Income-tax Officer, V. M/s. Shraddha & IHP JV Wangana Project, Pune

ITA 36/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9222 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 08-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Keywords: Rule of consistency; Advance ruling; Relationship of principal and agent
• Section: 194C; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E . , , ! ' , # $ BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AW ASTHY, JM . / ITA NO. 35/PUN/2016 #& ' (' / ASSESSMENT YEAR: 2012-13 THE INCOME TAX OFFICER, WARD 3(1), PUNE. ....... / APPELLANT & / V/S. M/S. SHRADDHA & PRASAD JV KHURA VARODA SHRADDHA HOUSE 1206/1/1, PLOT NO. 887A, SHIROLE ROAD, PUNE-411 004 PAN : ABGFS6231A / RESPONDENT . / ITA NO. 36/PUN/2016 #& ' (' / ASSESSMENT YEAR: 2012-13 THE INCOME TAX OFFICER, WARD 3(1), PUNE. ....... / APPELLANT & / V/S. M/S. SHRADDHA & IHP JV WANGANA PROJECT, SHRADDHA HOUSE, 1206/1/1, PLOT NO. 887-A, SHIROLE ROAD, PUNE-411 004 PAN : AACAS5183M / RESPONDENT 2 ITA NOS. 35 & 36 /PUN/2016 A.Y. 2012-13 REVENUE BY : DR. VIVEK AGGARWAL ASSESSEE BY : SHRI KISHORE PHADKE / DATE OF HEARING : 28.02.2018 / DATE OF PRONOUNCEMENT : 28.02.2018 ) / ORDER PER VIKAS AWASTHY, JM THESE TWO APPEALS BY THE DEPARTMENT AGAINST TWO DIFFERE NT ASSESSES ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-3, PUNE FOR THE ASSESSMENT YEAR 2012-13 IN THE CASE OF RESPECT IVE ASSESSEES. BOTH THE IMPUGNED ORDERS ARE DATED 12.10.2015. SINCE, THE ISSUES INVOLVED IN BOTH THE APPEALS ARE IDENTIC AL, THESE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION AND ARE DISPOSED OF VIDE THIS COMMON ORDER. FOR THE SAKE OF CONVENIENCE, FACTS ARE T AKEN FROM ITA NO. 35/PUN/2016. ITA NO. 35/PUN/2016 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM THE REC ORDS ARE: THE ASSESSEE IS A JOINT VENTURE OF M/S. SHRADDHA ENERGY INFR APROJECTS PVT. LTD. AND PRASAD & COMPANY LTD. THE ASSESSEE JV WAS FORMED AS SPECIAL PURPOSE OF VEHICLE FOR MAKING A BID FOR CONSTRUCTION OF DAM AT CHART HANE FOR KHURA- VARODA SINCHAN YOJANA. THE WORK WAS ALLOTTED TO THE ASS ESSEE. THE ASSESSEE RECEIVED RS. 38 CRORES AS CONTRACT CHARGES. THE CONTRA CT CHARGES WERE DISTRIBUTED BETWEEN THE CONSTITUENT MEMBERS OF JV I.E. THE ASSESSEE, FOR EXECUTING THE WORK. THE ASSESSEE FOR THE IMPUGNED ASSES SMENT YEAR FILED ITS RETURN OF INCOME ON 01.08.2012 DECLARING TOTAL INCOME AS NIL. THE CA SE OF THE 3 ITA NOS. 35 & 36 /PUN/2016 A.Y. 2012-13 ASSESSEE WAS SELECTED FOR SCRUTINY. DURING THE COURSE O F SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER DISALLOWED RS.38 CRORES PAID BY ASSESSEE TO ITS MEMBERS U/S. 40(A)(IA) OF THE INCOME TAX ACT, 1961 ( H EREINAFTER REFERRED TO AS THE ACT). 3. AGGRIEVED BY THE ASSESSMENT ORDER DATED 24.11.2014, T HE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) BY FOLLOWING THE ORDER OF TRIBUNAL IN T HE CASE OF ASSESSEES SISTER CONCERN, M/S. SHRADDHA & MAHALAXMI JOIN T VENTURE IN ITA NO. 942/PN/2013, DECIDED ON 28.11.2014, WHEREIN IDENTICAL ISS UES WERE INVOLVED GRANTED RELIEF TO THE ASSESSEE. AGAINST THE FINDIN GS OF COMMISSIONER OF INCOME TAX (APPEALS), THE DEPARTMENT IS IN APPEAL BEFORE THE TRIBU NAL. 4. DR. VIVEK AGGARWAL REPRESENTING THE DEPARTMENT VEHEME NTLY SUPPORTING THE ORDER OF ASSESSING OFFICER SUBMITTED THAT TDS WAS DEDUCTED IN THE NAME OF JOINT VENTURE AND BOTH THE CONSTITUENT MEM BERS OF JV SHARED THE RECEIPTS. EVEN IF MEMBERS OF JV HAVE SHOWN PROFITS ARISING F ROM JOINT VENTURE BUSINESS IN THEIR RESPECTIVE RETURNS OF INCOME, THEY WERE REQUIRED TO FOLLOW MANDATORY PROVISIONS OF RULE 37BA OF THE INCOME TAX RULE S TO GET THEIR NAME SUBSTITUTED IN THE TDS CERTIFICATE. 5. ON THE OTHER HAND, SHRI KISHORE PHADKE APPEARING ON B EHALF OF ASSESSEE SUBMITTED THAT THE CO-ORDINATE BENCH IN ASSES SEES OWN CASE IN IMMEDIATELY PRECEDING ASSESSMENT YEARS I.E. ITA NOS. 1957 & 1958/PN/2014 FOR ASSESSMENT YEARS 2010-11 & 2011-12 DECIDED ON 29.0 7.2016 HAS CONFIRMED THE DELETION OF DISALLOWANCE U/S.40(A)(IA) OF THE ACT UN DER SIMILAR CIRCUMSTANCES. THE LD. AR FURNISHED COPY OF ORDER OF TRIBUN AL DATED 29.07.2016 IN THE AFORESAID APPEALS. 4 ITA NOS. 35 & 36 /PUN/2016 A.Y. 2012-13 6. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BELOW PERU SED. THE ISSUE INVOLVED IN THE PRESENT APPEAL BY THE DEPARTMENT IS WITH REGARD TO NON DEDUCTION OF TDS U/S. 194C OF THE ACT IN RESPECT OF PAYM ENTS MADE BY ASSESSEE JOINT VENTURE TO ITS MEMBERS. WE FIND THAT IDENT ICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN IMMEDIATE LY PRECEDING ASSESSMENT YEAR. THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER : 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORDS. IN THE FACTS OF THE PRESENT CASE, THE ISSUE ARISING BEFORE US IS IN RELATION TO APPLICATION OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE ASS ESSEE AOP HAD RECEIVED CONTRACT FROM THIRD PARTY WHICH, IN TURN, WAS EXECU TED BY ONE OF THE MEMBERS AOP. THE PLEA OF THE ASSESSEE AOP WAS THAT IT WAS C ONSTITUTED FOR OBTAINING WORK AND RECEIVING PAYMENTS AGAINST THE SAID WORK D ONE BY THE CONSTITUENTS OF THE AOP AND THE SAID PAYMENT WAS TO BE DISTRIBUTED IN THE AGREED RATIO BETWEEN THE TWO MEMBERS OF THE AOP FOR CARRYING OUT THE WORK. THE TRUE RATIO IN THE INSTANT CASE IS 1:0. SUCH ASSIGNMENTS OF THE WO RK TO THE MEMBERS AS PER THE MEMORANDUM OF UNDERSTANDING AGREED UPON IS NOT EQUI VALENT TO SUB- CONTRACT PER SE AND THUS THE ASSESSEE AOP WAS NOT LIABLE TO DEDUCT TAX AT SOURCE OUT OF THE AMOUNT DISTRIBUTED AMONGST THE MEMBERS OF THE A OP IN THE AGREED RATIO OF RESPECTIVE SHARE. THE ASSESSING OFFICER, WHILE DECI DING THE CHARGEABILITY OF INCOME IN THE HANDS OF THE ASSESSEE DID OBSERVE THA T IN THE CASE OF M/S. SWAPNALI RDS JOINT VENTURE (SUPRA), SIMILAR ADDITIO N UNDER SECTION 40(A)(IA) HAS BEEN MADE FOR THE ASSESSMENT YEAR 2008-09 WHICH HAS BEEN DELETED BY THE PUNE BENCH OF THE TRIBUNAL. HOWEVER, THE DEPARTMENT HAS NOT ACCEPTED THE ORDER OF THE TRIBUNAL AND TO KEEP THE ISSUE ALIVE, THE AMOUNT PAID BY THE AOP TO ITS MEMBER WITHOUT DEDUCTION OF TAX IS DISALLOWED A ND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE IN TERMS OF SECTION 40(A)(IA ) OF THE ACT. WE NOTICE THAT IN THE IDENTICAL FACTS AND CIRCUMSTANCES, THE CO- ORDI NATE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. SHRADDHA & MAHALAXMI JOINT VENT URE AND OTHERS (SUPRA) AFTER MAKING REFERENCE TO SEVERAL JUDICIAL PRECEDEN TS INCLUDING M/S. SWAPNALI RDS JOINT VENTURE (SUPRA) HAS AFFIRMED THE VIEW TAK EN BY THE CIT(A) AND DECIDED AGAINST THE REVENUE. 10.1 THE RELEVANT FINDINGS OF THE ORDER OF THE CO-O RDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. SHRADDHA & MAHALAXMI JOINT V ENTURE AND OTHERS (SUPRA) IS REPRODUCED HEREUNDER FOR READY REFERENCE :- 10.WE HAVE HEARD THE RIVAL AND PERUSED THE RECORDS . IN THE FACTS OF THE PRESENT CASE, THE ISSUE ARISING BEFORE US IS IN REL ATION TO THE APPLICATION OF PROVISIONS OF SECTION 40A(IA) OF THE ACT. THE AS SESSEE AOP HAD RECEIVED CONTRACTS FROM THIRD PARTY WHICH, IN TURN, WAS EXEC UTED BY THE TWO MEMBERS OF AOP. THE PLEA OF THE ASSESSEE AOP WAS TH AT IT WAS CONSTITUTED FOR OBTAINING WORK AND RECEIVING PAYMEN TS AGAINST THE SAID WORK DONE BY THE CONSTITUENTS OF THE AOP AND THE SA ID PAYMENT WAS TO BE DISTRIBUTED IN THE AGREED RATIO BETWEEN 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 5 ITA NOS. 35 & 36 /PUN/2016 A.Y. 2012-13 TO SUB-CONTRACT AND AS SUCH THE ASSESSEE AOP WAS NO T LIABLE TO DEDUCT TAX AT SOURCE OUT OF THE AMOUNT DISTRIBUTED AMONGST THE MEMBERS OF THE AOP IN THE AGREED RATIO OF SHARE. THE ASSESSING OFF ICER, WHILE DECIDING THE ISSUE IN THE HANDS OF THE ASSESSEE, HAD GIVEN A N OFFICE NOTE TO THE EFFECT THAT IN THE CASE OF M/S. SWAPNALI RDS JOINT VENTURE (SUPRA), SIMILAR ADDITION UNDER SECTION 40(A)(IA) OF THE ACT HAS BEEN MADE FOR THE ASSESSMENT YEAR 2008-09 WHICH HAS BEEN DELETED BY T HE CIT(A)-II, PUNE. DEPARTMENT HAS FILED APPEAL AGAINST THIS ORDER TO I TAT AND THE MATTER IS PENDING BEFORE ITAT. TO KEEP THE ISSUE ALIVE IN OTH ER CASES ALSO, THE SIMILAR ADDITION IS BEING MADE IN THIS CASE ALSO. T HE FACTS AND CIRCUMSTANCES ARISING IN THE PRESENT APPEAL ARE IDE NTICAL 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. 200 6-07 IN THE CASE OF ITO VS. GAMMON PROGRESSIVE-JV, WHEREIN VIDE PARAS 5 TO 9 THE TRIBUNAL DECIDING SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE BY DISMISSING THE APPEAL OF THE REVENUE, HAS HELD AS U NDER: 5. AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THE FIRST ISSUE IS REGARDIN G STATUS OF THE ASSESSEE. THE ASSESSING OFFICER HAS MENTIONED T HE STATUS AS FIRM. HOWEVER, IN THE EXPLANATION GIVEN, THE ASSESSEE HAS MADE IT CLEAR THAT THE STATUS IN WHICH THE RETURNS WAS FILED WAS THAT OF AN AOP. IT WAS EXPLAI NED THAT IN THE RETURNS OF INCOME SINCE BEGINNING TILL THE A .Y. 2006- 07, THE STATUS WAS MENTIONED AS AOP ONLY, I.E., WHE N THE RETURNS WERE FILED MANUALLY. HOWEVER, FROM A.Y. 200 7-08, WHEN ELECTRONIC FILING HAD TO BE DONE, DUE TO COMPU TER ERROR THE STATUS APPEARED AS FIRM ON THE ITR ACKNOWLEDG EMENT, 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 ASSE SSEE 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 SH OWN AS AOP. THE CIT(A) NOTICED FROM THE RECORD THAT STATUS WAS SHOWN AS AOP. HOWEVER, IT WAS NOT VERY MUCH RELEVAN T FOR THE PURPOSE OF APPLICABILITY OF PROVISIONS OF SECTI ON 194C SINCE TDS PROVISIONS ARE APPLICABLE TO ALL ENTITIES EXCEPT INDIVIDUALS AND HUF HAVING GROSS RECEIPTS OR TURNOV ER 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 CON TRACT WORK BUT WERE MERELY FORMED FOR OBTAINING CONTRACT WORK AND FOR RECEIVING THE PAYMENT, WHICH WAS IMMEDIATEL Y DISTRIBUTED IN THE RATIO OF THE SHARE OF THE WORK D ONE. THE ACTUAL SHARE IN THE JOINT VENTURE OF THE TOTAL WORK ALLOCATED 6 ITA NOS. 35 & 36 /PUN/2016 A.Y. 2012-13 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 JOINT VENTURE REVEALS NOTHING BUT APPORTIONM ENT OF CONTRACT RECEIPTS, ASSETS AND LIABILITIES BETWEEN T HE MEMBERS. THERE WAS NO EXPENDITURE BOOKED IN THE CON TRACT ACCOUNT NOR ANY PROFIT AND LOSS ACCOUNT PREPARED FO R THE PURPOSE SINCE THERE DID NOT ARISE ANY PROFIT OR LOS S TO THE ASSESSEE PER SE. THE JOINT VENTURE TRANSFERRED NOT ONLY THE GROSS REVENUE BUT ALSO THE CORRESPONDING TDS TO ITS MEMBERS IN THE RATIO OF THEIR WORK DONE BY INDIVIDU AL MEMBERS FOR WHICH THE APPOINTMENT CERTIFICATE WAS D ULY ISSUED EVERY YEAR BY THE ASSESSING OFFICER. IN THIS BACKGROUND IT WAS SUBMITTED THAT THERE WAS NO RELATIONSHIP OF CONTRACTOR AND SUB-CONTRACTOR BETWE EN THE JOINT VENTURE AND ITS TWO MEMBERS. THEREFORE, 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 CERTIFICATES WHO HAVE AC COUNTED FOR THE CORRESPONDING CONTRACT REVENUE IN THEIR RES PECTIVE RETURNS. IT WAS ALSO SUBMITTED THAT NIL INCOME AR ISING IN THE HANDS OF THE AOP IS CONFIRMED BY THE ACTION OF THE ASSESSING OFFICER IN NOT ASSESSING ANY PROFIT/INCOM E ARISING FROM THE CONTRACT APART FROM THIS DISALLOWA NCE U/S. 40(A)(IA) OF THE ACT. THE ASSESSEE VIDE ITS SUBMISS IONS DATED 26.03.2010 AND 06.09.2010, EXPLAINED THE DIFFERENCE BETWEEN REVENUE SHARING ARRANGEMENT ENTE RED INTO BY THE JOINT VENTURE VIS-A-VIS SUBCONTRACT. IT WAS EXPLAINED ON BEHALF OF THE ASSESSEE THAT IN THE CAS E OF SUB- CONTRACT, 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-CONTR ACTING, THE CONTRACTOR RETAINS HIS SHARE OF PROFIT ALONGWITH TH E TDS AND ONLY THE BALANCE IS PASSED ON TO SUBCONTRACTOR. BUT IN JOINT VENTURE, ASSESSEES DID NOT RETAIN ANY SHARE IN THE REVENUE WITH IT AND HAS PASSED THE ENTIRE GROSS REVENUE ALO NGWITH TDS APPORTIONED FOR THEM. IT WAS SUBMITTED THAT THE DEPARTMENT HAS ALSO ISSUED TAX APPORTIONMENT CERTIFI CATES EVERY YEAR DURING THE PAST EIGHT YEARS TO ENABLE TH E TWO MEMBERS TO CLAIM THE TDS CREDITS IN THEIR RESPECTIV E CASES. EVEN IN THE CURRENT ASSESSMENT YEAR, IT WAS NOTICED THAT TAX APPORTIONMENT CERTIFICATE 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 AS SESSING OFFICER HAS ALLOWED APPORTIONMENT OF ENTIRE TDS OF RS.9,26,588/- DURING THE YEAR TO M/S.GAMMON INDIA LT D., SINCE ENTIRE WORK DURING THE YEAR WAS CARRIED OUT B Y IT. SIMILARLY, THERE HAS BEEN APPORTIONMENT TO EITHER OF THE TWO COMPANIES OR TO BOTH THE COMPANIES IN THE EARLIER Y EARS ALSO BY THE ASSESSING OFFICER FOR ENABLING THEM TO CLAIM 7 ITA NOS. 35 & 36 /PUN/2016 A.Y. 2012-13 TDS IN RESPECTIVE CASES. THE ASSESSEE, VIDE ITS SUB MISSION DATED 22.04.2010, FURNISHED THE DETAILS WHICH REVEA LED THAT GROSS REVENUE FROM THIS CONTRACT RECEIPTS BY J OINT 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 2008-09. IT WAS FUR THER 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 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 M ANGU TRANSPORT COOPERATIVE SOCIETY (2009) 227 CTR 299 (H P). 7. IN THE BACKGROUND OF THE TAX APPORTIONMENT CERTIF ICATES 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 VENTUR E AS WELL AS TO THEIR RESPECTIVE ASSESSING OFFICERS, WHICH SH OWS THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND AND CONS CIOUSLY 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 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 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 EXPLAINED THAT TAX RATES IN THE CASE OF DOMESTIC CO MPANY AND THE AOP WOULD BE THE SAME IN THIS CASE. THIS WA S DUE TO APPLICABILITY OF SECTION 167B OF THE ACT. THE AS SESSEE ALSO FILED DETAILS OF THE RETURNS OF INCOME OF THE TWO CORPORATE ENTITIES BEING JOINT VENTURE MEMBERS, ALO NGWITH ACKNOWLEDGEMENTS OF THEIR I.T. RETURNS, WHICH REVEA LED THAT BOTH OF THEM HAD HUGE POSITIVE RETURNED INCOMES EVE RY YEAR. FOR THIS PAYMENT THE STAND OF THE ASSESSEE WA S THAT THE METHOD OF APPORTIONMENT OF REVENUE TO THE MEMBE RS WAS NOT TO TAKE ANY UNDUE BENEFIT OF LOSSES INCURRE D BY THEM. THEREFORE, IT WAS STATED THAT THERE WAS NO LO SS TO THE REVENUE AS A RESULT OF THIS METHOD ADOPTED BY THE A SSESSEE OF SHARING THE GROSS REVENUE BY ITS MEMBERS, WHICH WAS TAXED IN THEIR HANDS. HOWEVER, THIS EXPLANATION OF THE ASSESSEE DID NOT FIND FAVOUR FROM THE ASSESSING OFF ICER. THE ASSESSEE HAS ALSO RAISED THE ISSUE OF CONSISTEN CY 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. IT WAS CONTENDED THAT THIS ASPECT HAS NOT B EEN CONSIDERED IN THE ASSESSMENT ORDER U/S.143(3) FOR A .Y. 2007-08. ON THE PRINCIPLE OF CONSISTENCY, THE LD. 8 ITA NOS. 35 & 36 /PUN/2016 A.Y. 2012-13 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 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 PARTI ES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLE NGING 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 CAS E OF MANJUNATH MOTOR SERVICE AND CANARA PUBLIC CONVEYANC ES, 197 ITR 321 (KAR.) OBSERVED THAT METHOD ADOPTED BY THE ASSESSING OFFICER WOULD RESULT IN DOUBLE TAXATION O F THE SAME INCOME SINCE GROSS RECEIPTS DISTRIBUTED AMONGS T THE TWO JOINT VENTURE PARTNERS WAS INCLUDED AS RECEIPTS IN THEIR RESPECTIVE CASES AND THE JOINT VENTURE PARTNERS HAD ALSO UTILISED THE TDS CREDITS ON THE BASIS OF APPORTIONM ENT CERTIFICATE ISSUED BY THE ASSESSING OFFICER. IN VIE W OF THE ABOVE DISCUSSION, CIT(A) WAS JUSTIFIED IN HOLDING T HAT IN ABSENCE OF ANY CONTRACT OR SUB-CONTRACT WORK BY JOI NT VENTURE TO ITS MEMBER COMPANIES, PROVISIONS OF SECT ION 194C WERE NOT APPLICABLE FOR THE PURPOSE OF TDS. TH E TWO CORPORATE ENTITIES FORMING JOINT VENTURE WERE ALREA DY BEING ASSESSED SINCE A.Y. 2000-01 ONWARDS ON THEIR RESPEC TIVE SHARES AND TDS APPORTIONMENT CERTIFICATES WERE ALSO ISSUED BY THE ASSESSING OFFICER EVERY YEAR FOR THES E EIGHT YEARS INCLUDING THE CURRENT ASSESSMENT YEAR TO ENAB LE THEM TO CLAIM THE SAME IN THEIR OWN CASES. MOREOVER , THERE WAS NO PROFIT AND LOSS ACCOUNT IN THE ASSESSEES CA SE AND THERE WAS NO CLAIM OF ANY EXPENDITURE. THEREFORE, T HERE WAS NO QUESTION OF ANY DISALLOWANCE UNDER THE PROVI SIONS OF SECTION 40(A)(IA) OF THE ACT. MOREOVER, DISALLOW ANCE U/S. 40(A)(IA) MADE BY THE ASSESSING OFFICER CANNOT BE SUSTAINED. IN EFFECT, THE METHOD ADOPTED BY THE ASS ESSING OFFICER WILL ALSO RESULT IN DOUBLE TAXATION OF THE SAME CONTRACT REVENUE WHICH IS IN VIOLATION OF THE KARNA TAKA 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 TH AT 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 CAN NOT LEAD TO TAXABILITY IN THE HANDS OF THE AOP UNLESS T HE AOP 9 ITA NOS. 35 & 36 /PUN/2016 A.Y. 2012-13 RECEIVES MONIES IN ITS OWN RIGHT. WE HAVE NOTED THA T HON'BLE AUTHORITY OF ADVANCE RULINGS WAS IN SEISIN OF A MATERIALLY IDENTICAL SITUATION IN THE CASE OF VAN O ORD ACZ BV IN RE(248 ITR 399) IN WHICH TWO CONTRACTORS JOIN ED HANDS FOR CARRYING OUT NEATLY IDENTIFIED SEPARATE W ORK WHICH WAS A PART OF COMPOSITE CONTRACT AWARDED TO T HE AOP, BUT THE TAXABILITY OF INCOME FROM SUCH CONTRAC T WAS HELD TO BE TAXABLE IN THE HANDS OF THE RESPECTIVE CONTRACTORS. WHILE HOLDING SO HON'BLE AUTHORITY FOR ADVANCE RULING 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 PR OFITS OR LOSS. THEY HAVE SPECIFICALLY PROVIDED IN THE AGREEM ENT THAT EACH PARTY WILL BEAR ITS OWN LOSS AND RETAIN ITS PR OFITS AS AND WHEN SUCH PROFITS OR LOSS ARISE. HAVING REGARD TO THE AGREEMENT WE ARE OF THE VIEW THAT THE APPLICANT CAN NOT 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 PURP OSE OR COMMON ACTION AND THE OBJECT OF THE ASSOCIATION MUS T BE TO PRODUCE INCOME JOINTLY. IT IS NOT ENOUGH THAT THE P ERSONS 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 SEPARATE LY. 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 THE CONTRACT WILL BE EXECUTED BY HCC. THE TOTAL VALUE O F THE CONTRACT WAS RS. 2,62,01,03,120. THE APPLICANT'S SH ARE OF WORK WAS VALUED AT RS. 44,52,78,920 (17 PER CENT OF TOTAL VALUE). THE ASSOCIATION WITH THE HCC WAS NOT WITH T HE OBJECT 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 AN D INCOME. IF THE COST INCURRED BY THE HCC OR THE APPL ICANT WAS MORE THAN THEIR INCOME, EACH PARTY WILL HAVE TO BEAR ITS LOSS WITHOUT ANY ADJUSTMENT FROM THE OTHER PART Y. 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 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 DESI GNED AND INDEPENDENT ROLE TO PLAY IN THE BUILDING PROJEC T. IN THE INSTANT CASE, THE APPLICANT HAS STATED THAT THE APP LICANT 10 ITA NOS. 35 & 36 /PUN/2016 A.Y. 2012-13 HAS MADE ITS OWN ARRANGEMENT FOR EXECUTION OF WORK INDEPENDENT FROM THAT OF HCC. THERE IS NO CONTROL O R CONNECTION BETWEEN THE WORK DONE BY THE APPLICANT A ND 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 SEPARATE AND INDEPENDENT ENTITY. THE QUESTION NO.1 IS ANSWER ED 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. 9.IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS 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. 11. SINCE THE FACTS ARE, MUTATIS MUTANDIS, IDENTICA L TO THE FACTS AND ISSUE DECIDED BY THE TRIBUNAL IN M/S. SWAPNALI RDS JOINT VENTURE (SUPRA), THEREFORE, FOLLOWING THE PARITY OF REASONING, WE UP HOLD THE ORDER OF THE CIT(A). CONSEQUENTLY, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 10.2 RESPECTFULLY FOLLOWING THE DECISION OF THE CO- ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. SHRADDHA & MAHALAXM I JOINT VENTURE AND OTHERS (SUPRA), WE ARE INCLINED TO HOLD AGAINST THE REVENUE. WE SIMULTANEOUSLY FIND THAT THE CASE OF THE ASSESSEE IS FULLY SUPPORT ED BY CBDT CIRCULAR NO.07/2016 (SUPRA) AND JUDICIAL OPINIONS EXPRESSED IN THE CASE OF SMSL- UANRCL (JV) (SUPRA) AND LINDE AG, LINDE ENGINEERING DIVISION AND ANR. (SUPRA). 10.3 WE ALSO SIMULTANEOUSLY TAKE AFFIRMATIVE NOTE O F THE ARGUMENT ON BEHALF OF THE ASSESSEE THAT RIGOURS OF SECTION 40(A)(IA) A RE DILUTED IN THE FACTS OF THE CASE SINCE THE PAYEE HAS ADMITTEDLY FILED ITS RETUR N OF INCOME DISCLOSING THE IMPUGNED RECEIPTS AND INCOME EARNED BY IT EMBEDDED IN THE RECEIPT HAS BEEN DULY OFFERED FOR TAXATION. IN THIS VIEW OF THE MAT TER, THE ASSESSEE JOINT VENTURE CANNOT BE TREATED AS ASSESSEE IN DEFAULT IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ANSAL LAND MARK TOW NSHIP (P.) LTD. (SUPRA) AND THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUN AL IN THE CASE OF ITO VS. SHRI CHANDRAKANT J. MANDALE (SUPRA). THUS, SEEN FROM AN Y ANGLE, WE FIND NO 11 ITA NOS. 35 & 36 /PUN/2016 A.Y. 2012-13 INFIRMITY IN THE ORDER OF THE CIT(A). ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED. 7. BOTH THE SIDES ARE UNANIMOUS IN STATING THAT THE ISSUE S INVOLVED IN THE PRESENT APPEAL ARE IDENTICAL. THEREFORE, IN THE LIGHT OF DEC ISION OF CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECED ING ASSESSMENT YEARS, THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) A RE UPHELD AND APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 36/PUN/2016 8. THE FACTS IN THE PRESENT APPEAL ARE UNDISPUTEDLY SIMILAR TO THE FACTS IN ITA NO.35/PUN/2016. THE LD. AR HAS PLACED ON RECORD A CO PY OF ORDER OF TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.2200 & 2201/PN /2014 FOR ASSESSMENT YEARS 2010-11 AND 2011-12 DECIDED ON 07.10 .2016 WHEREIN ON IDENTICAL SET OF FACTS, THE APPEAL OF THE REVENUE WAS DISMISSED. FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUN AL IN ASSESSEES OWN CASE IN PRECEDING ASSESSMENT YEARS, THE IMPUGNED ORDER IS UPHELD AND APPEAL OF THE REVENUE IS DISMISSED. 9. IN THE RESULT, BOTH THE APPEALS FILED BY REVENUE ARE DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 28 TH DAY OF FEBRUARY, 2018. SD/- SD/- ( . / D. KARUNAKARA RAO ) ( ! ' /VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; !' / DATED : 28 TH FEBRUARY, 2018 SB 12 ITA NOS. 35 & 36 /PUN/2016 A.Y. 2012-13 ) * +#,-! .!(, / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS)-3, PUNE. 4. THE PR. CIT-2, PUNE. 5. %&' () , * () , + +,- , / DR, ITAT, B BENCH, PUNE. 6. './ 01 / GUARD FILE. // % // TRUE COPY// *2 / BY ORDER, 3 (- / PRIVATE SECRETARY * () , / ITAT, PUNE.