M/s Transstroy(India)Limited, Hyderabad V. The ITO, Ward-2(2), Guntur

ITA 540/VIZ/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50295 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 17-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TH L PETER
• Keywords: Advance ruling; Benefit of exemption

Judgement Text

ITA NO540/V/2009 M/S. TRANSSTORY (INDIA) LTD., GUNTU R. 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 540 /VIZAG/ 20 09 ASSESSMENT YEAR : 2006 - 07 M/S. TRANSSTORY (I NDIA) LTD. GUNTUR VS. ITO WARD - 2(2) GUNTUR (APPELLANT) (RESPONDENT) PAN NO.AABCT 4226B APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI TH.L. PETER, CIT(DR) ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) ON A SOLITARY GROUND THAT CIT(A) HAS ERRED I N DENYING THE DEDUCTION U/S 80IA ELIGIBLE TO THE ASSESSEE IN RESPECT OF THE WORKS EXECUTED BY IT FOR GOVERNMENT OF KARNATAKA AND GOVERNMENT OF ANDHRA PR ADESH. 2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND DOCUMENTS PLACED ON RE CORD. THE FACTS IN BRIEF BORNE OUT FROM THE ORDERS OF THE LOWER AUTHORITIES ARE THAT ASSESSEE IS A COMPANY AND IT FORMED JOINT VENTURE NAMED NAVAYUGA TRANSTOY (JV) (HEREIN AFTER TO BE REFERRED AS J.V.) WHICH BID FOR THE CONTRACT. THE IRRIGATION DEPARTMENT OF ANDHRA PRADESH AWARDED THE CONTRACT T O JV, WHICH BECAME ENTITLED TO EXECUTE WORKS WORTH RS.664.50 CRORES. AS PER THE TERMS OF THE JV, THE ASSESSEE WAS TO EXECUTE 40% OF THE WORK IN NAVAYUGA, THE OTHER CONSTITUENT PARTNER WAS TO EXECUTE 60% OF THE WORKS AWARDED. THE ASSESSEE WAS THEREFORE TO EXECUTE WORK WORTH RS. 265.80 CROR ES, OUT OF WHICH WORKS VALUED AT RS.18.12 CRORES WERE EXECUTED DURING THE A.Y. 2006-07. BOTH THE CONSTITUENT PARTNERS OF THE JV RAISED BILLS ON THE JV FOR QUANTITY OF WORK AS CERTIFIED BY TECHNICAL CONSULTANT APPOINTED BY THE STATE GOVERNMENT. THE JV IN TURN RAISED A CONSOLIDATED BILL ON THE IRRIGATIO N DEPARTMENT OF ANDHRA PRADESH GOVERNMENT WITHOUT MAKING ANY ADDITIONS. T HE DEPARTMENT MAKES ITA NO540/V/2009 M/S. TRANSSTORY (INDIA) LTD., GUNTU R. 2 THE PAYMENTS TO THE JV, WHICH SHARES THE PAYMENT IN ACCORDANCE WITH THE BILLS RAISED BY EACH. THE JV FILES ITS INCOME TAX RETURNS SEPARATELY BUT DOES NOT CLAIM ANY DEDUCTION U/S 80IA(4) THEREIN. 3. THE ASSESSEE HAD ALSO FORMED A CONSORTIUM ALONG WITH ONE M/S. CORPORATION TRANSTROY, OJSC, MOSCOW, WITH THE UNDER STANDING THAT THE ASSESSEE WOULD EXECUTE 100% OF THE WORKS WHICH WERE AWARDED TO THE CONSORTIUM BY KSHIP, A BODY OF THE GOVERNMENT OF KA RNATAKA. DURING THE YEAR ASSESSEE EXECUTED WORKS VALUED WORTH RS.31.09 CRORES. THE ASSESSEE CLAIMED DEDUCTION U/S 80IA(4) ON THE PROFITS DERIVE D OUT OF THE AFORESAID WORKS. BUT IT WAS DISALLOWED BY THE ASSESSING OFFI CER ON THE GROUND THAT THE WORK WAS NOT AWARDED TO THE ASSESSEE. 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) WITH THE SUBMISSION THAT THE JOINT VENTURE OR THE CONSORTIUM WAS FORMED ONLY WITH AN OBJECT TO OBTAIN A CONTRACT FROM THE GOVERNMENT BUT IN FACT THE WORK WAS EXECUTED BY THE CONSTITUENTS OF THE JV I.E. THE ASS ESSEE AND THE OTHER CONSTITUENT. THE DEDUCTION U/S 80IA(4) IS TO BE AL LOWED TO THOSE ENTERPRISES WHO ARE ENGAGED IN THE BUSINESS OF DEVELOPING, MAIN TAINING AND OPERATING ANY INFRASTRUCTURE FACILITY. THE OTHER CONDITIONS LAID DOWN U/S 4A OF SECTION 80IA ARE FULFILLED IN THE INSTANT CASE. THEREFORE, THE ASSESSEE IS ENTITLED FOR DEDUCTIONS ON PROFIT EARNED FROM THE AFORESAID ACTI VITIES. 5. THE CIT(A) RE-EXAMINED THE ISSUE BUT WAS NOT CON VINCED WITH THE ASSESSEES EXPLANATIONS AND HE CONFIRMED THE DISALL OWANCE MADE BY THE A.O. 6. NOW THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT THE JV OR THE CONSORTIUM HAS NOT OF FERED ANY INCOME/PROFIT OUT OF THE WORK CONTRACT AWARDED TO IT AND ALSO DID NOT CLAIM ANY DEDUCTION U/S 80IA OF THE ACT. THE LD. COUNSEL FOR THE ASSES SEE FURTHER CONTENDED THAT DEDUCTION U/S 80IA IS TO BE ALLOWED TO THOSE ENTERP RISES WHO WERE CARRYING ON THE BUSINESS OF DEVELOPING, MAINTAINING AND OPER ATING ANY INFRASTRUCTURE FACILITY. IN THE INSTANT CASE, THE CONSORTIUM OR T HE JV DID NOT EXECUTE ANY WORK. THE WORK AWARDED TO JV WAS EXECUTED BY ITS C ONSTITUENTS. IN SUPPORT ITA NO540/V/2009 M/S. TRANSSTORY (INDIA) LTD., GUNTU R. 3 OF THIS CONTENTION, HE HAS INVITED OUR ATTENTION TO THE JOINT VENTURE AGREEMENT AND THE CONSORTIUMS WHICH ARE AVAILABLE AT PAGE NO. 4 TO 8 & 30 TO 36 RESPECTIVELY OF THE COMPILATION OF THE ASSESSEES. HE HAS ALSO INVITED OUR ATTENTION TO THE AGREEMENT EXECUTED BETWEEN THE JV AND THE CONSORTIUMS WITH THE GOVERNMENT. HE HAS ALSO INVITED OUR ATTEN TION TO THE RELEVANT CLAUSES OF THE JV AND THE CONSORTIUMS ACCORDING TO WHICH IT WAS AGREED AT THE TIME OF FORMATION OF JV THAT WHATEVER WORK IS AWARD ED TO IT, IT WOULD BE EXECUTED BY ITS CONSTITUENTS AND THEY WILL BE SOLEL Y RESPONSIBLE FOR THE RESPONSIBILITIES AND LIABILITIES OF THE EXECUTION O F THE WORK. IT WAS FURTHER CONTENDED THAT THESE PROVISIONS ARE BENEFICIAL PROV ISIONS AND WERE INTRODUCED TO PROVIDE INCENTIVES TO THOSE ENTERPRISES WHO IN F ACT EXECUTE THE WORK. THE LD. COUNSEL FOR THE ASSESSEE FURTHER INVITED OUR AT TENTION TO THE ORDER OF THE TRIBUNAL IN THE CASE OF ITO VS. UAN RAJU CONSTRUCTI ONS ITA NO.344/VIZAG/2009 OF THIS BENCH WITH THE SUBMISSION S THAT THE CONCEPT OF JOINT VENTURE WAS EXAMINED BY THE TRIBUNAL IN THIS CASE AND THE TRIBUNAL HAS GIVEN A SPECIFIC FINDING THAT JOINT VENTURE CANNOT BE HELD TO BE THE MAIN CONTRACTORS AND THE MEMBERS OF THE SAME ARE THE SUB -CONTRACTORS. REASONS FOR HOLDING SO WERE GIVEN THAT AS PER THE CONCEPT O F A JOINT VENTURE EACH JOINT VENTURER SHALL STAND IN RELATION TO A PRINCIPAL AS WELL AS AN AGENT OF OTHERS. ONCE IT IS HELD THAT JOINT VENTURER OR THE CONSTITU ENT OF THE VENTURES CANNOT BE CALLED TO BE A SUB-CONTRACTOR OF THE JOINT VENTURE, THE CONSTITUENTS OF JOINT VENTURER ARE ELIGIBLE FOR ALL BENEFITS OR DEDUCTION S OR EXEMPTIONS WHICH ARE AVAILABLE TO THE JOINT VENTURE FOR THE REASONS THAT THE WORK AWARDED WAS EXECUTED BY THE CONSTITUENTS OF THE JOINT VENTURE A ND NOT BY THE JOINT VENTURE ITSELF. IN FACT JOINT VENTURE IS AN ARTIFICIAL BOD Y IN WHOSE NAME THE CONTRACT WAS AWARDED. A RELIANCE WAS ALSO PLACED UPON THE J UDGEMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ABG HEAVY INDUSTR IES LTD. & ORS. 322 ITR 323. DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE ALSO FILED THE COPY OF RETURN AND THE ASSESSMENT ORDER OF THE J.V. IN SUPPORT OF HIS CONTENTION THAT JOINT VENTURE NEITHER OFFERED ANY I NCOME OUT OF THIS BUSINESS NOR CLAIMED ANY DEDUCTION U/S 80IA OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE FURTHER URGED THAT UNDER THIS SITUATION, T HE DEDUCTION U/S 80IA(4) MAY BE ALLOWED TO THE ASSESSEES. ITA NO540/V/2009 M/S. TRANSSTORY (INDIA) LTD., GUNTU R. 4 7. THE LD. D.R. ON THE OTHER HAND BESIDES, PLACING A HEAVY RELIANCE UPON THE ORDER OF THE CIT(A) HAS EMPHATICALLY ARGUED THA T THE WORK CONTRACT WAS AWARDED TO THE JOINT VENTURE AND NOT TO THE ASSESSE ES. THE BILLS WERE RAISED BY THE JOINT VENTURE AND PAYMENTS WERE ALSO MADE TO THE JOINT VENTURE BY THE GOVERNMENT BODIES. THEREFORE, IN ALL RESPECTS, THE WORK CONTRACT WAS EXECUTED BY THE JOINT VENTURE AND NOT BY THE ASSESS EES. THE LD. D.R. FURTHER CONTENDED THAT JOINT VENTURE IS AN INDEPENDENT IDEN TITY AND IS ASSESSABLE TO TAX AND THESE FACTS ARE EVIDENT FROM THE RECORD THA T JOINT VENTURE ITSELF HAS FILED ITS RETURN OF INCOME AND THE ASSESSMENT ORDER WAS PASSED IN ITS HANDS. IT IS TOTALLY IRRELEVANT WHETHER JOINT VENTURE HAS CLAIMED ANY DEDUCTION U/S 80IA OR NOT. NON-CLAIM OF DEDUCTION U/S 80IA BY TH E JOINT VENTURE WOULD NOT MAKE THE ASSESSEE ENTITLED TO CLAIM DEDUCTION U/S 8 0IA FOR THE WORK EXECUTED BY HIM. SINCE THE ASSESSEE AND THE JOINT VENTURE A RE INDEPENDENT ASSESSEES, THE BENEFIT ELIGIBLE TO THE JOINT VENTURE CANNOT BE TRANSFERRED TO THE ASSESSEES. THEREFORE, THE REVENUE HAS RIGHTLY DENI ED THE DEDUCTION U/S 80IA TO THE ASSESSEES. 8. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE R IVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE AUTHORI TIES BELOW AND DOCUMENTS PLACED ON RECORD, WE FIND THAT UNDISPUTEDLY THE JOI NT VENTURE OR THE CONSORTIUM WAS FORMED ONLY TO OBTAIN THE CONTRACT F ROM THE GOVERNMENT BODIES. AT THE TIME OF EXECUTION OF THE JOINT VENT URE OR THE CONSORTIUM, IT HAS BEEN MADE CLEAR THAT WORK/PROJECT AWARDED TO THE JO INT VENTURE WOULD BE EXECUTED BY THE JOINT VENTURERS OR THE CONSTITUENTS . AS PER MUTUALLY AGREED TERMS AND CONDITIONS BETWEEN THEM, IT WAS ALSO AGRE ED THAT EACH PARTY SHALL BE RESPONSIBLE FOR THE PROVISIONS OF WITHOUT LIMITA TION ON RESOURCES REQUIRED FOR THE PURPOSE OF FULFILLMENT OF THE SCOPE AND ALS O SOLELY RESPONSIBLE FOR THE PERFORMANCE OF ITS SCOPE OF WORK AND SHALL BEAR ALL TECHNICAL, COMMERCIAL AND FACING RISK INVOLVED IN PERFORMING ITS SCOPE OF WOR K. IT WAS ALSO AGREED THAT NONE OF THE PARTY SHALL ASSIGN ITS RIGHTS AND OBLIG ATIONS TO ANY OTHER PARTY WITHOUT WRITTEN CONSENT OF OTHER PARTY. FROM A CAR EFUL PERUSAL OF THIS JOINT VENTURE AGREEMENT AND THE CONSORTIUM AGREEMENT, IT IS EVIDENTLY CLEAR THAT THE JOINT VENTURE AND THE CONSORTIUM WAS FORMED ONL Y WITH AN OBJECT TO BID CONTRACT. ONCE THE PROJECT OR CONTRACT IS AWARDED TO THE JOINT VENTURE OR THE ITA NO540/V/2009 M/S. TRANSSTORY (INDIA) LTD., GUNTU R. 5 CONSORTIUM, IT IS TO BE EXECUTED BY ITS CONSTITUENT S OR THE JOINT VENTURES IN A RATIO AGREED UPON BY THE PARTIES. IN THE INSTANT C ASE IN CASE OF A JOINT VENTURE AGREEMENT, THE ASSESSEE WAS ENTITLED TO EXE CUTE THE 40% OF TOTAL WORK AWARDED BY THE ANDHRA PRADESH GOVERNMENT TO TH E JOINT VENTURE AND IN CASE OF A CONSORTIUM IT WAS AGREED THAT THE ENTIRE WORK IS TO BE EXECUTED BY THE ASSESSEE ITSELF. THEREFORE FOR ALL PRACTICAL P URPOSES, IT WAS THE ASSESSEE WHO EXECUTED THE WORK CONTRACT OR THE PROJECT AWARD ED TO THE JOINT VENTURE. NO DOUBT THE JOINT VENTURE IS AN INDEPENDENT IDENTI TY AND HAS FILED ITS RETURN OF INCOME AND WAS ALSO ASSESSED TO TAX BUT IT DID N OT OFFER ANY PROFIT OR INCOME EARNED ON THIS PROJECT/WORKS AWARDED TO IT N OR DID HE CLAIM ANY EXEMPTION/DEDUCTION U/S 80IA(4) OF THE ACT. THESE FACTS CLEARLY INDICATES THAT THE JOINT VENTURE WAS ONLY A DE-JURE CONTRACTO R BUT IN FACT THE ASSESSEE WAS A DE-FACTO CONTRACTOR. 9. THE SCOPE OF JOINT VENTURE AND ITS RELATION WITH ITS CONSTITUENTS WERE EXAMINED BY THIS BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. UAN RAJU CONSTRUCTIONS (SUPRA) AND THE TRIBUNAL HAS GIVEN TH E FINDING THAT THERE CANNOT BE ANY RELATION OF CONTRACTOR AND SUB-CONTRA CTOR BETWEEN THE JOINT VENTURE AND ITS CONSTITUENTS AFTER MAKING A DETAILE D ANALYSIS OF THIS RELATIONSHIP. THE RELEVANT OBSERVATION OF THE TRIB UNAL ARE EXTRACTED HEREUNDER: 6. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE RECORD. WE HAVE ALSO GONE THROUGH THE JOINT VENTURE PARTNE RS AGREEMENT ENTERED BY THE PARTIES ON 20-10-2003 AND ALSO THE C ODICIL ENTERED BETWEEN THEM. THE MAIN DISPUTE IS WITH REGARD TO T HE ASSESSABILITY OF INCOME, IF ANY, IN THE HANDS OF THE ASSESSEE-AOP . THE CASE OF THE AO IS THAT THE JOINT VENTURE AND ITS MEMBERS SHOULD BE TREATED AS SEPARATE PERSONS AND HENCE THE CONTRACT ALLOCATED TO THE MEMBERS SHOULD BE TREATED AS SUB-CONTRACTING. HO WEVER, THE CASE OF THE ASSESSEE IS THAT THE JOINT VENTURE HAS COME INTO EXISTENCE ONLY TO PROCURE AND WIN THE CONTRACTS AND SINCE THE CONTRACTS WERE ALLOCATED BETWEEN THE MEMBERS AND FU RTHER THEY WERE EXECUTED SEPARATELY BY EACH OF THE MEMBERS, NO INCOME CAN BE SAID TO HAVE ARISEN IN THE HANDS OF THE ASSESSEE -AOP. 7. IN O UR COUNTRY, THE IMPLEMENTATION OF INFRASTRUCTURE PR OJECTS IS TAKING PLACE IN A MASSIVE SCALE. IN THIS CONNEC TION, GLOBAL TENDERS ARE INVITED. HENCE TWO OR MORE BUSINESS EN TERPRISES ARE JOINING HANDS BY FORMING A CONSORTIUM OF JOINT VENT URE IN ORDER TO ITA NO540/V/2009 M/S. TRANSSTORY (INDIA) LTD., GUNTU R. 6 GET QUALIFIED FOR PARTICIPATING IN TENDER PROCESS. THEY REGULATE THEMSELVES, BY ENTERING INTO AN AGREEMENT, THE METH ODOLOGY TO BE ADOPTED FOR EXECUTING THE CONTRACT OBTAINED. BEFO RE GOING INTO THE MAIN ISSUES, WE FEEL THAT IT IS IMPERATIVE TO DISCUSS ABOUT THE STATUS AND LEGAL POSITION OF JOINT VENTURE VIS-A-VIS INC OME TAX ACT. THE JOINT VENTURES ARE NOT BE GOVERNED BY THE PROVISION S OF THE INDIAN PARTNERSHIP ACT, 1932. IT IS ALSO A KNOWN FACT THA T THERE IS NO STATUTE WHICH GOVERNS A JOINT VENTURE. HENCE THE I SSUE REGARDING THE RELATIONSHIP BETWEEN THE MEMBERS AND ALSO BETWE EN THE MEMBERS AND THE JOINT VENTURE HAS TO BE DECIDED ON THE BASIS OF THE TERMS OF AGREEMENT ENTERED BETWEEN THE PARTIES. THOUGH THE JOINT VENTURE AGREEMENTS GENERALLY FALL IN THE CA TEGORY OF ASSOCIATION OF PERSONS (AOP) UNDER THE INCOME TAX ACT, YET THEIR ASSESSABILITY IN THE STATUS OF AOP WAS NOT FREE F ROM DOUBT AND WE NOTICE THAT THE AUTHORITIES HAVE DECIDED THIS ISSUE ON THE BASIS OF FACTS AND CIRCUMSTANCES OF EACH CASE. 8. THE HONBLE SUPREME COURT HAS MADE A DETAILE D DISCUSSION ON THE CONCEPT OF JOINT VENTURE IN THE CASE OF F AZIR CHAND GULATI VS. UPPAL AGENCIES PRIVATE LTD. (2008) 10 SCC 345. THE RELEVANT OBSERVATIONS ARE EXTRACTED BELOW:- 17. THIS COURT HAD OCCASION TO CONSIDER THE NATURE OF `JOINT- VENTURE' IN NEW HORIZONS LTD VS. UNION OF INDIA [19 95 (1) SCC 478). THIS COURT HELD : 'THE EXPRESSION 'JOINT VENTURE' IS MORE F REQUENTLY USED IN THE UNITED STATES. IT CONNOTES A LEGAL ENTITY IN THE NA TURE OF A PARTNERSHIP ENGAGED IN THE JOINT UNDERTAKING OF A P ARTICULAR TRANSACTION FOR MUTUAL PROFIT OR AN ASSOCIATION OF PERSONS OR COMPANIES JOINTLY UNDERTAKING SOME COMMERCIAL ENTER PRISE WHEREIN ALL CONTRIBUTE ASSETS AND SHARE RISKS. IT REQUIRES A COMMUNITY OF INTEREST IN THE PERFORMANCE OF THE SUB JECT MATTER, A RIGHT TO DIRECT AND GOVERN THE POLICY IN CONNECTION THEREWITH, AND DUTY, WHICH MAY BE ALTERE D BY AGREEMENT, TO SHARE BOTH IN PROFIT AND LOSSES. [BLACK'S LAW DICTIONARY; SIXTH EDITION, P.839]. ACCORDING TO WOR DS AND PHRASES, PERMANENT EDITION, A JOINT VENTURE IS AN A SSOCIATION OF TWO OR MORE PERSONS TO CARRY OUT A SINGLE BUSINESS ENTERPRISE FOR PROFIT [P.117, VOL. 23].'[EMPHASIS SUPPLIED] THE FOLLOWING DEFINITION OF 'JOINT VENTUR E' OCCURRING IN AMERICAN JURISPRUDENCE [2ND EDITION, VOL.46 PAGES 19, 22 AND 23] IS RELEVANT: 'A JOINT VENTURE IS FREQUENTLY DEFINED AS AN ASSOCI ATION OF TWO OR MORE PERSONS FORMED TO CARRY OUT A SINGLE BUSINESS ENTERPRISE FOR PROFIT. MORE SPECIFICALLY, IT IS IN ASSOCIATION OF PERSONS WITH INTENT, BY WAY OF CONTRACT, EXPRESS OR IMPLIED, TO ENGAGE IN AND CARRY OUT A SINGLE BUSINESS VENTURE FOR JOINT PROFI T, FOR WHICH PURPOSE SUCH PERSONS COMBINE THEIR PROPERTY, MONEY, EFFECTS, SKILL, AND KNOWLEDGE, WITHOUT CREATING A P ARTNERSHIP, A ITA NO540/V/2009 M/S. TRANSSTORY (INDIA) LTD., GUNTU R. 7 CORPORATION OR OTHER BUSINESS ENTITY, PURSUANT TO A N AGREEMENT THAT THERE SHALL BE A COMMUNITY OF INTEREST AMONG T HE PARTIES AS TO THE PURPOSE OF THE UNDERTAKING, AND THAT EACH JOINT VENTURE MUST STAND IN THE RELATION OF PRINCIPAL, AS WELL AS AGENT, AS TO EACH OF THE OTHER COVERTURES WITHIN TH E GENERAL SCOPE OF THE ENTERPRISE . JOINT VENTURES ARE, IN GENERAL, GOVERNED BY THE SAME RULES AS PARTNERSHIPS . THE RELATIONS OF THE PARTIES TO A JOINT VENTURE AND THE NATURE OF THEIR ASSOCIATION ARE SO SIMILAR AND CLOSELY AKIN TO A PA RTNERSHIP THAT THEIR RIGHTS, DUTIES, AND LIABILITIES ARE GENERALLY TESTED BY RULES WHICH ARE CLOSELY ANALOGOUS TO AND SUBSTANTIALLY TH E SAME, IF NOT EXACTLY THE SAME AS THOSE WHICH GOVERN PARTNERSHIPS . SINCE THE LEGAL CONSEQUENCES OF A JOINT VENTURE ARE EQUIVALEN T TO THOSE OF A PARTNERSHIP, THE COURTS FREELY APPLY PARTNERSHIP LAW TO JOINT VENTURES WHEN APPROPRIATE. IN FACT, IT HAS BEEN SAI D THAT THE TREND IN THE LAW HAS BEEN TO BLUR THE DISTINCTIONS BETWEEN A PARTNERSHIP AND A JOINT VENTURE, VERY LITTLE LAW BE ING FOUND APPLICABLE TO ONE THAT DOES NOT APPLY TO THE OTHER. THUS, THE LIABILITY FOR TORTS OF PARTIES TO A JOINT VENTURE A GREEMENT IS GOVERNED BY THE LAW APPLICABLE TO PARTNERSHIPS.' 'A JOINT VENTURE IS TO BE DISTINGUISHED FR OM A RELATIONSHIP OF INDEPENDENT CONTRACTOR, THE LATTER BEING ONE WHO, E XERCISING AN INDEPENDENT EMPLOYMENT, CONTRACTS TO DO WORK ACCORD ING TO HIS OWN METHODS AND WITHOUT BEING SUBJECT TO THE CONTRO L OF HIS EMPLOYER EXCEPT AS TO THE RESULT OF THE WORK, WHILE A JOINT VENTURE IS A SPECIAL COMBINATION OF TWO OR MORE PER SONS WHERE, IN SOME SPECIFIC VENTURE, A PROFIT IS JOINTLY SOUGH T WITHOUT ANY ACTUAL PARTNERSHIP OR CORPORATE DESIGNATION.' (EMPH ASIS SUPPLIED) TO THE SAME EFFECT IS THE DEFINITION IN CO RPUS JURIS SECUNDUM (VOL. 48A PAGES 314-315): 'JOINT VENTURE,' A TERM USED INTERCHANGEAB LY AND SYNONYMOUS WITH JOINT ADVENTURE', OR COVENTURE, HAS BEEN DEFIN ED AS A SPECIAL COMBINATION OF TWO OR MORE PERSONS WHEREIN SOME SPECIFIC VENTURE FOR PROFIT IS JOINTLY SOUGHT WITHOUT ANY ACTUAL PARTNERSHIP OR CORPORATE DESIGNATION, OR AS AN ASSOCIATION OF TWO OR MORE PERSONS TO CARRY OUT A SINGLE BUSINE SS ENTERPRISE FOR PROFIT OR A SPECIAL COMBINATION OF PERSONS UNDE RTAKING JOINTLY SOME SPECIFIC ADVENTURE FOR PROFIT, FOR WHICH PURPO SE THEY COMBINE THEIR PROPERTY, MONEY, EFFECTS, SKILL, AND KNOWLEDGE........ AMONG THE ACTS OR CONDUCT WHICH A RE INDICATIVE OF A JOINT VENTURE, NO SINGLE ONE OF WHICH IS CONTR OLLING IN DETERMINING WHETHER A JOINT VENTURE EXISTS, ARE: (1 ) JOINT OWNERSHIP AND CONTROL OF PROPERTY; (2) SHARING OF E XPENSES, PROFITS AND LOSSES, AND HAVING AND EXERCISING SOME VOICE IN DETERMINING DIVISION OF NET EARNINGS; (3) COMMUNITY OF CONTROL OVER, AND ACTIVE PARTICIPATION IN, MANAGEMENT AND D IRECTION OF BUSINESS ENTERPRISE; (4) INTENTION OF PARTIES, EXPR ESS OR IMPLIED; ITA NO540/V/2009 M/S. TRANSSTORY (INDIA) LTD., GUNTU R. 8 AND (5) FIXING OF SALARIES BY JOINT AGREEMENT.' (EM PHASIS SUPPLIED) BLACK'S LAW DICTIONARY (7TH EDITION, PAGE 843) DEFINES `JOINT VENTURE' THUS 'JOINT VENTURE: A BUSINESS UNDERTAKING BY TWO OR MO RE PERSONS ENGAGED IN A SINGLE DEFINED PROJECT. THE NECESSARY ELEMENTS ARE: (1) AN EXPRESS OR IMPLIED AGREEMENT; (2) A COM MON PURPOSE THAT THE GROUP INTENDS TO CARRY OUT; (3) SH ARED PROFITS AND LOSSES; AND (4) EACH MEMBER'S EQUAL VOICE IN CO NTROLLING THE PROJECT.' 9. ON A CAREFUL READING OF THE ORDER OF THE HON BLE SUPREME COURT, WE NOTICE THE FOLLOWING ESSENTIAL INGREDIENT S FOR A JOINT VENTURE. A) IT CONNOTES A LEGAL ENTITY IN THE NATURE OF A PARTN ERSHIP ENGAGED IN THE JOINT UNDERTAKING OF A PARTICULAR TR ANSACTION FOR MUTUAL PROFIT. (OR) B) IT IS IN ASSOCIATION OF PERSONS WITH INTENT, B Y WAY OF CONTRACT, EXPRESS OR IMPLIED, TO ENGAGE IN AND CARRY OUT A SINGLE BUSINESS VENTURE FOR JOINT PROFIT, FOR WHICH PURPOSE SUCH PERSONS COMBINE THEIR PROPERTY, MONEY, EFFECTS, SKI LL, AND KNOWLEDGE, WITHOUT CREATING A PARTNERSHIP. (OR) C) A SPECIAL COMBINATION OF TWO OR MORE PERSONS W HEREIN SOME SPECIFIC VENTURE FOR PROFIT IS JOINTLY SOUGHT WITHOUT ANY ACTUAL PARTNERSHIP OR CORPORATE DESIGNATION, OR AS AN ASSOCIATION OF TWO OR MORE PERSONS TO CARRY OUT A SINGLE BUSINESS ENTERPRISE FOR PROFIT. D) THAT EACH JOINT VENTURER MUST STAND IN THE RELATION OF PRINCIPAL, AS WELL AS AGENT, AS TO EACH OF THE OTHER COVERTURES WITHIN THE GENERAL SCOPE OF THE ENTERPRISE . E) AMONG THE ACTS OR CONDUCT WHICH ARE INDICATIVE OF A JOINT VENTURE, NO SINGLE ONE OF WHICH IS CONTROLLING IN D ETERMINING WHETHER A JOINT VENTURE EXISTS, ARE: (1) JOINT OWNERSHIP AND CO NTROL OF PROPERTY; (2) SHARING OF EXPENSES, PROFITS AND LOSSES, A ND HAVING AND EXERCISING SOME VOICE IN DETERMINING DIVISION O F NET EARNINGS; (3) COMMUNITY OF CONTROL OVER, AND ACTIVE PARTI CIPATION IN, MANAGEMENT AND DIRECTION OF BUSINESS ENTE RPRISE; (4) INTENTION OF PARTIES, EX PRESS OR IMPLIED; AND (5) FIXING OF SALARIES BY JO INT AGREEMENT.' 10. AS STATED EARLIER, IN ORDER TO PARTICIPATE IN T HE GLOBAL TENDER PROCESS, SOME OF THE FOREIGN COMPANIES HAVE ESTABLI SHED JOINT VENTURES WITH THE INDIAN COMPANIES. WITH REGARD TO THE ISSUE OF THE ASSESSABILITY OF JOINT VENTURES, THE FOREIGN CO MPANIES HAVE APPROACHED THE AUTHORITY FOR ADVANCE RULING (AAR). WE DISCUSS BELOW THE DECISION RENDERED BY AAR IN BRIEF. ITA NO540/V/2009 M/S. TRANSSTORY (INDIA) LTD., GUNTU R. 9 A) VAN OORD ACZ BV (248 ITR 399): IN THIS CASE THE PAR TIES THEREIN HAD SPECIFICALLY PROVIDED IN THE AGREEMENT THAT EACH PARTY WILL BEAR ITS OWN LOSS AND RETAIN THE PROFITS SEPARATELY. THERE WAS ALSO SPECIFIC DECLARATION THAT IT WAS NOT THE INTENTION TO CREATE A JOINT VENTURE TO CARRY ON BUSINESS IN C OMMON. THE PARTIES THEREIN HAD UNDERTAKEN SEPARATE SCOPE OF WO RKS ACCORDING TO THEIR RESPECTIVE TECHNICAL SKILLS. TH ERE WAS NO CONTROL AND CONNECTION BETWEEN THE WORK DONE BY EAC H OF THE PARTIES. THUS IT WAS NOTICED THAT THERE WAS NO INTE NTION TO CARRY OUT ANY BUSINESS IN COMMON. UNDER THESE FACTUAL CIRCUMSTANCES, THE AAR HELD THAT THE CONSORTIUM CAN NOT BE TREATED AS ASSOCIATION OF PERSONS UNDER THE INCOME TAX ACT. IT IS PERTINENT TO NOTE THAT THIS DECISION WAS RENDERE D PRIOR TO 1.4.2002, I.E. PRIOR TO THE INSERTION OF THE EXPLAN ATION TO SECTION 2(31). B) GEO CONSULT ZT GMBH (304 ITR 283): IN THIS CASE, TH OUGH THE WORK WAS ALLOTTED TO EACH OF THE MEMBERS AND EA CH MEMBER HAS TO BEAR ITS OWN COSTS AND EXPENSES, YET IT WAS NOTICED THAT THE AGREEMENT STATED THAT THE MEMBERS WILL COLLABORATE FOR ALL THE WORK ASSOCIATED WITH THE PR OJECT WHICH IS TO BE MANAGED ON A JOINT BASIS BY ALL THE MEMBERS. FURTHER THE AGREEMENT PROVIDED THAT THE MEMBERS ARE JOINTLY AND SEVERALLY RESPONSIBLE FOR EXECUTION OF PROJECT. TH E AAR HAS EXPRESSED OPINION, BY PLACING RELIANCE ON THE DECIS ION OF HONBLE SUPREME COURT IN THE CASE OF N.V.SHANMUGAM AND CO. V CIT (1971) 81 ITR 301, THAT THE ULTIMATE DIVISION OF PROFITS AMONGST MEMBERS OF THE JOINT ENTERPRISE IS NOT A RE LEVANT CRITERION. FINALLY IT WAS HELD THAT THE JOINT VENTU RE IS ASSESSABLE AS AOP. C) M/S HYUNDAU ROTEM CO., KOREA AND M/S MITSUBISHI CO. , JAPAN (AAR NOS. 798-799 OF 2008 DT. 23-03-2010. IN THIS CASE, THE AAR HAS HELD THAT THE CONSORTIUM FORMED B Y FOUR MEMBERS IS NOT ASSESSABLE AS AOP, SINCE THE AAR HAS FELT THAT THE FACTS OF THE CASE ARE SIMILAR TO THE FACTS RELA TING TO VAN OORD ACZ BV, SUPRA. SECTION 2(31) OF THE ACT DEFINES THE TERM PERSON, WHICH INTERALIA, INCLUDES AN ASSOCIATION OF PERSONS OR A BODY OF IN DIVIDUALS, WHETHER INCORPORATED OR NOT. SINCE THE TERM ASSOC IATION OF PERSONS (AOP) WAS NOT DEFINED IN THE ACT, THE COUR TS HAVE INTERPRETED TO MEAN THAT IT IS AN ASSOCIATION ESTAB LISHED TO PRODUCE INCOME. HENCE THE FINANCE ACT 2002 HAS INSERTED AN EXPLANATION TO SECTION 2(31), ACCORDING TO WHICH, AN AOP SHALL BE DEEMED TO BE A PERSON, WHETHER OR NOT SUCH AOP WAS FORMED OR EST ABLISHED WITH THE OBJECT OF DERIVING INCOME, PROFITS OR GAINS. HOWEVER, IN THE INSTANT CASE, THERE IS NO DISPUTE WITH REGARD TO TH E ASSESSABILITY OF THE JOINT VENTURE PER SE. BOTH THE ASSESSEE AND THE DEPARTMENT ITA NO540/V/2009 M/S. TRANSSTORY (INDIA) LTD., GUNTU R. 10 HAVE TAKEN THE STAND THAT THE JOINT VENTURE IS AS SESSABLE IN THE STATUS OF ASSOCIATION OF PERSON. HOWEVER, THE I SSUE IS WHETHER THE AO IS RIGHT IN TREATING THE JOINT VENTURE-AOP A S THE MAIN CONTRACTOR AND ITS MEMBERS AS THE SUB-CONTRACTORS, THEREBY ESTIMATING THE INCOME WHICH WAS NOT EARNED BY THE J OINT VENTURE. 11. ON THE BASIS OF THE UNDERSTANDING OF THE CONC EPT OF JOINT VENTURE, LET US CONSIDER THE FACTS IN THE PRESENT CASE. THE AMENDED CLAUSE 3 READS AS UNDER: A) THE JOINT VENTURERS SHALL SUBJECT TO THE PROVIS IONS HEREINAFTER CONTAINED, BE ENTITLED TO SHARE THE WOR K AS MUTUALLY AGREED ON ITEM WISE, DEPENDING ON THE WORK SCHEDULE. SHARING OF THE WORK AND EXECUTION OF THE WORK CAN BE ALTERED AT ANY GIVEN TIME WITH MUTUAL CONSENT OF BOTH THE J.V. PARTNERS. AS PER THE ORIGINAL CLAUSE 3(A), THE MEMBERS OF JOI NT VENTURE WOULD SHARE IN A PRESCRIBED PERCENTAGE IN ALL PROFITS ARI SING OUT OF JOINT VENTURE. HOWEVER, THE SAID CLAUSE WAS IN CONTRADIC TION TO THE PREAMBLE OF THE AGREEMENT; WHEREIN IT HAD BEEN STAT ED THAT THE MEMBERS ARE DESIROUS OF SHARING THE CONTRACT AMOUNT . IN VIEW OF THE ABOVE, IT APPEARS THAT THE CLAUSE 3(A) WAS AMEN DED IN ACCORDANCE WITH THE ORIGINAL INTENTION OF THE MEMBE RS. HOWEVER IN CLAUSE 12 DEALING WITH FINAL ACCOUNTS, WE FIND A ME NTION ABOUT SHARING OF PROFIT OR LOSS, BUT THERE IS NO MENTION ABOUT THE PROPORTION. HOWEVER, IN REALITY, THE MEMBERS HAVE SHARED THE WORK ONLY AND HENCE THERE WAS NO PROFIT OR LOSS FOR THE JOINT VENTURE. 11.1 FURTHER, CLAUSE 9 OF THE AGREEMENT WHICH DE ALS WITH THE RESOURCES SPECIFICALLY STATES THAT EACH JOINT VEN TURER SHALL PROVIDE PLANT AND EQUIPMENT REQUIRED FOR THE EXECUTION OF T HEIR PORTION OF CONTRACT AND SUCH PLANT AND MACHINERY SHALL NOT BEC OME ASSET OF THE JOINT VENTURE. THUS THERE IS NO CLEAR PROVISION IN THE JOINT VENTURE WHICH PROVIDE FOR JOINT EXECUTION OF THE PR OJECT AND JOINT REALIZATION OF PROFIT. 11.2 CLAUSE-4 DEALS WITH THE RELATIONSHIP BETW EEN THE MEMBERS OF THE JOINT VENTURES. SUB-CLAUSES (C) AND (D) ARE RELEVANT. C. THIS AGREEMENT SHALL NOT BE CONSTRUED BY EITHER JOINT VENTURER HERETO AS CONSTITUTING EACH OF THEM THE AGENT OF THE OTHER NOR THE JOINT VENTURE AS THE AGE NT FOR EITHER OF THEM. E. THE JOINT VENTURERS AGREE THAT THIS AGREEMENT SHALL NOT CONSTITUTE A PARTNERSHIP AND ANY LIABILIT IES OF ANY SORT WHATSOEVER WHICH ONE JOINT VENTURER MAY ITA NO540/V/2009 M/S. TRANSSTORY (INDIA) LTD., GUNTU R. 11 INCUR TOWARDS OR ON BEHALF OF THE OTHER JOINT VENTURERS SHALL BE IN ACCORDANCE WITH THIS AGREEMEN T AND BE THERETO LIMITED AS PER THE CONCEPT OF THE JOINT VENTURE, EACH JOINT VENTURER SHALL STAND IN THE RELATION OF A PRINCIPAL AS WELL AS AN AGENT OF THE OTHER. HOWEVER CLAUSE 4(C) OF THE AGREEMENT SPECIFICALLY S TATES THAT THE MEMBERS DO NOT CONSTITUTE THE AGENT OF EACH OTHER. THE SAID CLAUSE ALSO STATES THAT THE JOINT VENTURE SHOULD NOT BE TAKEN AS THE AGENT OF THE MEMBERS ALSO. THUS, ACCORDING TO THE AGREEMENT, EACH MEMBER STANDS IN ITS OWN RIGHT AND NO SPECIFIC RELATIONSHIP IS CREATED BETWEEN THE JOINT VENTURE AND ITS MEMBERS. 12. THUS, ON AN UNDERSTANDING OF THE CONCEPT OF THE JOINT VENTURE AND THE TERMS OF AGREEMENT BETWEEN THE MEM BERS OF THE PRESENT CASE, WE ARE OF THE VIEW THAT IN THE INSTAN T CASE, THE CONSORTIUM OF JOINT VENTURE HAS BEEN FORMED ONLY TO PROCURE THE CONTRACT WORKS. BY WAY OF THE AGREEMENT, THE PARTI ES HAVE ONLY REGULATED THE RELATIONSHIP INTER SE WITH RESPECT TO THEIR JOINT RESPONSIBILITY THAT EXISTED IN RELATION TO THE PRIN CIPAL, VIZ., M/S KONKAN RAILWAY. IN REALITY, BOTH THE PARTIES HAVE DIVIDED THE CONTRACT WORKS BETWEEN THEMSELVES AND THEY HAVE EXE CUTED THEIR SHARE OF WORK ON THEIR OWN RISKS. IT IS PERTINENT TO NOTE HERE THAT THE AO HAS NOT GIVEN ANY FINDING ON THE ISSUES LIKE THAT EACH MEMBER HAD AUTHORITY TO INTERFERE WITH OR CONTROL T HE WORK EXECUTED BY THE OTHER MEMBER; THAT BOTH THE MEMBERS HAVE JOINTLY EXECUTED THE PROJECT AND THUS PRODUCED THE INCOME J OINTLY. IN OUR OPINION, THE FINDING ON THE LINES STATED ABOVE IS C RUCIAL TO DETERMINE THE ISSUE OF AVAILABILITY OF INCOME IN TH E HANDS OF JOINT VENTURE- AOP. ON THE CONTRARY, THE AO IS ON RECORD THAT THE EACH OF THE MEMBERS HAS DECLARED THE INCOME DERIVED FROM THEIR RESPECTIVE SHARE OF CONTRACT WORKS IN THEIR HANDS. IN THIS KIND OF SITUATION, WE DO NOT FIND ANY MERIT IN THE PRESUMPT ION MADE BY THE AO THAT THE JOINT VENTURE IS THE MAIN CONTRACTOR AND THE MEMBERS ARE THE SUB-CONTRACTORS. ONCE THIS PRESU MPTION HAS BEEN FOUND TO BE WRONG, THEN THE QUESTION OF ESTIMA TION OF INCOME BY WAY OF SUB-CONTRACT COMMISSION DOES NOT ARISE. SO ALSO THE QUESTION OF DEDUCTION OF TAX U/S 194C(2) OF THE ACT AND THE DISALLOWANCE U/S 40(A)(IA) DOES NOT ARISE. IN VIE W OF THE FORE GOING DISCUSSIONS, WE DO NOT FIND ANY INFIRMITY IN THE DECISION REACHED BY THE LD CIT(A). 10. THERE IS NO DISPUTE WITH REGARD TO THE NATURE O F BUSINESS OR THE ACTIVITIES UNDERTAKEN BY THE ASSESSEES. THE DISPUT E IS ONLY WITH REGARD TO THE IDENTITY OF A PERSON TO WHOM THIS BENEFIT OF DEDUCT ION U/S 80IA(4) CAN BE ALLOWED. WE HAVE CAREFULLY PERUSED THE PROVISIONS OF SECTION 80IA(4) AND WE FIND THAT THE BENEFIT OF EXEMPTION/DEDUCTION IS TO BE ALLOWED TO ANY ITA NO540/V/2009 M/S. TRANSSTORY (INDIA) LTD., GUNTU R. 12 ENTERPRISE CARRYING ON BUSINESS OF DEVELOPING OR OP ERATING AND MAINTAINING OR DEVELOPING, OPERATING, MAINTAINING ANY INFRASTRUCTU RE FACILITY SUBJECT TO FULFILLMENT OF CERTAIN CONDITIONS. ONE OF THE COND ITION IS THAT THE ENTERPRISE SHOULD BE OWNED BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES OR ANY OTHER BODY ESTABLISHED OR CONSTITU TED UNDER ANY CENTRE OR ANY STATE ACT. THE OTHER CONDITION IS THAT IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT O R LOCAL AUTHORITIES OR ANY OTHER STATUTORY BODY FOR DEVELOPING, OPERATING AND MAINTAINING OR DEVELOPING, OPERATING & MAINTAINING A NEW INFRASTRU CTURE FACILITY. THERE IS NO DISPUTE WITH REGARD TO THE FULFILLMENT OF OTHER REQUISITE CONDITIONS. THE DISPUTE WAS ONLY RAISED THAT THE CONTRACT WAS AWARD ED ONLY TO THE JOINT VENTURE AND NOT TO THE ASSESSEE AND THEREFORE ASSES SEE IS NOT ENTITLED FOR DEDUCTION. IF WE READ THESE PROVISIONS OF SUB-SECT ION 4 OF 80IA, WE WOULD FIND THAT THIS BENEFIT OF DEDUCTIONS IS TO BE GIVEN TO AN ENTERPRISE WHO CARRY ON THE AFORESAID CLASSIFIED BUSINESS. THE LEGISLAT URE HAVE ALSO USED THE WORD CONSORTIUM OF SUCH COMPANIES, MEANING THEREBY THE L EGISLATURE WAS AWARE ABOUT THE OBJECT OF FORMATION OF CONSORTIUM AND JOI NT VENTURES. GENERALLY THE JOINT VENTURES OR CONSORTIUMS ARE FORMED TO OBTAIN A CONTRACT FROM THE GOVERNMENT BODY FOR ITS EXECUTION BY ITS CONSTITUEN TS. IF THE CONSTITUENTS DO NOT WANT TO EXECUTE THE WORK, THERE WAS NO NEED TO FORM A CONSORTIUM. THEREFORE, MERE FORMATION OF CONSORTIUM FOR OBTAINI NG A CONTRACT SHOULD NOT DEBAR THE ENTERPRISES WHO IN FACT CARRIED ON THE AF ORESAID CLASSIFIED BUSINESS FROM CLAIMING THE DEDUCTION OR EXEMPTION U/S 80IA(4 ). FOR THE SAKE OF REFERENCE, WE EXTRACT THE PROVISIONS OF SECTION 80I A(4) AS UNDER: SECTION 80IA(4): THIS SECTION APPLIES TO (I) ANY ENTERPRISE CARRYING ON THE BUSINESS [OF (I) DEV ELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPER ATING AND MAINTAINING] ANY INFRASTRUCTURE FACILITY WHICH FULF ILS ALL THE FOLLOWING CONDITIONS, NAMELY:- (A) IT IS OWNED BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES [OR BY AN AUTHORITY OR A BOARD OR A CORPORATION OR ANY OTHER BODY ESTABLISHED OR C ONSTITUTED UNDER ANY CENTRAL OR STATE ACT;] (B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORI TY OR ANY OTHER STATUTORY BODY FOR (I) DEVELOPING OR (II) OPERATING ITA NO540/V/2009 M/S. TRANSSTORY (INDIA) LTD., GUNTU R. 13 AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY;] (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1 ST DAY OF APRIL, 1995: PROVIDED THAT WHERE AN INFRASTRUCTURE FACILITY IS TRANSFERRE D ON OR AFTER THE 1 ST DAY OF APRIL, 1999 BY AN ENTERPRISE WHICH DEVELOPED SUCH INFRASTRUCTURE FACILITY (HEREAFTER R EFERRED TO IN THIS SECTION AS THE TRANSFEROR ENTERPRISE) TO AN OTHER ENTERPRISE (HEREAFTER IN THIS SECTION REFERRED TO A S THE TRANSFEREE ENTERPRISE) FOR THE PURPOSE OF OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON ITS BEHA LF IN ACCORDANCE WITH THE AGREEMENT WITH THE CENTRAL GOVERNMENT, STATE GOVERNMENT, LOCAL AUTHORITY OR ST ATUTORY BODY, THE PROVISIONS OF THIS SECTION SHALL APPLY TO THE TRANSFEREE ENTERPRISE AS IF IT WERE THE ENTERPRISE TO WHICH THIS CLAUSE APPLIES AND THE DEDUCTION FROM PROFITS AND GAINS WOULD BE AVAILABLE TO SUCH TRANSFEREE ENTERPRISE FO R THE UNEXPIRED PERIOD DURING WHICH THE TRANSFEROR ENTERP RISE WOULD HAVE BEEN ENTITLED TO THE DEDUCTION, IF THE T RANSFER HAD NOT TAKEN PLACE. [ EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, INFRASTRUCTURE FACILITY MEANS (A) A ROAD INCLUDING TOLL ROAD, A BRIDGE OR A RAIL SYST EM; (B) A HIGHWAY PROJECT INCLUDING HOUSING OR OTHER ACTIVI TIES BEING AN INTEGRAL PART OF THE HIGHWAY PROJECT; (C) A WATER SUPPLY PROJECT, WATER TREATMENT SYSTEM, IRRIGATION PROJECT, SANITATION AND SEWERAGE SYSTEM OR SOLID WASTE MANAGEMENT SYSTEM; (D) A PORT, AIRPORT, INLAND WATERWAY [INLAND PORT OR NAVIGATIONAL CHANNEL IN THE SEA];] [(II) ANY UNDERTAKING WHICH HAS STARTED OR STARTS P ROVIDING TELECOMMUNICATION SERVICES, WHETHER BASIC OR CELLUL AR, INCLUDING RADIO PAGING, DOMESTIC SATELLITE SERVICE, NETWORK OF TRUNKING, BROADBAND NETWORK AND INTERNET SERVICES O N OR AFTER THE 1 ST DAY OF APRIL, 1995, BUT ON OR BEFORE THE 31 ST DAY OF MARCH, [2005].] EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, DOME STIC SATELLITE MEANS A SATELLITE OWNED AND OPERATED BY AN INDIAN COMPANY FOR PROVIDING TELECOMMUNICATION SERVICE; (III) ANY UNDERTAKING WHICH DEVELOPS, DEVELOPS AND OPERATES OR MAINTAINS AND OPERATES AN INDUSTRIAL PARK [OR SP ECIAL ECONOMIC ZONE] NOTIFIED BY THE CENTRAL GOVERNMENT I N ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY T HAT GOVERNMENT FOR THE PERIOD BEGINNING ON THE 1 ST DAY OF APRIL, 1997 AND ENDING ON THE 31 ST DAY OF MARCH, [2006]: [ PROVIDED THAT IN A CASE WHERE AN UNDERTAKING DEVELOPS AN INDUSTRIAL PARK ON OR AFTER THE 1 ST DAY OF APRIL, 1999 OR A SPECIAL ECONOMIC ZONE ON OR AFTER THE 1 ST DAY OF APRIL, 2001 AND TRANSFERS THE OPERATION AND MAINTENANCE OF SUCH INDUSTRIAL PARK OR SUCH SPECIAL ECONOMIC ZONE, AS T HE CASE ITA NO540/V/2009 M/S. TRANSSTORY (INDIA) LTD., GUNTU R. 14 MAY BE, TO ANOTHER UNDERTAKING (HEREAFTER IN THIS S ECTION REFERRED TO AS THE TRANSFEREE UNDERTAKING), THE DED UCTION UNDER SUB-SECTION (1) SHALL BE ALLOWED TO SUCH TRAN SFEREE UNDERTAKING FOR THE REMAINING PERIOD IN THE TEN CON SECUTIVE ASSESSMENT YEARS AS IF THE OPERATION AND MAINTENANC E WERE NOT SO TRANSFERRED TO THE TRANSFEREE UNDERTAKING: [ PROVIDED FURTHER THAT IN THE CASE OF ANY UNDERTAKING WHICH DEVELOPS, DEVELOPS AND OPERATES OR MAINTAINS AND OPERATES AND INDUSTRIAL PARK, THE PROVISIONS OF THI S CLAUSE SHALL HAVE EFFECT AS IF FOR THE FIGURES, LETTERS AN D WORDS 31 ST DAY OF MARCH, 2006, THE FIGURES, LETTERS AND WORDS 31 ST DAY OF MARCH, [2011] HAD BEEN SUBSTITUTED;] (IV) AN [UNDERTAKING] WHICH,-- . .. (VI) . 11. TURNING TO THE FACTS OF THE CASE, WE FIND THAT JOINT VENTURE AND THE CONSORTIUM WAS FORMED ONLY TO OBTAIN THE CONTRACT F ROM THE GOVERNMENT BODY AND THEY IN FACT DID NOT EXECUTE THE WORK AWAR DED TO IT. IN A JOINT VENTURE AGREEMENT OR A CONSORTIUM AGREEMENT, IT WAS AGREED THAT THE AWARDED WORK HAD TO BE EXECUTED BY THE JOINT VENTUR ERS OR PARTIES TO THE AGREEMENT IN AN AGREED MANNER. THE WORK WAS AWARDE D BY THE ANDHRA PRADESH GOVERNMENT AND THE KSHIP, A BODY OF THE STA TE GOVERNMENT OF KARNATAKA TO THE J.V. AND CONSORTIUM BUT THE WORK W AS EXECUTED BY THE ASSESSEE AND THE OTHER CONSTITUENTS. IN CASE OF JO INT VENTURE AGREEMENT, 40% WORKS WERE EXECUTED BY THE ASSESSEE AND IN CASE OF CONSORTIUM, THE 100% WORK WAS EXECUTED BY THE ASSESSEE. WHATEVER B ILLS WERE RAISED BY THE ASSESSEE FOR THE WORK EXECUTED ON J.V. AND CONSORTI UM, THE JOINT VENTURE AND CONSORTIUM IN TURN RAISED THE FURTHER BILL OF THE S AME AMOUNT TO THE GOVERNMENT. WHATEVER PAYMENT WAS RECEIVED BY THE J OINT VENTURE, IT WAS ACCORDINGLY TRANSFERRED TO THEIR CONSTITUENTS. THE REFORE, THE JOINT VENTURE OR THE CONSORTIUM WAS ONLY A PAPER ENTITY AND HAS NOT EXECUTED IN CONTRACT ITSELF. THEY HAVE ALSO NOT OFFERED ANY INCOME OUT OF THE WORK EXECUTED BY ITS CONSTITUENTS, NOR DID THEY CLAIM ANY DEDUCTIONS U/S 80IA(4). THEREFORE, IN ALL PRACTICAL PURPOSES, THE CONTRACT WAS AWARDED TO THE CONSTITUENTS OF THE JOINT VENTURERS THROUGH JOINT VENTURE AND THE WORK WAS EX ECUTED BY THEM. AS PER PROVISIONS OF SECTION 80IA(4), THE BENEFIT OF DEDUC TION UNDER THIS SECTION IS TO ITA NO540/V/2009 M/S. TRANSSTORY (INDIA) LTD., GUNTU R. 15 BE GIVEN ONLY TO THE ENTERPRISE WHO CARRIED ON THE CLASSIFIED BUSINESS. THEREFORE, IN THE LIGHT OF THIS LEGAL PROPOSITION, WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED FOR THE DEDUCTIONS U/S 80IA(4) ON THE PROFIT EARNED FROM THE EXECUTION OF THE WORK AWARDED TO JV AND CONSORT IUM. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE A.O. T O ALLOW THE DEDUCTIONS. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 14.7.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 14 TH JULY, 2011 COPY TO 1 M/S. MAHESH, VIRENDER & SRIRAM, CHARTERED ACCOUNTAN TS, 6 - 3 - 788/36 & 37A, AMEERPET, HYDERABAD 2 ACIT, CIRCLE - 2(1), GUNTUR 3 THE CI T, GUNTUR 4 THE CIT (A) , GUNTUR 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM