ACIT, Hyderabad V. Madhucon Sino Hydro(JV), Hyderabad

ITA 646/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66546 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M RAVINDER SAI
• Assessee Lawyers: P MURALI MOHAN RAO
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 646/HYD/2010 ASSESSMENT YEAR: 2006-07 ASST. COMMISSIONER OF INCOME-TAX, ... APPELLANT CENTRAL CIRCLE 4,HYDERABAD. VS. MADHUCON SINO HYDRO(JV), RESPONDENT HYDERABAD. (PAN AANFM 1451G/M-378 ITA NO. 701/HYD/2010 ASSESSMENT YEAR: 2006-07 MADHUCON SINO HYDRO(JV), APPELLANT HYDERABAD. (PAN AANFM 1451G/M-378) VS. ASST. COMMISSIONER OF INCOME-TAX, ... RESPONDENT CENTRAL CIRCLE 4,HYDERABAD. REVENUE BY : SHRI M. RAVINDER SAI ASSESSEE BY : SHRI P. MURALI MOHAN RAO DATE OF HEARING : 16/11/2012 DATE OF PRONOUNCEMENT : 27/11/ 2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THESE ARE CROSS APPEALS BY THE ASSESSEE AS WELL AS THE REVENUE DIRECTED AGAINST THE ORDER OF CIT(A)-I, HYD ERABAD DATED 26/02/2010 FOR THE AY 2006-07. ITA NOS. 646 & 701/HYD/10 MADHUCON SINO-HYDRO(JV) 2 ITA 701/H/10 ASSESSEES APPEAL 2. THE APPELLANT IS A JOINT VENTURE (AOP). THE JOI NT VENTURE IS FORMED BY TWO CONSTITUENTS NAMELY MADHUC ON PROJECTS LTD AND SINO HYDRO CORPORATION, CHINA. DU RING THE YEAR UNDER CONSIDERATION THE APPELLANT WAS AWARDED WORKS WORTH RS.135,69,37,509/- BY VARIOUS GOVERNMENT DEPARTMENTS. AS PER THE JOINT VENTURE AGREEMENT, T HE ENTIRE WORKS WERE SHARED AND EXECUTED BY THE CONSTITUENTS. ACCORDINGLY, OUT OF THE TOTAL WORKS, WORKS WORTH RS.132,97,60,010/- WAS GIVEN TO MADHUCON PROJECTS L TD AND THE BALANCE WAS GIVEN TO SINO HYDRO CORPORATION, FO R EXECUTION. HOWEVER, THESE AMOUNTS WERE NOT REFLECT ED IN THE PROFIT & LOSS ACCOUNT PREPARED BY THE ASSESSEE. ONLY SOME ADMINISTRATIVE EXPENSES TOTALING RS.77,961/- H AD BEEN REFLECTED IN THE DEBIT SIDE AND THE LOSS WAS CLAIME D. THE AO HAD RECAST THE P&L OF THE ASSESSEE BY INCLUDING THE TOTAL CONTRACT VALUE AND DEDUCTING THE AMOUNTS OF CONTRAC T ALLOCATED BETWEEN THE TWO CONSTITUENTS. OUT OF THIS THE AO HAS DISALLOWED (I) RS. 2,71,38,750/- AS NOT BEING R EFLECTED IN THE HANDS OF MPL- ONE OF THE CONSTITUTENTS (II) RS. 24,96,00,027/- BEING THE CONTRACT AMOUNTS FOR WHICU H TDS WAS NOT DEDUCTED AND (III) RS. 2,71,38,750/- BEING AMOUNT DUE TO THE CHINESE CONSTITUENT OF THE CONSORTIUM ON THE GROUND TDS WAS PAID IN THE SUBSEQUENT YEAR AND (IV) RS. 86,39,27,480/- ON THE GROUND THAT TDS WAS PAID BELA TEDLY. THE AO DETERMINED THE TAXABLE INCOME OF THE ASSESSE E AT RS. 116,77,27,038/- 3. THE MAINS ISSUE IS WHETHER THE APPELLANT BEING AN AOP/JV IS LIABLE TO DEDUCT TAX AT SOURCE FROM THE P AYMENTS MADE TO THE CONSTITUENT PARTNERS. THE AO HAS RELIE D ON THE ITA NOS. 646 & 701/HYD/10 MADHUCON SINO-HYDRO(JV) 3 DECISION OF HONBLE ITAT, HYDERABAD IN THE CASE OF KCT-PES, JV VS. ITO WARD 14(2), HYDERABAD IN ITA NO.779 AND 780/HYD/2003. THE ISSUES RAISED BY THE APPELLANT BE FORE THE ITAT WERE AS UNDER: A. KCT-PES JV IS NOT A PERSON AS PER THE IT ACT AND HE NCE THERE IS NO LIABILITY TO DEDUCT TAX AT SOURCE. B. THAT THE INDIVIDUAL CONSTITUENT OF THE JV ARE NOT S UB CONTRACTORS OF THE KCT-PES JV. 4. AS REGARDS THE FIRST ISSUE, THE HONBLE ITAT OBS ERVED THAT THE STATUS OF THE APPELLANT IS AOP ONLY. AS RE GARDS THE SECOND ISSUE, THE ITAT OBSERVED THAT THE APPELLANT S CONTENTION THAT THERE IS NO SUB CONTRACTING OF WORK TO THE INDIVIDUAL CONSTITUENTS CANNOT BE ACCEPTED. THE TW O INDIVIDUAL CONSTITUENTS OF THE JOINT VENTURE ARE DI STINCT AND HAVE SEPARATE IDENTITY AND ARE ASSESSED TO TAX. IN THIS VIEW OF MATTER, THE APPELLANT WAS LIABLE TO DEDUCT TAX A S PER THE PROVISION OF SECTION 194C(2) OF THE I.T.ACT. NO DO UBT THIS ORDER WAS PASSED SOME TIME IN MARCH 2006. SUBSEQUEN T TO THIS ORDER, THE HONBLE ITAT, MUMBAI, E-BENCH IN TH E CASE OF TARMAC INFRA ENGINEERING PVT LTD VS. ITO 15(2)(2) I N ITAT NO.4569/MUM/2008 FOR AY 2005-06 HAVE TAKEN A DIFFER ENT VIEW. IN THIS CASE, THE APPELLANT JV HAD MADE CERT AIN PAYMENTS TO ONE OF THE CONSTITUENTS FOR THE WORK DO NE DURING THE YEAR. ACCORDING TO THE AO, THE ASSESSEE AS PER THE PROVISION OF SECTION 40A(IA), 194C AND 200(1) R EAD WITH I.T. RULES 30 WAS REQUIRED TO DEDUCT TAX AND DEPOSI T THE SAME LATEST BY 31 ST MAY 2005, BUT THE SAID AMOUNT WAS PAID ON 27.8.2005 AND HENCE THE AMOUNT PAID BY THE ASSES SEE SHALL NOT BE DEDUCTED WHILE COMPUTING THE INCOME. ITA NOS. 646 & 701/HYD/10 MADHUCON SINO-HYDRO(JV) 4 5. IN THE CIRCUMSTANCES IN THE APPEAL PREFERRED BEF ORE HIM, THE CIT(A) WHILE OBSERVING THE SECTION 194C(1) DOES NOT HAVE ANY EMBARGO ON AOP BEING CONTRACTOR FOR NO T DEDUCTING ANY TAX BUT THE APPELLANTS CASE IS SQUAR ELY COVERED BY THE PROVISION OF SECTION 194C(2). THE H ONBLE ITAT AT PARA 10 OF THE ORDER OBSERVED THAT SINCE AO P WAS NOT A SPECIFIED PERSON PRIOR TO THE AMENDMENT MADE BY FINANCE ACT 2008, THE PAYMENTS MADE BY THE ASSESSEE TO ITS CONSTITUENTS WOULD NOT BE TREATED AS PAYMENT MADE B Y THE CONTRACTOR TO A SUB CONTRACTOR SO AS TO ATTRACT THE PROVISIONS OF SECTION 194C(2). 6. THE CIT(A) HELD THAT WHILE THERE IS A DIVERGENCE OF OPINION WITH REGARD TO THE RELATIONSHIP BETWEEN THE JV AND ITS CONSTITUENTS, THE DECISION OF JURISDICTIONAL TR IBUNAL IS AGAINST THE ASSESSEE, THE SAME IS TO BE FOLLOWED. HE HAD ALSO CITED THE CASE OF SPCL-IVRCL INFRASTRUCTURE (A .Y.2002- 03 ITA NO.0365/CIT(A)-II/07-08 DATED 21.08.2008) DE CIDED BY HIM WHEREIN HE HAD NOT AGREED IN PRINCIPLE WITH THE CONTENTION OF THE APPELLANT JV THAT IT IS NOT LIABL E FOR TDS U/S.194C SINCE THE ENTIRE TURNOVER WAS SHOWN BY THE CONSTITUENT. ACCORDINGLY, TO MAINTAIN CONSISTENCY IN STAND THE CIT(A) HELD THAT THE APPELLANT WAS REQUIRED TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS MADE BY IT TO THE J V CONSTITUENTS. THAT AS PER FACTS AVAILABLE ON RECOR D, THE APPELLANT JV IN THIS APPEAL HAS IN FACT DEDUCTED TA X AT SOURCE ON A PORTION OF THE PAYMENT MADE BY IT TO ITS CONST ITUENTS JV M/S. MADHUCON PROJECTS LTD. HENCE THE CIT(A) HAS H ELD THAT THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE IN R ESPECT OF CONTRACT WORKS CARRIED OUT BY THE CONSTITUENTS. CON SEQUENTLY THE CIT(A) HAS CONFIRMED THE DISALLOWANCE OF CERTAI N ITA NOS. 646 & 701/HYD/10 MADHUCON SINO-HYDRO(JV) 5 PAYMENTS TO CONSTITUENTS ON THE GROUND THAT TAX HAS NOT BEEN DEDUCTED AT SOURCE BY THE AOP. 7. AGGRIEVED THE ASSESSEE IS IN APPEAL. THE ASSESS EE AOP WAS FORMED BY THE TWO CONSTITUENTS ONLY FOR THE PUR POSE OF OBTAINING THE CONTRACTS FROM THE GOVERNMENT. BUT ON CE THE CONTRACT WAS OBTAINED, THE WORK TO BE CARRIED OUT B Y EACH OF THE CONSTITUENT IS CLEARLY DEMARCATED. THE RESPECTI VE CONSTITUENT CARRIES OUT THE WORK EARMARKED TO THEM AND ARE PAID THE CONTRACTED AMOUNT FOR THE SAME. THE RESPEC TIVE CONSTITUENT HAVE OFFERED THE INCOME FROM CARRYING O UT THE PROJECT APPORTIONED BETWEEN THEMSELVES. 8. THE JOINT VENTURE OR THE CONSORTIUM WAS FORMED O NLY TO OBTAIN THE CONTRACT FROM THE GOVERNMENT BODIES. AT THE TIME OF EXECUTION OF THE JOINT VENTURE 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 COND ITIONS BETWEEN THEM, IT WAS ALSO AGREED THAT EACH PARTY SH ALL BE 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 WORK. IT WAS AL SO AGREED THAT NONE OF THE PARTY SHALL ASSIGN ITS RIGHTS AND OBLIGATIONS TO ANY OTHER PARTY WITHOUT WRITTEN CONSENT OF OTHER PARTY. IT IS EVIDENTLY CLEAR THAT THE JOINT VENTURE AND THE C ONSORTIUM WAS FORMED ONLY WITH AN OBJECT TO BID CONTRACT. ONC E THE PROJECT OR CONTRACT IS AWARDED TO THE JOINT VENTURE OR THE CONSORTIUM, IT IS TO BE EXECUTED BY ITS CONSTITUENT S OR THE JOINT VENTURES IN A RATIO AGREED UPON BY THE PARTIE S. THE ASSESSEE WAS ENTITLED TO EXECUTE THE MAJOR AGREED P ORTION OF TOTAL WORK AWARDED TO THE JOINT VENTURE AND IN CASE OF A ITA NOS. 646 & 701/HYD/10 MADHUCON SINO-HYDRO(JV) 6 CONSORTIUM IT WAS AGREED THAT THE ENTIRE WORK IS TO BE EXECUTED BY THE ASSESSEE ITSELF. THEREFORE FOR ALL PRACTICAL PURPOSES, IT WAS THE ASSESSEE WHO EXECUTED THE WORK CONTRACT OR THE PROJECT AWARDED TO THE JOINT VENTUR E. NO DOUBT THE JOINT VENTURE IS AN INDEPENDENT IDENTITY AND HAS FILED ITS RETURN OF INCOME AND WAS ALSO ASSESSED TO TAX BUT IT DID NOT OFFER ANY PROFIT OR INCOME EARNED ON THIS PROJECT/WORKS AWARDED TO IT. THESE FACTS CLEARLY IN DICATES THAT THE JOINT VENTURE WAS ONLY A DE-JURE CONTRACTO R BUT IN FACT THE CONSTITUENTS WERE THE DE-FACTO CONTRACTORS IN RESPECT OF THE RESPECTIVE PORTIONS OF WORK. IN SUCH A CASE THE QUESTION OF THE AOP GIVING THE CONSTITUENTS WOR KS CONTRACT WOULD NOT ARISE. IN OUR OPINION, IN CASES WHERE THE AOP IS FORMED ONLY FOR THE PURPOSE OF OBTAINING CON TRACTS AND SPECIFIC PORTIONS OF THE CONTRACT ARE TO BE COM PLETED BY THE INDIVIDUAL CONSTITUENTS INDEPENDENTLY, THEN IT CANNOT BE CASE OF THE AOP GIVING WORKS CONTRACT TO THE CONSTI TUENTS. THIS VIEW IS SUPPORTED BY THE DECISION OF THE ITAT VISHAKHAPATNAM IN THE CASE OF M/S TTRANSSTORY (IND IA) LTD GUNTUR 2011-TIOL-499-ITAT-VIZAG. THE AAR IN THE CAS E OF IN RE MITSUBUSHI CORPN 323 ITR 277 HAS HELD THAT UN DER SIMILAR CIRCUMSTANCES WHEN AN AOP WAS FORMED ONLY F OR THE PURPOSE OF GETTING ORDERS AND THE MEMBERS CARRIED O UT SPECIFIC PORTIONS OF THE PROJECT, THE PROFIT OF THE PROJECT SHOULD BE ASSESSED IN THE HANDS OF THE INDIVIDUAL CONSTITUENTS AND NOT IN THE HANDS OF CONSORTIUM AOP . THE HYDERABAD TRIBUNAL HAS HELD IN THE CASE OF ACIT V M /S PARDHANA CONSTRUCTION CO IN ITA NO 1046/HYD/2010 DA TED 7.01.2011 (FOR THE AY 2006-07) AND IN THE CASE OF M /S SOMA ENTERPRISES V DCIT IN ITA NO 1116/HYD/2010 DATED 15.06.2011 HAVE HELD THAT IF THE CONSTITUENT HAS OF FERED INCOME FROM THE JV, THEN CREDIT MUST BE GIVEN TO TH E TDS ITA NOS. 646 & 701/HYD/10 MADHUCON SINO-HYDRO(JV) 7 MADE BY THE CLIENT, EVEN THOUGH THE TDS CERTIFICATE S MAY BE IN THE NAME OF THE AOP. THIS CLEARLY SHOWS THAT THE PROFITS FROM THE JV ARE TO BE OFFERED BY THE RESPECTIVE CON STITUENTS AND THE CONSTITUENTS SHALL BE ENTITLED TO THE TDS C REDIT DEDUCTED BY THE CLIENT, EVEN IF SUCH TDS CERTIFICA TES ARE IN THE NAME OF THE AOP. IN THE CIRCUMSTANCES THERE IS NO QUESTION OF AOP GRANTING WORKS CONTRACT TO THE CONS TITUENTS, REQUIRING DEDUCTION OF TAX AT SOURCE. 9. IN THE CIRCUMSTANCES WE HOLD THAT THE ASSESSING OFFICER ERRED IN RECASTING THE P&L OF THE AOP TO BRING IN THE WORKS DIRECTLY TAKEN UP BY THE CONSTITUENTS. FURTHER THE CONSTITUENTS HAVE OFFERED THE INCOME FROM THEIR POR TION OF THE PROJECT AS THEIR INCOME AND OFFERED THE SAME FO R TAX. THIS HAS BEEN ACCEPTED BY THE DEPARTMENT. FROM THE RATIO OF THE DECISIONS CITED ABOVE, IN THE CASE OF A JV/ CON SORTIUM FORMED SPECIFICALLY FOR THE SOLE PURPOSE OF OBTAINI NG THE CONTRACTS AND SPECIFIC PORTIONS OF THE PROJECTS ARE CARRIED OUT BY MUTUAL AGREEMENT BY SPECIFIC CONSTITUENTS, T HE PROFITS FROM THE PORTION OF THE PROJECTS DERIVED FROM THE I NDIVIDUAL CONSTITUENT CAN BE OFFERED BY THEM FOR TAX IN THEIR RETURN. ONCE SUCH INCOME IS ASSESSED IN THEIR INDIVIDUAL HA NDS THE ASSESSING OFFICER CANNOT AGAIN BRING TO TAX THE ENT IRETY OF THE RECEIPTS IN THE HANDS OF THE CONSORTIUM. CONSEQ UENTLY THERE CANNOT BE ANY DISALLOWANCE IN THE HANDS OF TH E CONSORTIUM ANY AMOUNTS RECEIVABLE BY THE CONSTITUEN TS TOWARDS THEIR SHARE OF WORK ON THE GROUND THAT CONS ORTIUM HAS NOT DEDUCTED TAX AT SOURCE FROM SUCH PAYMENT. T HE CREDIT FOR THE TDS MADE BY THE CLIENT WILL BE AVAIL ABLE TO THE RESPECTIVE CONSTITUENTS WHO HAS OFFERED INCOME ON W HICH SUCH TDS HAS BEEN MADE, EVEN THOUGH THE CERTIFICATE ISSUED BY THE CLIENT IS IN THE NAME OF THE CONSORTIUM. ITA NOS. 646 & 701/HYD/10 MADHUCON SINO-HYDRO(JV) 8 10. THE AO HAS DISALLOWED CERTAIN AMOUNTS ON THE GR OUND THAT THE TDS ON THEM WERE PAID ON 31.5.2006 I.E BEL ATEDLY. IN VIEW OF THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF CIT V VIRGIN CREATIONS, TDS PAID BEFORE THE DUE DATE FOR FILING OF THE INCOME RETURN IS AN ALLOWABLE DEDUCTI ON AND CANNOT BE DISALLOWED U/S 40(A)(IA).THE SPECIAL BENC H OF ITAT, VISHAKAPATNAM IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (2012-TIOL-184-ITAT-VIZAG-SB) HAS HELD THAT DISALLOWANCE U/S 40(A)(I) IS ONLY TO THE EXTENT OF THE AMOUNT OUTSTANDING AS ON THE LAST DAY OF THE PREVIOUS YEAR AND AMOUNTS WHICH HAVE BEEN PAID DURING THE PREVIOUS YE AR CANNOT BE DISALLOWED FOR NON DEDUCTION OF TDS. 11. THE NEXT ADDITION MADE BY THE AO RELATES TO NO N- DEDUCTION OF TAX AND CONSEQUENT DISALLOWANCE OF RS . 2,71,38,750/- U/S.40A(I) FOR THE PAYMENTS MADE TO M /S. SINO HYDRO CORPORATION, CHINA. AS PER THE AO, WORKS WORTH RS.2,71,38,750/- WAS GIVEN AS SUB CONTRACT TO SINO HYDRO CORPORATION, CHINA. THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE THAT THE SAID CONCERN HAD FILED THE RETURN OF INCOME OFFERING THE RESULTANT INCOME BY EXECUTING T HE WORK GIVEN TO IT BY THE ASSESSEE. APPARENTLY DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE VIDE ITS LETTE R DATED 2.12.2008 SUBMITTED THAT TDS WAS PROVIDED AND PAID AT THE TIME OF REMITTANCE OF THE AMOUNT TO CHINA. IT WAS SUBMITTED THAT THE REMITTANCE WAS SENT IN SUBSEQUEN T YEARS AND NOT IN THE YEAR UNDER CONSIDERATION. THE AO TH EREFORE HELD THAT THERE WAS LAPSE ON THE PART OF THE ASSESS EE WITH REGARD TO TAX DEDUCTION AT SOURCE IN TERMS OF SECTI ON 195 OF THE ACT. HE THEREFORE DISALLOWED THE AMOUNT AS PER SECTION ITA NOS. 646 & 701/HYD/10 MADHUCON SINO-HYDRO(JV) 9 40A(I) OF THE ACT. THIS WAS CONFIRMED ON APPEAL BY THE CIT(A) 12. IN VIEW OF OUR CONCLUSION EARLIER THAT THE PROF ITS OF THE INDIVIDUAL CONSTITUENTS ARE TO BE ASSESSED IN THEIR INDIVIDUAL HANDS AND THERE IS NO QUESTION OF THE ASSESSEE DEDU CTING TAX AT SOURCE WHILE PASSING ON THE PAYMENTS TO THE CONSTITUENTS TOWARDS THEIR SHARE OF WORK CARRIED OU T BY THEM, THE DISALLOWANCE OF RS. 2,71,38,750/- BEING T HE SHARE OF RECEIPTS OF THE CHINES CONCERN TOWARDS THEIR SHA RE OF WORK CARRIED OUT IN THE HANDS OF THE ASSESSEE IS DELETED . HOWEVER, IT HAS TO BE VERIFIED WHETHER THE CHINESE CONCERN HAS OFFERED THIS INCOME FOR TAX IN INDIA. IF THE CH INESE CONCERN HAS NOT FILED INCOME TAX RETURN AND OFFERED THIS AMOUNT AS PART OF THEIR INCOME IN COMPUTING THEIR T AXABLE INCOME, THE SAME SHALL BE ASSESSED AS INCOME OF THE ASSESSEE, AS THE PERSON RESPONSIBLE FOR MAKING THE PAYMENT TO THE NON RESIDENT. IF THE CHINESE CONSTITUENT HAS NOT OFFERED THIS AMOUNT AS PART OF THEIR TAXABLE INCOME IN INDIA, THE AO MAY TAKE SUITABLE ACTION FOR BRINGING THE AM OUNT TO TAX IN ACCORDANCE WITH PROVISIONS OF THE ACT. 13. THE NEXT ISSUE IN ASSESSEES APPEAL IS AGAINST THE ADDITION OF RS. 11,44,46,927/-. THE DISPUTE APPAREN TLY IS REGARDING THE NATURE OF THE PAYMENTS- WHETHER IT WA S IN THE NATURE OF INVESTMENT OR PAYMENT FOR WORKS EXECUTED. THE CIT(A) HAS SET ASIDE THE MATTER TO THE FILE OF THE AO FOR REDOING THE ISSUE IN ACCORDANCE WITH LAW. THE ASSES SEE HAS RAISED AN ISSUE THAT THE AO HAD NOT GIVEN THEM REAS ONABLE OPPORTUNITY TO EXPLAIN THEIR CASE. WHILE THE ORDER GIVING EFFECT TO THE ORDER OF THE CIT(A) IS NOT BEFORE US, WE DIRECT THE AO REDO THIS ISSUE TAKING INTO ACCOUNT OUR DECI SION ITA NOS. 646 & 701/HYD/10 MADHUCON SINO-HYDRO(JV) 10 ABOVE AND IN ACCORDANCE WITH LAW AFTER GIVING REASO NABLE OPPORTUNITY TO THE ASSESSEE. 14. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 646/H/10 APPEAL BY THE REVENUE 15. IN OUR OPINION THE ISSUES RAISED IN THE REVENUE S APPEAL ARE COVERED BY OUR DECISION THE ASSESSEES APPEAL S UPRA. THE AO ERRED IN RECASTING THE P&L OF THE ASSESSEE, WHEN THE INDIVIDUAL PORTIONS OF THE PROJECT WAS SEPARATELY C ARRIED OUT BY THE INDIVIDUAL CONSTITUENTS AND THE CONSTITUENTS HAVE OFFERED THE PROFITS FROM THEIR SHARE OF THE PROJECT TO TAX IN THEIR RETURN, WHICH HAS BEEN ACCEPTED. THEREFORE TH ERE CAN BE NO DISALLOWANCE IN RESPECT OF AMOUNTS PAYABLE TO THE CONSTITUENTS ON THE GROUND THAT NO TAX HAS BEEN DED UCTED AT SOURCE. SIMILARLY THE DISCREPANCIES IF ANY IN THE A CCOUNT ARISING DUE TO THE AO RECASTING THE ACCOUNTS OF THE ASSESSEE INCLUDING THE ENTIRE PROJECTS IN THE HANDS OF THE A SSESSEE HAS TO BE REVIEWED IN THE LIGHT OF OUR CONCLUSIONS. 16. IN THE CIRCUMSTANCES THE APPEAL OF THE REVENUE IS RESTORED TO THE FILES OF THE AO TO RE-DO THE ISSUE AS PER THE DECISION IN THE ASSESSEES APPEAL SUPRA AND OUR DIR ECTIONS IN THE EARLIER PARAGRAPHS. 17. IN THE RESULT, THE APPEAL OF THE REVENUE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NOS. 646 & 701/HYD/10 MADHUCON SINO-HYDRO(JV) 11 18. TO SUM UP, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSES AND THE REVENUES APPEAL IS AL LOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 27/11/2012. SD/- SD/- ( CHANDRA POOJARI) (ASHAVIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 27 TH NOVEMBER, 2012. KV COPY TO:- 1) MADHUCON SINO HYDRO (JV) 8-2-293/82/A/1129/A, ROAD NO. 36, JUBILEE HILLS, HYDERABAD. 2) ACIT, CENTRAL CIRCLE-4, HYDERABAD. 3) THE CIT (A)-I, HYDERABAD 4) CIT(CENTRAL), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD.