ITO Wd3(4), Pune V. M/s. Gammon Progressive- JV., Pune

ITA 65/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9733 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 14-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Rule of consistency; Advance ruling
• Section: 194C; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI R.K.PANDA, ACCOUNTANT MEMBER. ITA.NO.65/PN/2011 (ASSTT. YEAR : 2007-08) ITO, WARD-3(4), PUNE. .. APPELLANT VS. M/S.GAMMON PROGRESSIVE JV, SOMA HEIGHTS, 3 SIDDIVINAYAK SOCIETY, KARVE ROAD, KARVE PUTALA, PUNE 411038. PAN: AAAAG1428R .. RESPONDENT APPELLANT BY : SHRI S.K.SINGH, CIT(DR). RESPONDENT BY : SHRI SUNIL PATHAK DATE OF HEARING : 07.08.2012 DATE OF PRONOUNCEMENT : 22.08.2012 ORDER PER SHAILENDRA KUMAR YADAV, JM : THIS APPEAL HAS BEEN FILED BY THE REVENUE ON THE F OLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANC ES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GR OSSLY ERRED IN HOLDING THAT NO INCOME ATTRIBUTABLE ON CON TRACT RECEIPTS COULD BE TAXED IN THE STATUS OF THE AOP. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GR OSSLY ERRED IN IGNORING THAT THE ASSESSEE, BEING A SEPARA TE ENTITY U/S 2(31) OF THE INCOME-TAX ACT, 1961, AND HAVING A PER MANENT ACCOUNT NUMBER SHOULD HAVE PREPARED ITS OWN PROFIT & LOSS ACCOUNT AS WELL AS THE BALANCE SHEET REFLECTING THE FULL TRANSACTIONS UNDERTAKEN BY IT AND NOT JUST SHOWING APPORTIONMENT OF RECEIPTS/PAYMENTS AND ASSETS/LIABI LITIES BETWEEN ITS MEMBERS. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN FAILING TO APPRECIATE THAT THE WORK CONTRACT ORDERS ISSUED TO THE ASSESSEE BY THE CONTRACTEE WERE IN ITS NAME AND SO ALSO 2 THE PAYMENTS WERE CREDITED TO THE ASSESSEE'S ACCOUN T. AS SUCH, RE-ALLOCATION OF THESE CONTRACTS AMONG THE ME MBERS OF THE ASSESSEE AMOUNTS TO SUB-CONTRACTING. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN FAILING TO APPRECIATE THAT AS THE PAYMENTS MADE BY THE ASSESSEE TO MEMBERS WERE CLEARLY TOWARDS SUB-CONTRA CT, TAX WAS DEDUCTIBLE FROM SUCH PAYMENTS U/S 194C AND IN V IEW OF THE ASSESSEE'S FAILURE TO DO SO, THE ASSESSING OFFI CER WAS PERFECTLY JUSTIFIED IN APPLYING THE PROVISIONS OF S EC. 40(A)(IA) OF THE INCOME-TAX ACT, 1961. 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN IGNORING THE FACT THAT THE ASSESSEE AOP WAS IN FULL CONTROL OF THE CONTRACT AND IT WAS THE RESPONSIBILITY OF THE A SSESSEE TO SUBMIT THE BILLS TO AND RECEIVE PAYMENTS FROM MKVDC LTD. WHICH IN TURN WAS PASSED ON BY THE ASSESSEE TO THE CO- VENTURERS. 7. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN NOT CONSIDERING THE LANDMARK JUDGEMENT OF THE HON'B LE SUPREME COURT IN THE CASE OF CH. ACHAIAH (1996) 218 ITR 239 WHEREIN IT WAS HELD THAT IF THE SHARE OF PROFIT IS DETERMINED IN THE JOINT VENTURE AGREEMENT, IT CANNOT BE ANYTHING BUT AOP, AND WHERE THE CHARGE IS ON THE INCOME OF THE AOP, I N SUCH STATUS, THE ASSESSING OFFICER HAS NO CHOICE BUT TO TAX IT, IRRESPECTIVE OF THE FACT AS TO WHETHER SUCH SHARE O F PROFIT HAS BEEN OFFERED TO TAX OR TAXED IN THE HANDS OF MEMBER S OR NOT. 8. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN NOT CONSIDERING THE RECENT AND ELABORATE JUDGEMENT OF THE HON'BLE AUTHORITY FOR ADVANCE RULINGS IN THE CASE O F GEOCONSULTANT ZT GMBH, IN RE(2008) 304 ITR 283 WHER EIN THE JOINT VENTURE WAS HELD TO BE AOP, FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT DECISION IN THE CASE OF C H.ACHAIAH. 9. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTOR ED. 2. THE ASSESSEE IS A JOINT VENTURE BETWEEN GAMMON I NDIA LTD., AND PROGRESSIVE CONSTRUCTIONS LTD., AND RETURNS HAV E BEEN FILED IN THE STATUS OF AOP SINCE A.Y. 2001-02 AT NIL INCOM E EVERY YEAR. THIS WAS BECAUSE THE CONTRACT REVENUE WAS DIRECTLY APPORTIONED BETWEEN THE TWO CORPORATE ENTITIES, I.E., THE MEMBE RS OF THE JOINT VENTURE, AND THERE WAS NO RECEIPT/EXPENDITURE AND N O PROFIT AND LOSS IN THE CASE OF THE APPELLANT. THE MAIN ISSUE I S OF TREATING REVENUE SHARING BETWEEN THE APPELLANT AND ITS MEMBE RS AS SUBCONTRACTING, AND THEREBY DISALLOWING THE AMOUNT OF RS.4,12,49,749/- U/S.40(A)(IA) OF THE INCOME TAX AC T, 1961 3 (HEREINAFTER CALLED IN SHORT AS THE ACT). THE AS SESSING OFFICER OBSERVED THAT IN THE RETURN THE ASSESSEE HAD CLAIME D THE STATUS AS FIRM AND THE DEED OF PARTNERSHIP WAS ALSO FILED. T HE ASSESSING OFFICER STATED THAT GAMMON PROGRESSIVE JOINT VENTUR E WAS A PARTNERSHIP OF M/S.GAMMON INDIA LTD., AND M/S.PROGR ESSIVE CONSTRUCTION LTD. CONSIDERING THE PROVISIONS OF SE CTION 194C OF THE ACT, THE ASSESSEE WAS LIABLE TO DEDUCT TAX ON SUB-C ONTRACT PAYMENTS AND THAT ASSESSEE HAS TRANSFERRED THE CONTRACT RECE IPTS TO M/S.GAMMON INDIA LTD., WITHOUT MAKING ANY TDS. THE REFORE, THE ASSESSING OFFICER APPLIED THE PROVISIONS OF SECTION 40(A)(IA) TO DISALLOW THE ENTIRE AMOUNT TRANSFERRED TO M/S.GAMMO N INDIA LTD., BY ASSESSEE WHICH WAS THE ENTIRE CONTRACT RECEIPTS OF THE JOINT VENTURE FOR THE YEAR. THE STAND OF THE ASSESSEE BE FORE THE ASSESSING OFFICER WAS THAT CONTRACT RECEIPTS WERE DISTRIBUTED BETWEEN THE PARTNERS OF THE JOINT VENTURE AND THE WORK EXECUTED WAS ALSO SHARED BY THEM. THE CONTRACT RECEIPTS WERE DISTRIBUTED IN ACCORDANCE WITH THE WORK CARRIED OUT BY THE JOINT VENTURE PARTNERS. SINCE THE JOINT VENTURE HAS NOT MADE ANY PAYMENT FOR CONTRACT/SUB-C ONTRACT, THE QUESTION OF TDS DID NOT ARISE. IT WAS ALSO EXPLAIN ED ON BEHALF OF THE ASSESSEE THAT ASSESSEE HAD BEEN FOLLOWING THIS METH OD CONSISTENTLY SINCE A.Y. 2000-01 AND IN RESPECT OF SIMILAR AOPS T HIS ASPECT WAS ACCEPTED IN ASSESSMENT PROCEEDINGS IN THE EARLIER Y EARS. THE ASSESSING OFFICER OBSERVED THAT SINCE THE WORK HAS BEEN RECEIVED BY THE ASSESSEE BUT PASSED ON TO M/S.GAMMON INDIA LTD. , THE TRANSACTION WAS COVERED U/S.194C FOR DEDUCTION OF T AX. DUE TO VIOLATION OF THE SAME, THE ASSESSING OFFICER DISALL OWED THE AMOUNT OF RS.4,12,49,749/- U/S.40(A)(IA) WHICH WAS THE ENT IRE CONTRACT RECEIPTS RECEIVED BY JOINT VENTURE DURING THE YEAR AND PASSED ON TO M/S.GAMMON INDIA LTD. 3. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AU THORITY. VARIOUS CONTENTIONS WERE RAISED AND CIT(A) AFTER AN ALYSING THE FACTS UNDER THE RELEVANT LAWS, GRANTED RELIEF TO THE ASSE SSEE. SAME HAS BEEN OPPOSED BEFORE US. 4 4. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE S UBMITTED THAT THE CIT(A) ERRED IN HOLDING THAT NO INCOME ATTRIBUT ABLE ON CONTRACT RECEIPTS COULD BE TAXED IN THE STATUS OF AOP. CIT( A) ERRED IN IGNORING THAT ASSESSEE BEING A SEPARATE ENTITY U/S. 2(31) OF THE ACT, AND HAVING PERMANENT ACCOUNT NUMBER SHOULD HAVE PRE PARED ITS OWN PROFIT & LOSS ACCOUNT AS WELL AS THE BALANCE SH EET REFLECTING THE FULL TRANSACTIONS UNDERTAKEN BY IT AND NOT JUST SHOWING APPORTIONMENT OF RECEIPTS/PAYMENTS AND ASSETS/LIABI LITIES BETWEEN ITS MEMBERS. CIT(A) ERRED IN FAILING TO APPRECIATE THAT WORK CONTRACT ORDERS ISSUED TO THE ASSESSEE BY THE CONTR ATEE WERE IN ITS NAME AND SO ALSO THE PAYMENTS WERE CREDITED TO THE ASSESSEES ACCOUNT. AS SUCH, REALLOCATION OF THESE CONTRACTS AMONG THE MEMBERS OF THE ASSESSEE AMOUNTS TO SUB-CONTRACTING. ACCORDINGLY, THE ASSESSING OFFICER WAS JUSTIFIED IN APPLYING THE PROVISIONS OF SECTION 40(A)(IA). SAME SHOULD BE UPHELD. ON THE OTHER HAND, LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESS ING OFFICER HAS ERRED IN TREATING REVENUE SHARING BETWEEN THE ASSES SEE AND ITS MEMBERS AND SUB-CONTRACTING AND THEREBY DISALLOWING THE AMOUNT OF RS.4,12,49,749/- U/S. 40(A)(IA) OF THE ACT FOR 8 YEARS. THE ASSESSEE, THEREFORE, SUBMITTED THAT ASSESSING OFFIC ER WAS NOT JUSTIFIED IN MAKING DISALLOWANCE OF RS.4,12,49,749/ - U/S. 40(A)(IA) OF THE ACT. BESIDES THIS, THE LD. AUTHORISED REPRE SENTATIVE RAISED VARIOUS CONTENTIONS IN SUPPORT OF THE ORDER OF THE CIT(A). 5. AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND MA TERIAL ON RECORD, WE FIND THAT THE FIRST ISSUE IS REGARDING S TATUS OF THE ASSESSEE. THE ASSESSING OFFICER HAS MENTIONED THE 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 EXPLAINED THAT IN THE RETURNS OF INCOME SINC E BEGINNING TILL THE A.Y. 2006-07, THE STATUS WAS MENTIONED AS AOP O NLY, I.E., WHEN THE RETURNS WERE FILED MANUALLY. HOWEVER, FROM A.Y . 2007-08, WHEN ELECTRONIC FILING HAD TO BE DONE, DUE TO COMPUTER E RROR THE STATUS 5 APPEARED AS FIRM ON THE ITR ACKNOWLEDGEMENT, WHER EAS IN THE COMPUTATION OF TOTAL INCOME, IT WAS CORRECTLY MENTI ONED AS AOP. IT WAS EXPLAINED THAT I.T.RETURN FORM NO.5 WAS ACTUALL Y APPLICABLE FOR FIRMS, AOPS AND BOIS. THEREFORE, THIS ERROR MIGHT HAVE OCCURRED. THE ASSESSEE HAS ALSO FILED COMPUTATION OF TOTAL IN COME ALONGWITH ACKNOWLEDGEMENTS FROM A.Y. 2002-03 TO A.Y. 2006-07 IN WHICH THE STATUS WAS REGULARLY SHOWN AS AOP AND EVEN IN THE A PPLICATION FORM FOR ALLOTMENT OF PAN IT WAS SHOWN AS AOP. THE CIT(A) NOTICED FROM THE RECORD THAT STATUS WAS SHOWN AS AOP. HOWE VER, IT WAS NOT VERY MUCH RELEVANT FOR THE PURPOSE OF APPLICABILITY OF PROVISIONS OF SECTION 194C SINCE TDS PROVISIONS ARE APPLICABLE TO ALL ENTITIES EXCEPT INDIVIDUALS AND 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 R ECEIVING THE PAYMENT, WHICH WAS IMMEDIATELY DISTRIBUTED IN THE R ATIO OF THE SHARE OF THE WORK DONE. THE ACTUAL SHARE IN THE JO INT VENTURE OF THE TOTAL WORK ALLOCATED WAS 60% FOR M/S.GAMMON INDIA L TD. AND 40% FOR M/S.PROGRESSIVE CONTRACTION LTD. IN THIS BACKG ROUND IT WAS EXPLAINED THAT THE CONTRACT ACCOUNT AND THE BALANCE SHEET OF THE JOINT VENTURE REVEALS NOTHING BUT APPORTIONMENT 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 PREPARED FOR THE PURPOSE SINCE THERE DID NO T ARISE ANY PROFIT OR LOSS TO THE ASSESSEE PER SE. THE JOINT V ENTURE TRANSFERRED NOT ONLY THE GROSS REVENUE BUT ALSO THE CORRESPONDI NG TDS TO ITS MEMBERS IN THE RATIO OF THEIR WORK DONE BY INDIVIDU AL MEMBERS FOR WHICH THE APPOINTMENT CERTIFICATE WAS DULY ISSUED E VERY YEAR BY THE ASSESSING OFFICER. IN THIS BACKGROUND IT WAS SUBM ITTED THAT THERE WAS NO RELATIONSHIP OF CONTRACTOR AND SUB-CONTRACTO R BETWEEN 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 6 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 AP PORTIONMENT CERTIFICATES WHO HAVE ACCOUNTED FOR THE CORRESPONDI NG CONTRACT REVENUE IN THEIR RESPECTIVE RETURNS. IT WAS ALSO S UBMITTED THAT NIL INCOME ARISING IN THE HANDS OF THE AOP IS CONFIRMED BY THE ACTION OF THE ASSESSING OFFICER IN NOT ASSESSING ANY PROFIT/I NCOME ARISING FROM THE CONTRACT 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 VENTURE VIS-A -VIS SUB- CONTRACT. IT WAS EXPLAINED ON BEHALF OF THE ASSESS EE THAT IN THE CASE OF SUB-CONTRACT, THERE WAS A RELATIONSHIP OF PRINCI PAL AND AGENT WHEREAS IN THE SITUATION OF REVENUE SHARING, IT WAS ON A PRINCIPAL TO PRINCIPAL BASIS. FURTHER, IN SUB-CONTRACTING, THE CONTRACTOR RETAINS HIS SHARE OF PROFIT ALONGWITH THE TDS AND ONLY THE BALANCE IS PASSED ON TO SUB-CONTRACTOR. BUT IN JOINT VENTURE, ASSESS EES DID NOT RETAIN ANY SHARE IN THE REVENUE WITH IT AND HAS PASSED THE ENTIRE GROSS REVENUE ALONGWITH TDS APPORTIONED FOR THEM. IT WAS SUBMITTED THAT THE DEPARTMENT HAS ALSO ISSUED TAX APPORTIONME NT CERTIFICATES EVERY YEAR DURING THE PAST EIGHT YEARS TO ENABLE TH E TWO MEMBERS TO CLAIM THE TDS CREDITS IN THEIR RESPECTIVE CASES. E VEN IN THE CURRENT ASSESSMENT YEAR, IT WAS NOTICED THAT TAX APPORTIONM ENT 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 ASSESSING OFFICER HAS ALLOWED APPORTIONMENT OF ENTIRE TDS OF RS.9,26,588/- DURING THE YEAR TO M/S.GAMMON INDIA LTD., SINCE ENT IRE WORK DURING THE YEAR WAS CARRIED OUT BY IT. SIMILARLY, THERE HAS BEEN APPORTIONMENT TO EITHER OF THE TWO COMPANIES OR TO BOTH THE COMPANIES IN THE EARLIER YEARS ALSO BY THE ASSESSIN G OFFICER FOR ENABLING THEM TO CLAIM TDS IN RESPECTIVE CASES. TH E ASSESSEE, VIDE ITS SUBMISSION DATED 22.04.2010, FURNISHED THE DETA ILS WHICH REVEALED THAT GROSS REVENUE FROM THIS CONTRACT RECE IPTS BY JOINT VENTURE WAS ACCOUNTED FOR IN CASE OF EITHER OR BOTH OF THE TWO 7 COMPANIES WHO WERE MEMBERS OF THE JOINT VENTURE IN ALL ASSESSMENT 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 BETWEEN CASES OF CONTRACT/ 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 COOPER ATIVE SOCIETY (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 O F THE ASSESSEE THAT THE ASSESSING OFFICER HAS MARKED COPY OF THIS CERTI FICATE TO THE MEMBERS OF THE JOINT VENTURE AS WELL AS TO THEIR RE SPECTIVE ASSESSING OFFICERS, WHICH SHOWS THAT THE ASSESSING OFFICER HA S APPLIED HIS MIND AND CONSCIOUSLY ACCEPTED THE FACT THAT THE JOI NT VENTURE AOP WAS FOR THE DISTRIBUTION OF RECEIPTS AMONGST ITS CO NSTITUENTS 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 DOME STIC COMPANIES, BEING JOINT VENTURE PARTNER IN THEIR IND IVIDUAL CAPACITY AND THE TAX RATES APPLICABLE TO THE AOP. HOWEVER, IN SUBMISSION DATED 21.10.2010, IT WAS EXPLAINED THAT TAX RATES I N THE CASE OF DOMESTIC COMPANY AND THE AOP WOULD BE THE SAME IN T HIS CASE. THIS WAS DUE TO APPLICABILITY OF SECTION 167B OF TH E ACT. THE ASSESSEE ALSO FILED DETAILS OF THE RETURNS OF INCOM E 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 EVERY YEAR. FOR THIS PAYMENT THE STAND OF THE ASSESSEE WAS THAT THE METH OD OF APPORTIONMENT OF REVENUE TO THE MEMBERS WAS NOT TO TAKE ANY UNDUE BENEFIT OF LOSSES INCURRED BY THEM. THEREFOR E, IT WAS STATED 8 THAT THERE WAS NO LOSS TO THE REVENUE AS A RESULT O F THIS METHOD ADOPTED BY THE ASSESSEE OF SHARING THE GROSS REVENU E 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 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. IT WAS CONTENDED THAT THIS ASPECT HAS NOT BEEN CONSIDERED IN THE ASSESSMENT ORDER U/S.143(3) FOR A.Y. 2007-08. ON T HE PRINCIPLE OF CONSISTENCY, THE LD. AUTHORISED REPRESENTATIVE RELI ED ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE O F GOPAL PUROHIT (2010) 228 CTR 582 (BOM.) AND ASSESSEE ALSO RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RADHASO AMI SATSANG VS. CIT (1992) 193 ITR 321 (SC) WHEREIN IT WAS OBSE RVED THAT STRICTLY SPEAKING THE PRINCIPLE OF RES JUDICATA DOE S NOT APPLY TO INCOME TAX PROCEEDINGS SINCE EACH ASSESSMENT YEAR W AS A SEPARATE UNIT IN ITSELF AND WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR. IT WAS FURTHER CONTENDED THAT WHER E A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HA VE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORD ER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE C HANGED IN A SUBSEQUENT YEAR. IT WAS ALSO CONTENDED THAT HON'BL E KERALA HIGH COURT IN THE CASE OF MANJUNATH MOTOR SERVICE AND CA NARA PUBLIC CONVEYANCES, 197 ITR 321 (KAR.) OBSERVED THAT METHO D ADOPTED BY THE ASSESSING OFFICER WOULD RESULT IN DOUBLE TAXATI ON 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 PARTNERS HAD ALSO UTILISED TH E TDS CREDITS ON THE BASIS OF APPORTIONMENT CERTIFICATE ISSUED BY TH E ASSESSING OFFICER. IN VIEW OF THE ABOVE DISCUSSION, CIT(A) W AS JUSTIFIED IN HOLDING THAT IN ABSENCE OF ANY CONTRACT OR SUB-CONT RACT WORK BY JOINT VENTURE TO ITS MEMBER COMPANIES, PROVISIONS O F SECTION 194C 9 WERE NOT APPLICABLE FOR THE PURPOSE OF TDS. THE TW O CORPORATE ENTITIES FORMING JOINT VENTURE WERE ALREADY BEING A SSESSED SINCE A.Y. 2000-01 ONWARDS ON THEIR RESPECTIVE SHARES AND TDS APPORTIONMENT CERTIFICATES WERE ALSO ISSUED BY THE ASSESSING OFFICER EVERY YEAR FOR THESE EIGHT YEARS INCLUDING THE CURR ENT 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. TH EREFORE, THERE WAS NO QUESTION OF ANY DISALLOWANCE UNDER THE PROVI SIONS OF SECTION 40(A)(IA) OF THE ACT. MOREOVER, DISALLOWANCE U/S. 40(A)(IA) MADE BY THE ASSESSING OFFICER CANNOT BE SUSTAINED. IN EFFE CT, THE METHOD ADOPTED BY THE ASSESSING OFFICER WILL ALSO RESULT I N DOUBLE TAXATION 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 OBS ERVED 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 CANNOT L EAD TO TAXABILITY IN THE HANDS OF THE AOP UNLESS THE AOP R ECEIVES MONIES IN ITS OWN RIGHT. WE HAVE NOTED THAT HON'BL E AUTHORITY OF ADVANCE RULINGS WAS IN SEISIN OF A MATERIALLY ID ENTICAL 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 PART OF COMPOS ITE CONTRACT AWARDED TO THE AOP, BUT THE TAXABILITY OF INCOME FROM SUCH CONTRACT WAS HELD TO BE TAXABLE IN THE HANDS O F THE RESPECTIVE CONTRACTORS. WHILE HOLDING SO HON'BLE A UTHORITY 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 AGR EEMENT THAT EACH PARTY WILL BEAR ITS OWN LOSS AND RETAIN I TS PROFITS AS AND WHEN SUCH PROFITS OR LOSS ARISE. HAV ING REGARD TO THE AGREEMENT WE ARE OF THE VIEW THAT THE APPLICANT CANNOT BE TREATED AS A PARTNERSHIP WHICH CAN 10 ONLY BE CREATED BY AN AGREEMENT. NOR CAN IT BE TREA TED AS AN AOP. IN ORDER TO CONSTITUTE AN AOP THERE WILL HA VE TO BE COMMON PURPOSE OR COMMON ACTION AND THE OBJECT O F THE ASSOCIATION MUST BE TO PRODUCE INCOME JOINTLY. IT IS NOT ENOUGH THAT THE PERSONS RECEIVE THE INCOME JOIN TLY. 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 BUSIN ESS IN COMMON, ONLY A PART OF THE JOB WILL BE DONE BY VOAC Z ACCORDING TO ITS TECHNICAL SKILL AND CAPABILITY. TH E OTHER PART OF THE CONTRACT WILL BE EXECUTED BY HCC. THE T OTAL VALUE OF THE CONTRACT WAS RS. 2,62,01,03,120. THE APPLICANT'S SHARE OF WORK WAS VALUED AT RS. 44,52,7 8,920 (17 PER CENT OF TOTAL VALUE). THE ASSOCIATION 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 ARI SING THEREFROM WAS QUITE SEPARATE AND INDEPENDENT OF THE APPLICANT'S WORK AND INCOME. IF THE COST INCURRED B Y THE HCC OR THE APPLICANT WAS MORE THAN THEIR INCOME, EA CH PARTY WILL HAVE TO BEAR ITS LOSS WITHOUT ANY ADJUST MENT FROM THE OTHER PARTY. THE ASSOCIATION OF THE PETITI ONER COMPANY WITH HCC WAS UNDOUBTEDLY FOR MUTUAL BENEFIT BUT SUCH ASSOCIATION WILL NOT MAKE THEM A SINGLE ASSESSABLE UNIT AND LIABLE TO TAX AS AN AOP. FOR EX AMPLE, A BUILDING CONTRACTOR MAY ASSOCIATE WITH A PLUMBER AND AN ELECTRICIAN TO EXECUTE A BUILDING PROJECT. ALL T HESE PERSONS ARE DRIVEN BY PROFIT-MAKING MOTIVE. BUT THA T BY ITSELF WILL NOT MAKE THE THREE PERSONS LIABLE TO BE TAXED AS AN AOP IF EACH ONE HAS A DESIGNED AND INDEPENDENT R OLE TO PLAY IN THE BUILDING PROJECT. IN THE INSTANT CAS E, THE APPLICANT HAS STATED THAT THE APPLICANT HAS MADE IT S OWN ARRANGEMENT FOR EXECUTION OF WORK INDEPENDENT FROM 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 LEV Y OF INCOME-TAX. THE APPLICANT WILL BE LIABLE TO BE TAXE D AS A SEPARATE AND INDEPENDENT ENTITY. THE QUESTION NO.1 IS ANSWERED ACCORDINGLY.' 7. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS SO EXPRESSED BY THE HON'BLE AUTHORITY FOR ADVANCE RULING. WE ADO PT THE REASONING OF THE HON'BLE AAR AND, RESPECTFULLY FOLL OWING THE SAME, APPROVE THE CONCLUSION ARRIVED AT BY THE CIT( A) AND DECLINE TO INTERFERE IN THE MATTER. 11 IN VIEW OF THE ABOVE DISCUSSION, WE ARE NOT INCLINE D TO INTERFERE IN THE FINDING OF THE CIT(A) WHO HAS DIRECTED THE ASSE SSING OFFICER TO DELETE THE ADDITION. THE SAME IS UPHELD. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF AUGUST, 2012. SD/- SD/- ( R.K.PANDA ) ( SHAILENDRA KUMAR YAD AV ) ACCOUNTANT MEMBER JUDICIAL MEMBER GSPS PUNE, DATED THE 22 ND AUGUST, 2012. COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE ITO, WARD-3(4), PUNE. 3. THE CIT(A)-II, PUNE. 4. THE CIT-II, PUNE. 5. THE DR B BENCH, PUNE. 6. GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE.