT BE SUSTAINED. IN EFFECT, THE METHOD ADOPTED BY THE ASSESSING OFFICER HAS ALSO RESULTED IN DOUBLE TAXAT ION OF THE SAME CONTRACT REVENUE; WHICH IS IN VIOLATION OF THE KARNATAKA HIG H COURT DECISION REPORTED IN 197 ITR 321 (KAR). GROUND OF APPEAL NO. 1 IS, AC CORDINGLY, LIABLE TO BE ALLOWED.' 3.4 THE ABOVE FINDINGS OF THE CIT (APPEALS) IN THE CASE OF SWAPNALI RDS JOINT VENTURE, WERE CONTESTED BEFORE THE ITAT B Y THE DEPARTMENT. THE HONBLE ITAT, PUNE VIDE ORDER ITA NO.771/PN/2011 DA TED 26.09.2012 HAS DECLINED TO INTERFERE WITH THE FINDING GIVEN BY THE CIT (APPEALS) AND HAS HELD AS UNDER : 2. AT THE OUTSET OF HEARING, LD. AUTHORISED REPRES ENTATIVE POINTED OUT THAT THIS CASE IS COVERED IN FAVOUR OF THE ASSESSEE BY ITAT, PUNE BENCH, IN ITA.NO.65/PN/2011 FOR A.Y. 2006-07 IN THE CASE OF I TO VS. GAMMON PROGRESSIVE-JV, WHEREIN VIDE PARAS 5 TO 9 THE TRIBU NAL DECIDING SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE BY DISMISSING THE APPEAL OF 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 E XPLAINED THAT IN THE RETURNS OF INCOME SINCE BEGINNING TILL THE A.Y. 2006-07, TH E STATUS WAS MENTIONED AS AOP ONLY, I.E., WHEN THE RETURNS WERE FILED MANUALL Y. 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 ACKNOWLEDGEMEN T, WHEREAS IN THE COMPUTATION OF TOTAL INCOME, IT WAS CORRECTLY MENTI ONED AS AOP. IT WAS EXPLAINED THAT I.T.RETURN FORM NO.5 WAS ACTUALLY AP PLICABLE FOR FIRMS, AOPS AND BOIS. THEREFORE, THIS ERROR MIGHT HAVE OCCURRE D. THE ASSESSEE HAS ALSO FILED COMPUTATION OF TOTAL INCOME ALONGWITH AC KNOWLEDGEMENTS FROM A.Y. 2002-03 TO A.Y. 2006-07 IN WHICH THE STATUS WA S 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 STATU S WAS SHOWN AS AOP. HOWEVER, IT WAS NOT VERY MUCH RELEVANT FOR THE PURP OSE OF APPLICABILITY OF PROVISIONS OF SECTION 194C SINCE TDS PROVISIONS ARE APPLICABLE TO ALL ENTITIES EXCEPT INDIVIDUALS AND HUF 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 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 ALLOCA TED 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 APPO RTIONMENT OF CONTRACT RECEIPTS, ASSETS AND LIABILITIES BETWEEN THE MEMBER S. THERE WAS NO EXPENDITURE BOOKED IN THE CONTRACT ACCOUNT NOR ANY PROFIT AND LOSS ACCOUNT 9 ITA NOS.2200 & 2201/PN/2014 PREPARED FOR THE PURPOSE SINCE THERE DID NOT ARISE ANY PROFIT OR LOSS TO THE ASSESSEE PER SE. THE JOINT VENTURE TRANSFERRED NOT ONLY THE GROSS REVENUE BUT ALSO THE CORRESPONDING TDS TO ITS MEMBERS IN TH E RATIO OF THEIR WORK DONE BY INDIVIDUAL MEMBERS FOR WHICH THE APPOINTMEN T CERTIFICATE WAS DULY ISSUED EVERY YEAR BY THE ASSESSING OFFICER. IN TH IS BACKGROUND IT WAS SUBMITTED THAT THERE WAS NO RELATIONSHIP OF CONTRAC TOR AND SUB-CONTRACTOR BETWEEN THE JOINT VENTURE AND ITS TWO MEMBERS. THE REFORE, THERE WAS NO QUESTION OF APPLICABILITY OF TDS PROVISIONS U/S.194 C OF THE ACT. THE ASSESSEE ALSO EXPLAINED WHY A RETURNS WERE FILED BY THE JOINT VENTURE AS AOP. IT WAS EXPLAINED THAT IT WAS DONE TO PASS ON THE CREDIT OF TDS TO THE MEMBERS ON THE BASIS OF TAX APPORTIONMENT CERTIFICA TES WHO HAVE ACCOUNTED FOR THE CORRESPONDING CONTRACT REVENUE IN THEIR RES PECTIVE RETURNS. IT WAS ALSO SUBMITTED THAT NIL INCOME ARISING IN THE HAN DS OF THE AOP IS CONFIRMED BY THE ACTION OF THE ASSESSING OFFICER IN NOT ASSES SING ANY PROFIT/INCOME ARISING FROM THE CONTRACT APART FROM THIS DISALLOWA NCE 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. IT WA S EXPLAINED ON BEHALF OF THE ASSESSEE THAT IN THE CASE OF SUB-CONTRACT, THERE WA S A RELATIONSHIP OF PRINCIPAL AND AGENT WHEREAS IN THE SITUATION OF REV ENUE SHARING, IT WAS ON A PRINCIPAL TO PRINCIPAL BASIS. FURTHER, IN SUB-CONT RACTING, THE CONTRACTOR RETAINS HIS SHARE OF PROFIT ALONGWITH THE TDS AND ONLY THE BALANCE IS PASSED ON TO SUB-CONTRACTOR. BUT IN JOINT VENTURE, ASSESSEES DI D 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 DE PARTMENT HAS ALSO ISSUED TAX APPORTIONMENT CERTIFICATES EVERY YEAR DURING TH E PAST 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 DEPARTMENT VIDE LETTE R NO.PN/WD.3(4)/TC/07-08 DATED 26.11.2008 OF THE ASSESSING OFFICER IN WHICH THE ASSESSING OFFICER HAS 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 EIT HER 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. TH E ASSESSEE, VIDE ITS SUBMISSION DATED 22.04.2010, FURNISHED THE DETAILS WHICH REVEALED THAT GROSS REVENUE FROM THIS CONTRACT RECEIPTS BY JOINT VENTURE WAS ACCOUNTED FOR IN CASE OF EITHER OR BOTH OF THE TWO COMPANIES WHO WERE MEMBERS OF THE JOINT VENTURE IN ALL ASSESSMENT YEARS 2001-02 TO 20 08-09. 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 CO NTRACT/SUB-CONTRACT, IN THE BACKGROUND OF CLAUSES OF THE AGREEMENT, THE ASS ESSEE RELIED ON THE DECISION OF HON'BLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF CIT VS. AMBUJA DARLA KASHLOG MANGU TRANSPORT COOPERATIVE SO CIETY (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 CERTIFICATE TO THE MEMBERS OF THE JOINT VENTURE AS WELL AS TO THEIR RESPECTIVE ASSESSING OF FICERS, WHICH SHOWS THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND AND CONS CIOUSLY ACCEPTED THE FACT THAT THE JOINT VENTURE AOP WAS FOR THE DISTRIB UTION OF RECEIPTS AMONGST ITS 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 APPLICABLE TO DOMESTIC COMPANIES, BEING JOINT 10 ITA NOS.2200 & 2201/PN/2014 VENTURE PARTNER IN THEIR INDIVIDUAL CAPACITY AND TH E TAX RATES APPLICABLE TO THE AOP. HOWEVER, IN SUBMISSION DATED 21.10.2010, IT W AS EXPLAINED THAT TAX RATES IN THE CASE OF DOMESTIC COMPANY AND THE AOP W OULD BE THE SAME IN THIS CASE. THIS WAS DUE TO APPLICABILITY OF SECTIO N 167B OF THE ACT. THE ASSESSEE ALSO FILED DETAILS OF THE RETURNS OF INCOM E OF THE TWO CORPORATE ENTITIES BEING JOINT VENTURE MEMBERS, ALONGWITH ACK NOWLEDGEMENTS 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 MEMBE RS WAS NOT TO TAKE ANY UNDUE BENEFIT OF LOSSES INCURRED BY THEM. THEREFOR E, IT WAS STATED THAT THERE WAS NO LOSS TO THE REVENUE AS A RESULT OF THIS METH OD ADOPTED BY THE ASSESSEE OF SHARING THE GROSS REVENUE BY ITS MEMBER S, WHICH WAS TAXED IN THEIR HANDS. HOWEVER, THIS EXPLANATION OF THE ASSE SSEE DID NOT FIND FAVOUR FROM THE ASSESSING OFFICER. THE ASSESSEE HAS ALSO RAISED THE ISSUE OF CONSISTENCY STATING THAT THE SAME 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 OR DER 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 O F RADHASOAMI SATSANG VS. CIT (1992) 193 ITR 321 (SC) WHEREIN IT WAS OBSE RVED THAT STRICTLY SPEAKING THE PRINCIPLE OF RES JUDICATA DOES NOT APP LY TO INCOME TAX PROCEEDINGS SINCE EACH ASSESSMENT YEAR WAS A SEPARA TE UNIT IN ITSELF AND WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FO LLOWING YEAR. IT WAS FURTHER CONTENDED THAT WHERE A FUNDAMENTAL ASPECT P ERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAI NED 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' BLE KERALA HIGH COURT IN THE CASE OF MANJUNATH MOTOR SERVICE AND CANARA PUBL IC CONVEYANCES, 197 ITR 321 (KAR.) OBSERVED THAT METHOD ADOPTED BY THE ASSESSING OFFICER WOULD RESULT 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 PAR TNERS HAD ALSO UTILISED THE TDS CREDITS ON THE BASIS OF APPORTIONMENT CERTIFICA TE ISSUED BY THE ASSESSING OFFICER. IN VIEW OF THE ABOVE DISCUSSION , CIT(A) WAS JUSTIFIED IN HOLDING THAT IN ABSENCE OF ANY CONTRACT OR SUB-CONT RACT WORK BY JOINT VENTURE TO ITS MEMBER COMPANIES, PROVISIONS OF SECTION 194C WERE NOT APPLICABLE FOR THE PURPOSE OF TDS. THE TWO CORPORATE ENTITIES FOR MING 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. THEREFORE, THERE WAS NO QUESTION OF ANY DISALLOWANCE UNDER THE PROVISIONS OF SECTION 40 (A)(IA) OF THE ACT. MOREOVER, DISALLOWANCE U/S. 40(A)(IA) MADE BY THE A SSESSING 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 REPO RTED IN 197 ITR 321 (KAR.). THIS VIEW IS FORTIFIED BY THE DECISION OF THE ITAT PUNE BENCH IN ITO VS. RAJDEEP & PMCC INFRASTRUCTURE, WHEREIN THE TRIB UNAL 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 B ETWEEN THE 11 ITA NOS.2200 & 2201/PN/2014 MSRDC AND THE TWO PERSONS CONSTITUTING THIS AOP SO FAR AS THEIR SEPARATE, AND NEATLY IDENTIFIED, WORK AREAS ARE CON CERNED. A MERE EXISTENCE OF AN AOP CANNOT LEAD TO TAXABILITY IN TH E HANDS OF THE AOP UNLESS THE AOP RECEIVES MONIES IN ITS OWN RIGHT. W E HAVE NOTED THAT HON'BLE AUTHORITY 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 HANDS FOR CARR YING OUT NEATLY IDENTIFIED SEPARATE WORK WHICH WAS A PART OF COMPOS ITE CONTRACT AWARDED TO THE AOP, BUT THE TAXABILITY OF INCOME FR OM SUCH CONTRACT WAS HELD TO BE TAXABLE IN THE HANDS OF THE RESPECTI VE CONTRACTORS. 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 PAR TNERSHIP 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 AND RETAIN ITS PROFITS AS AND WHEN SUCH PROFITS OR LOSS ARISE. HAVING REGARD TO THE AGREEMENT WE ARE OF THE VIEW THAT THE APPLIC ANT CANNOT BE TREATED AS A PARTNERSHIP WHICH CAN ONLY BE CREATED BY AN AGREEMENT. NOR CAN IT BE TREATED AS AN AOP. IN ORDER TO CONSTI TUTE 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 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 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. TH E OTHER PART OF THE CONTRACT WILL BE EXECUTED BY HCC. THE TOTAL VALUE O F THE CONTRACT 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 VALUE). THE ASSO CIATION WITH THE HCC WAS NOT WITH THE OBJECT OF EARNING THIS INCOME BUT FOR CO ORDINATION IN EXECUTING THE CONTRACT SO THAT HCC CO ULD ALSO MAKE ITS OWN PROFIT. HHC'S WORK AND INCOME ARISING THEREFROM WAS QUITE SEPARATE AND INDEPENDENT OF THE APPLICANT'S WORK AN D 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 PETITI ONER COMPANY WITH HCC WAS UNDOUBTEDLY FOR MUTUAL BENEFIT BUT SUCH ASS OCIATION WILL NOT MAKE THEM A SINGLE ASSESSABLE UNIT AND LIABLE TO TA X AS AN AOP. FOR EXAMPLE, A BUILDING CONTRACTOR MAY ASSOCIATE WITH A PLUMBER AND AN ELECTRICIAN TO EXECUTE A BUILDING PROJECT. ALL THES E PERSONS ARE DRIVEN BY PROFIT-MAKING MOTIVE. BUT THAT BY ITSELF WILL NO T 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 BUILDING PROJECT. I N THE INSTANT CASE, THE APPLICANT HAS STATED THAT THE APPLICANT HAS MAD E 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.' 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 ACCORDINGLY.' 12 ITA NOS.2200 & 2201/PN/2014 7. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS SO EXPRESSED BY THE HON'BLE AUTHORITY FOR ADVANCE RULING. WE ADOPT THE REASONING OF THE HON'BLE AAR AND, RESPECTFULLY FOLLOWING THE SAME, APPROVE T HE CONCLUSION ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTE R. IN VIEW OF THE ABOVE DISCUSSION, WE ARE NOT INCLINE D TO INTERFERE IN THE FINDING OF THE CIT(A) WHO HAS DIRECTED THE ASSESSING OFFICE R TO DELETE THE ADDITION. THE SAME IS UPHELD. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 3. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF REVENUE. 4. FACTS BEING SIMILAR, SO FOLLOWING SAME REASONING WE ARE NOT INCLINED TO INTERFERE WITH THE FINDING OF THE CIT(A) WHO HAS RI GHTLY HELD THAT THERE IS NO QUESTION OF DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT. SA ME IS UPHELD. 3.5 SINCE THE FACTUAL MATRIX AND THE LEGAL POSITION OF THE ISSUE INVOLVED IS PARI MATERIA THE SAME AS IN THE CASE OF SWAPNALI RDS JOI NT VENTURE ALSO RELIED UPON BY THE APPELLANT AND FOLLOWED IN APPELLANT'S CASE FOR A. Y. 2009-10, FOLLOWING THE DECISION TAKEN BY MY PREDECESSOR AND THE DECISION O F THE HONBLE ITAT, PUNE, THE DISALLOWANCE U/S 40(A)(IA) MADE BY THE AO, IS HELD TO BE NOT SUSTAINABLE. GROUNDS NO. 1 TO 6 OF APPEAL RAISED BY THE APPELLANT ARE LI ABLE TO BE ALLOWED FOR BOTH THE YEARS UNDER CONSIDERATION. 5. BEFORE US, AT THE OUTSET, LD. AR SUBMITTED THAT THE ISSUE IN THE PRESENT APPEAL IS COVERED IN ASSESSEES FAVOUR BY THE DECIS ION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10. HE PLACED ON RECORD THE COPY OF THE ORDER OF TRIBUNAL IN ITA NOS .942 TO 944/PN/2013 ORDER DATED 28.11.2014 AND POINTED TO THE RELEVANT FINDINGS OF THE TRIBUNAL. HE THEREFORE SUBMITTED THAT FOLLOWING THE DECISION OF THE CO-ORD INATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE THE APPEAL OF THE REVENUE NEEDS TO BE DISMISSED. THE LD. DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF ASSES SING OFFICER. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THE LD. CIT(A) WHILE DELETING THE ADDITION HAD NOTED THAT THE FACTS OF THE PRESENT CASE ARE IDENTICAL TO THAT OF SWAPNALI RDS JOINT VENTURE AND HE HAD FOLLOWED THE DECISION OF PREDECESSOR IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10. WE FIND THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN 13 ITA NOS.2200 & 2201/PN/2014 CASE FOR ASSESSMENT YEAR 2009-10 HAS DECIDED THE IS SUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER :- 10. WE HAVE HEARD THE RIVAL AND PERUSED THE RECORD S. IN THE FACTS OF THE PRESENT CASE, THE ISSUE ARISING BEFORE US IS IN RELATION TO THE APPLICATION OF PROVISIONS OF SECTION 40A(IA) OF THE ACT. THE ASSESSEE AOP HAD RE CEIVED CONTRACTS FROM THIRD PARTY WHICH, IN TURN, WAS EXECUTED BY THE TWO MEMBE RS OF AOP. THE PLEA OF THE ASSESSEE AOP WAS THAT IT WAS CONSTITUTED FOR OBTAIN ING WORK AND RECEIVING PAYMENTS AGAINST THE SAID WORK DONE BY THE CONSTITU ENTS OF THE AOP AND THE SAID PAYMENT WAS TO BE DISTRIBUTED IN THE AGREED RATIO B ETWEEN THE TWO MEMBERS OF THE AOP FOR CARRYING OUT THE WORK. SUCH ASSIGNMENTS OF THE WORK TO THE MEMBERS AS PER THE MEMORANDUM OF UNDERSTANDING AGREED UPON IS NOT EQUIVALENT TO SUB- CONTRACT AND AS SUCH THE ASSESSEE AOP WAS NOT LIABL E TO DEDUCT TAX AT SOURCE OUT OF THE AMOUNT DISTRIBUTED AMONGST THE MEMBERS OF TH E AOP IN THE AGREED RATIO OF SHARE. THE ASSESSING OFFICER, WHILE DECIDING THE IS SUE IN THE HANDS OF THE ASSESSEE, HAD GIVEN AN OFFICE NOTE TO THE EFFECT TH AT IN THE CASE OF M/S. SWAPNALI RDS JOINT VENTURE (SUPRA), SIMILAR ADDITION UNDER S ECTION 40(A)(IA) OF THE ACT HAS BEEN MADE FOR THE ASSESSMENT YEAR 2008-09 WHICH HAS BEEN DELETED BY THE CIT(A)-II, PUNE. DEPARTMENT HAS FILED APPEAL AGAINS T THIS ORDER TO ITAT AND THE MATTER IS PENDING BEFORE ITAT. TO KEEP THE ISSUE AL IVE IN OTHER CASES ALSO, THE SIMILAR ADDITION IS BEING MADE IN THIS CASE ALSO. T HE FACTS AND CIRCUMSTANCES ARISING IN THE PRESENT APPEAL ARE IDENTICAL TO THE FACTS AND CIRCUMSTANCES OF THE CASE BEFORE THE TRIBUNAL IN M/S. SWAPNALI RDS JOINT VENTURE (SUPRA), WHEREIN IT WAS HELD AS UNDER:- 2. AT THE OUTSET OF HEARING, LD. AUTHORISED REPRES ENTATIVE POINTED OUT THAT THIS CASE IS COVERED IN FAVOUR OF THE ASSESSEE BY ITAT, PUNE BENCH, IN ITA.NO.65/PN/2011 FOR A.Y. 2006-07 IN THE CASE OF I TO VS. GAMMON PROGRESSIVE-JV, WHEREIN VIDE PARAS 5 TO 9 THE TRIBU NAL DECIDING SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE BY DISMISSING THE APPEAL OF THE REVENUE, HAS HELD 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 OFFICER HAS MENTIONED THE STATUS AS FIRM. HOWEVER, IN THE EXPLANATION GI VEN, THE ASSESSEE HAS MADE IT CLEAR THAT THE STATUS IN WHICH THE RETURNS WAS FILED WAS THAT OF AN AOP. IT WAS EXPLA INED THAT IN THE RETURNS OF INCOME SINCE BEGINNING TILL THE A.Y. 2006-07, THE STATUS WAS MENTIONED AS AOP ONLY, I.E., WHEN TH E RETURNS WERE FILED MANUALLY. HOWEVER, FROM A.Y. 2007-08, W HEN ELECTRONIC FILING HAD TO BE DONE, DUE TO COMPUTER E RROR THE STATUS APPEARED AS FIRM ON THE ITR ACKNOWLEDGEMEN T, WHEREAS IN THE COMPUTATION OF TOTAL INCOME, IT WAS CORRECTLY MENTIONED AS AOP. IT WAS EXPLAINED THAT I.T.RETURN FORM NO.5 WAS ACTUALLY APPLICABLE FOR FIRMS, AOPS AND BO IS. THEREFORE, THIS ERROR MIGHT HAVE OCCURRED. THE ASS ESSEE HAS ALSO FILED 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 EVE N 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 AOP. HOWEVER, IT WAS NOT VERY MUCH RELEVANT FOR TH E PURPOSE OF APPLICABILITY OF PROVISIONS OF SECTION 194C SINC E TDS PROVISIONS ARE APPLICABLE TO ALL ENTITIES EXCEPT IN DIVIDUALS AND 14 ITA NOS.2200 & 2201/PN/2014 HUF 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 DISTRI BUTED IN THE RATIO OF THE SHARE OF THE WORK DONE. THE ACTUA L SHARE IN THE JOINT VENTURE OF THE TOTAL WORK ALLOCATED WAS 6 0% FOR M/S.GAMMON INDIA LTD. AND 40% FOR M/S.PROGRESSIVE CONTRACTION LTD. IN THIS BACKGROUND IT WAS EXPLAIN ED THAT THE CONTRACT ACCOUNT AND THE BALANCE SHEET OF THE JOINT VENTURE REVEALS NOTHING BUT APPORTIONMENT OF CONTRACT RECEI PTS, ASSETS AND LIABILITIES BETWEEN THE MEMBERS. THERE WAS NO EXPENDITURE BOOKED IN THE CONTRACT ACCOUNT NOR ANY PROFIT AND LOSS ACCOUNT PREPARED FOR THE PURPOSE SINCE THERE D ID NOT ARISE ANY PROFIT OR LOSS TO THE ASSESSEE PER SE. T HE JOINT VENTURE TRANSFERRED NOT ONLY THE GROSS REVENUE BUT ALSO THE CORRESPONDING TDS TO ITS MEMBERS IN THE RATIO OF TH EIR WORK DONE BY INDIVIDUAL MEMBERS FOR WHICH THE APPOINTMEN T 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 BE TWEEN THE JOINT VENTURE AND ITS TWO MEMBERS. THEREFORE, THER E WAS NO QUESTION OF APPLICABILITY OF TDS PROVISIONS U/S.194 C OF THE ACT. THE ASSESSEE ALSO EXPLAINED WHY A RETURNS WER E FILED BY THE JOINT VENTURE AS AOP. IT WAS EXPLAINED THAT IT WAS DONE TO 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 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 CO NTRACT 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 REVENU E SHARING ARRANGEMENT ENTERED INTO BY THE JOINT VENTU RE VIS-A-VIS SUB-CONTRACT. IT WAS EXPLAINED ON BEHALF OF THE AS SESSEE THAT IN THE CASE OF SUB-CONTRACT, THERE WAS A RELATIONSH IP OF PRINCIPAL AND AGENT WHEREAS IN THE SITUATION OF REV ENUE SHARING, IT WAS ON A PRINCIPAL TO PRINCIPAL BASIS. FURTHER, IN SUB-CONTRACTING, THE CONTRACTOR RETAINS HIS SHARE O F PROFIT ALONGWITH THE TDS AND ONLY THE BALANCE IS PASSED ON TO SUB- CONTRACTOR. BUT IN JOINT VENTURE, ASSESSEES DID NO T RETAIN ANY SHARE IN THE REVENUE WITH IT AND HAS PASSED THE ENT IRE GROSS REVENUE ALONGWITH TDS APPORTIONED 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 CR EDITS IN THEIR RESPECTIVE CASES. EVEN IN THE CURRENT ASSESS MENT YEAR, IT WAS NOTICED THAT TAX APPORTIONMENT CERTIFICATE W AS ISSUED BY THE DEPARTMENT VIDE LETTER NO.PN/WD.3(4)/TC/07-08 D ATED 26.11.2008 OF THE ASSESSING OFFICER IN WHICH THE AS SESSING OFFICER HAS ALLOWED APPORTIONMENT 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 B Y IT. SIMILARLY, THERE HAS BEEN APPORTIONMENT TO EITHER O F THE TWO COMPANIES OR TO BOTH THE COMPANIES IN THE EARLIER Y EARS ALSO 15 ITA NOS.2200 & 2201/PN/2014 BY THE ASSESSING OFFICER FOR ENABLING THEM TO CLAIM TDS IN RESPECTIVE CASES. THE ASSESSEE, VIDE ITS SUBMISSIO N DATED 22.04.2010, FURNISHED THE DETAILS WHICH REVEALED TH AT GROSS REVENUE FROM THIS CONTRACT RECEIPTS BY JOINT VENTUR E WAS ACCOUNTED FOR IN CASE OF EITHER OR BOTH OF THE TWO COMPANIES WHO WERE MEMBERS OF THE JOINT VENTURE IN ALL ASSESS MENT 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 DONE IN THE PARTICULAR YEAR. HAVING EXPLAINED THE DIFFERENCE B ETWEEN CASES OF CONTRACT/SUB-CONTRACT, IN THE BACKGROUND O F CLAUSES OF THE AGREEMENT, THE ASSESSEE RELIED ON THE DECISI ON OF HON'BLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF CIT VS. AMBUJA DARLA KASHLOG MANGU TRANSPORT COOPERATIVE SO CIETY (2009) 227 CTR 299 (HP). 7. IN THE BACKGROUND OF THE TAX APPORTIONMENT CERTI FICATES ISSUED BY THE ASSESSING OFFICER, IT WAS STATED ON B EHALF 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 TH AT THE ASSESSING OFFICER HAS APPLIED HIS MIND AND CONSCIOU SLY ACCEPTED THE FACT THAT THE JOINT VENTURE AOP WAS FO R THE DISTRIBUTION OF RECEIPTS AMONGST ITS CONSTITUENTS I N PROPORTION OF THEIR WORK SHARING. THEREFORE, THERE WAS NO APP LICABILITY 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 APPLIC ABLE TO DOMESTIC COMPANIES, BEING JOINT VENTURE PARTNER IN THEIR INDIVIDUAL CAPACITY AND THE TAX RATES APPLICABLE TO THE AOP. HOWEVER, IN SUBMISSION DATED 21.10.2010, IT WAS EXP LAINED THAT TAX RATES IN THE CASE OF DOMESTIC COMPANY AND THE AOP WOULD BE THE SAME IN THIS CASE. THIS WAS DUE TO AP PLICABILITY OF SECTION 167B OF THE ACT. THE ASSESSEE ALSO FILE D DETAILS OF THE RETURNS OF INCOME OF THE TWO CORPORATE ENTITIES BEING JOINT VENTURE MEMBERS, ALONGWITH ACKNOWLEDGEMENTS OF THEI R 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 O F REVENUE TO THE MEMBERS WAS NOT TO TAKE ANY UNDUE BE NEFIT OF LOSSES INCURRED BY THEM. THEREFORE, IT WAS STATED THAT THERE WAS NO LOSS TO THE REVENUE AS A RESULT OF THIS METH OD ADOPTED 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 FAVOUR FRO M THE ASSESSING OFFICER. THE ASSESSEE HAS ALSO RAISED TH E ISSUE OF CONSISTENCY STATING THAT THE SAME METHOD WAS BEING ACCEPTED BY THE DEPARTMENT IN THE PAST 8 TO 10 YEAR S INCLUDING A.Y. 2007-08 IN WHICH TAX APPORTIONMENT C ERTIFICATE 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. AUTHORISED REPRESENTATIVE RELIED ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT (201 0) 228 CTR 582 (BOM.) AND ASSESSEE ALSO RELIED ON THE DECI SION OF THE HON'BLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS. CIT (1992) 193 ITR 321 (SC) WHEREIN IT WAS 16 ITA NOS.2200 & 2201/PN/2014 OBSERVED THAT STRICTLY SPEAKING THE PRINCIPLE OF RE S JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS SINCE EACH ASSESSMENT YEAR WAS A SEPARATE UNIT IN ITSELF AND W HAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR. IT WAS FURTHER CONTENDED THAT WHERE A FUNDAMENTAL ASPE CT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS H AS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HA VE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING TH E ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITI ON TO BE CHANGED IN A SUBSEQUENT YEAR. IT WAS ALSO CONTENDE D THAT HON'BLE KERALA HIGH COURT IN THE CASE OF MANJUNATH MOTOR SERVICE AND CANARA PUBLIC CONVEYANCES, 197 ITR 321 (KAR.) OBSERVED THAT METHOD ADOPTED BY THE ASSESSING OFFIC ER WOULD RESULT IN DOUBLE TAXATION OF THE SAME INCOME SINCE GROSS RECEIPTS DISTRIBUTED AMONGST THE TWO JOINT VE NTURE PARTNERS WAS INCLUDED AS RECEIPTS IN THEIR RESPECTI VE CASES AND THE JOINT VENTURE PARTNERS HAD ALSO UTILISED TH E TDS CREDITS ON THE BASIS OF APPORTIONMENT CERTIFICATE I SSUED BY THE ASSESSING OFFICER. IN VIEW OF THE ABOVE DISCUSSION , CIT(A) WAS JUSTIFIED IN HOLDING THAT IN ABSENCE OF ANY CON TRACT OR SUB- CONTRACT WORK BY JOINT VENTURE TO ITS MEMBER COMPAN IES, PROVISIONS OF SECTION 194C WERE NOT APPLICABLE FOR THE PURPOSE OF TDS. THE TWO CORPORATE ENTITIES FORMING JOINT VENTURE WERE ALREADY BEING ASSESSED SINCE A.Y. 2000 -01 ONWARDS ON THEIR RESPECTIVE SHARES AND TDS APPORTIO NMENT CERTIFICATES WERE ALSO ISSUED BY THE ASSESSING OFFI CER EVERY YEAR FOR THESE EIGHT YEARS INCLUDING THE CURRENT AS SESSMENT 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 EXPEN DITURE. THEREFORE, THERE WAS NO QUESTION OF ANY DISALLOWANC E UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. MO REOVER, DISALLOWANCE U/S. 40(A)(IA) MADE BY THE ASSESSING O FFICER 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 FORTIFIED BY THE DECISION OF THE ITAT PUNE BENCH IN ITO VS. RAJDEEP & PMCC INFRASTRUCTURE, 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 C ONDUIT BETWEEN THE MSRDC AND THE TWO PERSONS CONSTITUTING THIS AOP SO FAR AS THEIR SEPARATE, AND NEATLY IDENTIFIED , WORK AREAS ARE CONCERNED. A MERE EXISTENCE OF AN AOP CA NNOT LEAD TO TAXABILITY IN THE HANDS OF THE AOP UNLESS T HE AOP RECEIVES MONIES IN ITS OWN RIGHT. WE HAVE NOTED TH AT HON'BLE AUTHORITY OF ADVANCE RULINGS WAS IN SEISIN OF A MAT ERIALLY IDENTICAL 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 PAR T OF COMPOSITE CONTRACT AWARDED TO THE AOP, BUT THE TAXA BILITY OF INCOME FROM SUCH CONTRACT WAS HELD TO BE TAXABLE IN THE HANDS OF THE RESPECTIVE CONTRACTORS. WHILE HOLDING SO HON'BLE AUTHORITY FOR ADVANCE RULING OBSERVED AS FOLLOWS: 17 ITA NOS.2200 & 2201/PN/2014 '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 EA CH PARTY WILL BEAR ITS OWN LOSS AND RETAIN ITS PROFITS AS AN D WHEN SUCH PROFITS OR LOSS ARISE. HAVING REGARD TO THE AGREEME NT 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 ORDER TO CONSTITUTE AN AOP TH ERE WILL HAVE TO BE COMMON PURPOSE OR COMMON ACTION AND THE OBJECT OF THE ASSOCIATION MUST BE TO PRODUCE INCOME JOINTL Y. 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. B OTH HAVE AGREED TO EXECUTE THE JOB TOGETHER FOR BETTER CO-OP ERATION 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 TECH NICAL 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 APPLICANT'S SHARE OF WORK WAS V ALUED AT RS. 44,52,78,920 (17 PER CENT OF TOTAL VALUE). THE ASSOCIATION WITH THE HCC WAS NOT WITH THE OBJECT OF EARNING THI S INCOME BUT FOR CO ORDINATION IN EXECUTING THE CONTRACT SO THAT HCC COULD ALSO MAKE ITS OWN PROFIT. HHC'S WORK AND INCO ME ARISING THEREFROM WAS QUITE SEPARATE AND INDEPENDEN T OF THE APPLICANT'S WORK AND INCOME. IF THE COST INCURRED B Y THE HCC OR THE APPLICANT WAS MORE THAN THEIR INCOME, EACH P ARTY WILL HAVE TO BEAR ITS LOSS WITHOUT ANY ADJUSTMENT FROM T HE OTHER PARTY. THE ASSOCIATION OF THE PETITIONER COMPANY WI TH HCC WAS UNDOUBTEDLY FOR MUTUAL BENEFIT BUT SUCH ASSOCIA TION WILL NOT MAKE THEM A SINGLE ASSESSABLE UNIT AND LIABLE T O TAX AS AN AOP. FOR EXAMPLE, A BUILDING CONTRACTOR MAY ASSO CIATE WITH A PLUMBER AND AN ELECTRICIAN TO EXECUTE A BUIL DING 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 HAS A DESIGNED AND INDEPENDENT ROLE TO PLAY IN THE BUILDING PROJECT. I N THE INSTANT CASE, THE APPLICANT HAS STATED THAT THE APPLICANT H AS MADE ITS OWN ARRANGEMENT FOR EXECUTION OF WORK INDEPENDENT F ROM THAT OF HCC. THERE IS NO CONTROL OR CONNECTION BETWEEN T HE 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 IN COME-TAX. THE APPLICANT WILL BE LIABLE TO BE TAXED AS A SEPAR ATE 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. 18 ITA NOS.2200 & 2201/PN/2014 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. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 3. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF REVENUE. 4. FACTS BEING SIMILAR, SO FOLLOWING SAME REASONING WE ARE NOT INCLINED TO INTERFERE WITH THE FINDING OF THE CIT(A) WHO HAS RIGHTLY HELD THAT THERE IS NO QUESTION OF DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT. SAME IS UPHELD. 7. BEFORE US, REVENUE HAS NOT POINTED OUT ANY DISTI NGUISHABLE FEATURES IN THE FACTS OF THE PRESENT CASE AND THAT OF ASSESSMENT YE AR 2009-10 NOR HAS CONTROVERTED THE FINDINGS OF LD. CIT(A). IN VIEW O F THESE FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THUS THI S GROUND OF REVENUE IS DISMISSED. ITA NO.2201/PN/2014 (FOR A.Y. 2011-12) : 8. SINCE BOTH THE PARTIES HAVE ADMITTED THAT THE FA CTS OF THE PRESENT CASE IN THE YEAR UNDER APPEAL ARE IDENTICAL TO ASSESSMENT YEAR 2010-11, WE THEREFORE FOLLOWING THE SAME REASONING GIVEN WHILE DECIDING THE APPEAL FOR ASSESSMENT YEAR 2010-11 HEREINABOVE AND FOR SIMILAR REASONS DISMISS THE GRO UND OF REVENUE. 9. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED ON THIS 7 TH DAY OF OCTOBER, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER PUNE ; DATED : 7 TH OCTOBER, 2016. 19 ITA NOS.2200 & 2201/PN/2014 & ' (!)* +*! / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-II, PUNE; 4) THE CIT-II, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. & / BY ORDER , ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* , / ITAT, PUNE