ITO, Ward- 2(3), Gurgaon V. KEC KIEL JV, Gurgaon

ITA 7047/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6328 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 23-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKSAH SINHA
• Assessee Lawyers: MRINALINI SAPRA
• Keywords: Fair market value
• Section: 271(1)(c); 143(3); 143(1)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH,FNEW DELHI BEFORE SHRI N.K. BILLAIYA ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 7047/DEL/2017 (AY 2014-15) (H EARING IN VIRTUAL COURT) INCOME TAX OFFICER WARD-2(3), GURGAON VS M/S KEC KIEL JV, 8 TH FLOOR, BUILDING NO. 9A, DLF CYBER CITY PHASE-III, GURGAON REVENUE / APPELLANT ASSESSEE/RESPONDENT ASSESSEE BY MS MRINALINI SAPRA SR DR, REVENUE BY SHRI PRAKSAH SINHA CA DATE OF HEARING 17.08.2021 DATE OF PRONOUNCEMENT 17.08.2021 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER : 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-1, [CIT(A)], GURGAON DATED 26.09.2017 FOR ASSESSMENT YEAR (AY) 2014-15. THE REVENUE HAS RAISED FOLLOWING GROUND OF APPEAL:- WHETHER THE LD. CIT(A) WAS RIGHT ON FACTS AND IN LAW IN DELETING THE ADDITIONS OF RS. 2,19,56,917/- MADE BY ASSESSING OFFICER BY COMPUTING THE PROFIT OF JOINT VENTURE @4% OF THE GROSS RECEIPTS AS THE ASSESSEE HAD GIVEN THE PAYMENT TO THE PERSONS SPECIFIED UNDER SECTION 40A(2)(B) OF THE INCOME TAX ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A JOINT VENTURE OF KEC INTERNATIONAL LIMITED AND KIRAN INFRA ENGINEERS LTD HAVING SHARING OF 90% AND 10% RESPECTIVELY. THE ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2014- 15 ON 29.11.2014 DECLARING INCOME OF RS.30,02,517/-. THE CASE WAS 2 SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 24.11.2016. THE ASSESSING OFFICER (AO) WHILE PASSING THE ASSESSMENT ORDER ESTIMATED THE INCOME OF ASSESSEE @4% OF GROSS RECEIPT OF RS. 62,39,85,858/-. THE ASSESSING OFFICER DURING THE ASSESSMENT NOTED THAT THE ASSESSEE DIVERTED THE WORK CONTRACT TO LEADING PARTNER I.E. M/S. KEC INTERNATIONAL LIMITED. THE WORK WAS CARRIED OUT BY LEADING PARTNER M/S. KEC INTERNATIONAL LIMITED. THE AO ISSUED SHOW CAUSE NOTICE VIDE ORDER SHEET ENTRY DATED 12 TH AUGUST, 2016 AS TO WHY NET PROFIT (NP) SHOULD NOT BE TAKEN @4% OF GROSS RECEIPT AS THE WORK IS EXECUTED BY RELATED PARTY, AS PER SECTION 40(A) OF THE INCOME TAX ACT. THE ASSESSEE FILED ITS REPLY DATED 7.11.2016. IN THE REPLY THE ASSESSEE HAS STATED THAT BID FOR AVAILING CONTRACT WAS MADE THROUGH LEAD PARTNER M/S. KEC INTERNATIONAL LIMITED. THE ENTIRE COORDINATION WAS DONE BY M/S. KEC INTERNATIONAL LIMITED RIGHT FROM THE TIME OF SUBMISSION BY BID AND TILL THE TIME OF AWARD OF CONTRACT. THE COST OF BID MANAGEMENT ETC. WAS ENTIRELY BORNE BY M/S. KEC INTERNATIONAL LIMITED WITHOUT ANY ADDITIONAL COST OF JOINT VENTURE. THE ASSESSEE ALSO FURNISHED ITS PROFIT AND LOSS ACCOUNT. IT WAS FURTHER EXPLAINED THAT PERFORMANCE GUARANTEE ON BEHALF OF THE JOINT VENTURE WAS ALSO FURNISHED BY M/S. KEC INTERNATIONAL LIMITED. IT WAS EXPLAINED THAT JV BEING AN 3 UNREGISTERED CONSORTIUM OF THE LEAD PARTNER, THE ASSESSEE COULD NOT HAVE ARRANGED THE BANK GUARANTEE ON ITS OWN AND EVEN SUCH BANK GUARANTEE WOULD HAVE BEEN POSSIBLY ISSUED BY JOINT VENTURE. IN ADDITION TO THAT OFFICE OF JOINT VENTURE, OFFICE OF THE JOINT VENTURE, STAFF AND FACILITIES LIKE TELEPHONE, FAX, INTERNET INCLUDING PROJECT SITES OFFICES ARE BEING UTILISED BY JOINT VENTURE AND ITS COST ARE BEING BORN BY M/S. KEC INTERNATIONAL LIMITED WITH NO COST TO THE JV. THE PROFIT AND LOSS ACCOUNT OF JOINT VENTURE WAS ALSO FURNISHED. THE ASSESSEE ALSO SUBMITTED THAT JOINT VENTURE AND KEC ARE BEING ASSESSED IN HIGHEST TAX AND ANY DISALLOWANCE IF DONE, WILL BE A TAX NEUTRAL. THEREFORE DISALLOWANCE WOULD NOT SERVE ANY PURPOSE. THE ASSESSEE ALSO RELIED UPON THE DECISION OF OTHER GROUP JOINT VENTURE CASE IN KEC-DELCO-VARAHA-JV APPEAL NO. 27/14-15 ASSESSMENT YEAR 2011-12 DECIDED BY CIT(A) GURGAON WHEREIN IT WAS HELD THAT WHERE THE CONSTITUENT PARTICIPANTS MAKE A JOINT VENTURE TO SECURE A CONTRACT WHICH IS MERELY A PASS THROUGH ENTITY WITH MINIMUM EXPENSES NO TAX LIABILITY CAN BE ATTRIBUTED BY HOLDING THE SUBJECT ENTITY AS AOP AND NO NET PROFIT ON PERCENTAGE BASIS CAN BE TAXED. THE REPLY OF ASSESSEE WAS NOT ACCEPTED BY THE AO. THE AO TOOK HIS VIEW THAT ASSESSEE CAME INTO EXISTENCE BY AN AGREEMENT WITH M/S. KEC INTERNATIONAL LIMITED AND KIRAN INFRA ENGINEERS LTD. WITH 90% 4 AND 10% OF SHARES RESPECTIVELY. THE SECOND PARTY IS MERELY A FACILITATOR. IF JV EARNS MORE PROFIT THE 10% THEREOF GOES TO THE SECOND PARTY. THE AO ASSESSED THE INCOME OF THE ASSESSEE AS 4% OF GROSS RECEIPT. THE REPLY OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO. THE AO ON THE BASIS OF THE GROSS RECEIPT OF OF RS. 62.39 CRORE ESTIMATED THE INCOME OF THE ASSESSEE @ 4% OF RECEIPT, THEREBY MADE ADDITIONS OF RS. 2.19 CRORE. 3. ON APPEAL BEFORE LD. CIT(A),THE ENTIRE ADDITION. THE LD. CIT(A) WHILE DELETING THE ADDITION HELD THAT IN THE CASE OF M/S. KEC SIDHARTH, JV VS ITO THE AO HAS MADE SIMILAR ADDITION WHICH WAS CONFIRMED BY LD. CIT(A) AND ON FURTHER APPEAL BEFORE TRIBUNAL THE ENTIRE ADDITION WAS DELETED BY TRIBUNAL VIDE ORDER DATED 28 TH FEBRUARY, 2017. THUS THE LD. CIT(A) BY FOLLOWING THE ORDER OF TRIBUNAL DELETED THE ENTIRE ADDITION. AGGRIEVED BY THE ORDER OF LD. CIT(A) THE REVENUE HAS FILED THIS APPEAL BEFORE TRIBUNAL. 4. WE HAVE HEARD THE SUBMISSIONS OF LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AND LD. AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE AND HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITIES. THE LD. DR FOR THE REVENUE RELIED UPON THE ORDER OF THE AO. 5. ON THE OTHER HAND LD. AR FOR THE ASSESSEE SUBMITS THE GROUNDS OF APPEAL RAISED BY THE REVENUE IS SQUARELY COVERED BY THE DECISION 5 OF TRIBUNAL IN ASSESSEES GROUP CASES IN ITA NO.ITA NO. 7044/DEL/2017 IN THE CASE OF M/S KEC SIDHARTH JV AND ITA NO. 7045/DEL/2017, ITA NO. 7046/DEL/2017 IN THE CASE OF M/S KEC PLR KPIPL JV. THE LD. AR FURTHER SUBMITTED THAT LD. CIT(A) WHILE GRANTING THE RELIEF TO THE ASSESSEE FOLLOWED THE ORDER OF THE TRIBUNAL IN ASSESSEES GROUP CASE. THUS, THE GROUNDS OF APPEAL RAISED BY THE REVENUE HAS NO MERIT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND DELIBERATED ON THE DECISION OF TRIBUNAL IN ASSESSEES GROUP CASE SUPRA. WE FIND THAT ON ALMOST SIMILAR SET OF FACTS, SIMILAR ADDITIONS WERE MADE IN ASSESSEES GROUP CASE IN ITA NO.ITA NO. 7044/DEL/2017 IN THE CASE OF M/S KEC SIDHARTH JV AND ITA NO. 7045/DEL/2017, ITA NO. 7046/DEL/2017 IN THE CASE OF M/S KEC PLR KPIPL JV. ON APPEAL BEFORE LD. CIT THE ADDITIONS WERE DELETED BY FOLLOWING THE ORDER OF TRIBUNAL DATED 28.2.2017. WE EVEN FURTHER FIND IN ASSESSEES ANOTHER CASE IN ITA NO. 7047/DEL/2017 IN THE CASE OF M/S. KEC KIEL, JV WE FIND THAT ON SIMILAR ADDITIONS IN ASSESSMENT YEAR 2013-14 AND 2014-15 IN ASSESSEES OTHER GROUP CASE IN ITA NO.ITA NO. 7044/DEL/2017 IN THE CASE OF M/S KEC SIDHARTH JV AND ITA NO. 7045/DEL/2017, ITA NO. 7046/DEL/2017 IN THE CASE OF M/S KEC PLR KPIPL JV. TRIBUNAL GRANTED SIMILAR RELIEF TO THE ASSESSEE. FOR APPRECIATION OF 6 THE FACT THE RELEVANT PART OF THE ORDER PASSED BY THE COORDINATE BENCH BY PASSING THE FOLLOWING ORDER :- 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 27.11.2013 DECLARING AN INCOME OF RS.1,23,320/- WHICH WAS PROCESSED AS SUCH ON 28.03.2015 U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT A JOINT VENTURE AGREEMENT WAS EXECUTED ON 26.10.2010 BETWEEN M/S KEC INTERNATIONAL LTD. AND M/S SIDHARTH CONSTRUCTION AND TRADING PVT. LTD. WITH CERTAIN CONDITIONS TO CARRY OUT WORK ALLOCATED TO JOINT VENTURE THROUGH TENDER NO. 1 OF 10-11 BY EASTERN RAILWAY, CONSTRUCTION DIVISION,KOLKATA FOR PATULI-KATWA IN THE STATE OF WEST BENGAL VIDE LETTER DATED 02.09.2010. ANOTHER JOINT VENTURE AGREEMENT WAS ALSO EXECUTED ON 09.12.2010 BETWEEN AFORESAID PARTIES. THE LEADING PARTNER M/S KEC INTERNATIONAL LTD. WAS HAVING 80% SHARE AND THE REMAINING 20% SHARE WAS WITH THE OTHER PARTY. HE FURTHER OBSERVED THAT THE WORK CONTRACT WAS AWARDED TO THE ASSESSEE BY THE RAILWAY AUTHORITY AND THE ASSESSEE FURTHER DIVERTED ITS 99% CONTRACT WORK BY SIMPLE LETTER DATED 09.09.2010 FOR CHAMPA- JHARSUGUDA STATING THEREIN BACK TO BACK AGREEMENT TO THE AFORESAID LEAD PARTNER I.E. M/S KEC INTERNATIONAL LTD. THE AO WAS OF THE VIEW THAT THE ASSESSEE HAD SHIFTED ITS REAL PROFIT BY MAKING SUB-CONTRACT AND THAT THE ASSESSEE WAS COVERED WITHIN THE MEANING OF SECTION 40A(2)(B) OF THE ACT. THE AO MADE THE ADDITION OF RS.44,29,401/- BY OBSERVING AS UNDER: 7 7. FURTHER, THE ANALYSIS MADE BELOW SHOWS THAT THE JV (ASSESSEE) HAS SHIFTED THE REAL PROFIT BY MAKING SUB CONTACT. REVENUE EARNED BY ASSESSEE (JV) 11,38, 17,920 EXPENSES INCURRED BY JV OB ACCOUNT OF SUB CONTRACT 11,37,06,154 DEEMED PROFIT OF JV 1,23,316 ON A CONTRACT RECEIPTS OF RS. 11,38,17,920/- NET PROFIT IS ONLY RS.1,23,316/- WHICH IS 0.1%. IT IS, THEREFORE, CLEAR THAT THE MOTIVE OF THE ASSESSEE WAS TO SHIFT THE PROFIT FROM JV TO M/S KEC INTERNATIONAL LIMITED. THE PAYMENTS MADE ARE EXCESSIVE AND UNREASONABLE. IN TRUE TERMS THE JV HAS ONLY AWARDED THE CONTRACT AND ALL THE TRANSACTIONS WERE PASSED THROUGH THE ACCOUNTS OF JV(ASSESSEE) TO M/S KEC INTERNATIONAL LIMITED AND THE ASSESSEE HAS CHARGED ONLY 0.1% WHICH IS VERY MARGINAL AS THE WORK CONTRACT HAS BEEN FURTHER GIVEN TO ASSOCIATED PARTY IN VIEW OF SECTION 40A(2)(B) OF THE ACT. FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT THE ASSESSEE JV HAS TO BE TAXED ASAOP IN RESPECT OF EXCESSIVE PAYMENT MADE TO PERSONS SPECIFIED U/S 40A(2)(B) OF THE I.T. ACT. ON CAREFUL CONSIDERATION, I ASSESS THE NET INCOME AT RS.45,52,717/- BEING 4% OF GROSS RECEIPT OF RS. 11,38,17,920/- AGAINST RETURNED INCOME OF RS. 1,23,316/-. I AM SATISFIED THAT ASSESSEE HAS CONCEALED AND FURNISHED INACCURATE PARTICULARS OF HIS INCOME TO THIS EXTENT & ACCORDINGLY PENALTY PROCEEDINGS U/S 271(1)(C) ARE TO BE INITIATED SEPARATELY. 5. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) WHO DELETED THE ADDITION BY OBSERVING IN PARAS 4.5 TO 4.7 OF THE IMPUGNED ORDER AS UNDER: 8 4.5 I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUBMISSIONS. I VE ALSO PERUSED THE FACTS OF THE CASE AS ALSO THE ORDER OF THE HON'BLE ITAT REFERRED TO ABOVE. IN THE ORDER DATED 21.11.2016 IN THE CASE OF ITO VS KEC ASIA (SUPRA), THE HON'BLE ITAT HELD AS UNDER: ON GOING THROUGH THE MANDATE OF THE ABOVE PROVISION, IT IS CLEAR THAT THE DISALLOWANCE UNDER THIS SECTION IS MADE IN RESPECT OF THE EXPENSES INCURRED OR PAYMENTS MADE WHICH ARE NOT DEDUCTIBLE. THIS SECTION HAS NO APPLICATION TO INCOME ASPECT OF THE ASSESSEE. AS THE ASSESSING OFFICER HAS MADE DISALLOWANCE U/S 40A(2)(B) INRESPECT OF INCOME WHICH THE ASSESSEE IN HIS OPINION OUGHT TO HAVE EARNED RATHER THAN CERTAIN EXPENSES INCURRED, I AM OF THE CONSIDERED OPINION THAT THE PROVISIONS OF THIS SECTION ARE NOT ATTRACTED. I, THEREFORE, UPHOLD THE IMPUGNED ORDER ON THIS SCORE DELETING THE DISALLOWANCE. 4.6 IN THE CASE OF KEC SIDHARTHA VS ITO IN ORDER DATED 28.02.2017 THE HOBBLE ITAT FOLLOWED THE ORDER DATED 21.11.2016(SUPRA), IN THIS CASE OF KEC SIDHARTHA FOR A.Y. 2012-13 THE ADDITION MADE BY THE AO ON THE SAME ISSUE WAS CONFIRMED BY ME VIDE ORDER DATED 15.09.2016 IN I.T APPEAL NO. 215/15-16. THE ORDER WAS REVERSED BY THE HON'BLE ITAT VIDE ITS ORDER DATED 28.02.2017. 4.7 THE ISSUE INVOLVED IN THE APPELLANT'S CASE IS SQUARELY COVERED BY THE AFORESAID TWO DECISIONS OF THE HON'BLE JURISDICTIONAL ITAT RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL ITAT IN APPELLANT'S GROUP CASES, THE ADDITION MADE BY THE ASSESSINGOFFICER IS DELETED. THESE GROUNDS OF APPEAL ARE ALLOWED. 6. NOW THE DEPARTMENT IS IN APPEAL. THE LD. SR. DR SUBMITTED THAT THE AO RIGHTLY INVOKED THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT AS THE EXPENSES INCURRED BY THE ASSESSEE WERE EXCESSIVE. SHE SUPPORTED THE ASSESSMENT ORDER PASSED BY THE AO. 7. IN HIS RIVAL SUBMISSIONS, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE 9 ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE EARLIER ORDERS OF THE ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2011-12 AND 2012-13 IN ITA NOS.2326 & 5943/DEL/2016 RESPECTIVELY VIDE RESPECTIVE ORDER DATED 21.11.2016 AND 28.02.2017 (COPIES ARE PLACED AT PAGE NOS. 37 TO 47 OF THE ASSESSEES PAPER BOOK). 8. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED POSITION THAT THE AO MADE THE ADDITION BY INVOKING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT WHICH ARE APPLICABLE TO THE EXPENSES CONSIDERED TO BE EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS/SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE. HOWEVER, IN THE INSTANT CASE, THE AO ESTIMATED THE PROFIT OF THE ASSESSEE AND DETERMINED THE INCOME, NOWHERE HE DOUBTED THE EXPENSES INCURRED BY THE ASSESSEE. THEREFORE, I AM OF THE CONFIRMED VIEW THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION BY INVOKING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT WHICH ARE APPLICABLE TO THE EXPENDITURE AND NOT TO THE RECEIPTS AND THE LD. CIT(A) RIGHTLY DELETED THE SAME. A SIMILAR ISSUE HAVING IDENTICAL FACTS HAS ALREADY BEEN ADJUDICATED BY THE ITAT DELHI BENCH SMC, NEW DELHI VIDE ORDER DATED 21.11.2016 IN ITA NO. 2326/DEL/2016 FOR THE ASSESSMENT YEAR 2011-12 IN THE CASE OF ITO, WARD-2(2), GURGAON VS KECASIAKOM UB (JV), GURGAON WHEREIN THE RELEVANT FINDINGS ARE GIVEN IN PARAS 5 & 6 OF THE ORDER DATED 21.11.2016 WHICH READ AS UNDER: 5. IT IS NOTICED THAT THE AO MADE DISALLOWANCE U/S 40A(2)(B) OF THE ACT BY OPINING THAT THE ASSESSEE SHOULD HAVE EARNED INCOME FROM SUBCONTRACTING. AT THIS STAGE, IT IS RELEVANT TO NOTE THE PRESCRIPTION OF THE RELEVANT PART OF SECTION 40A(2), WHICH IS AS UNDER :- 40A(2)(A) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REFERRED TO IN CLAUSE (B) OF THIS SUB-SECTION, AND THE ASSESSING OFFICER IS OF OPINIONTHAT SUCH EXPENDITURE 10 IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSIONOF THE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUING TO HIM THEREFROM, SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION. 6. ON GOING THROUGH THE MANDATE OF THE ABOVE PROVISION, IT IS CLEAR THAT THE DISALLOWANCE UNDER THIS SECTION IS MADE IN RESPECT OF THE EXPENSES INCURRED OR PAYMENTS MADE WHICH ARE NOT DEDUCTIBLE. THIS SECTION HAS NO APPLICATION TO INCOME ASPECT OF THE ASSESSEE. AS THE AO HAS MADE DISALLOWANCE U/S 40A(2)(B) IN RESPECT OF INCOME WHICH THE ASSESSEE IN HIS OPINION OUGHT TO HAVE EARNED RATHER THAN CERTAIN EXPENSES INCURRED, I AM OF THE CONSIDERED OPINION THAT THE PROVISIONSOF THIS SECTION ARE NOT ATTRACTED. I, THEREFORE, UPHOLD THE IMPUGNED ORDER ON THIS SCORE DELETING THE DISALLOWANCE. 9. THE AFORESAID ORDER WAS FOLLOWED IN THE ASSESSEES OWN CASE IN ITA NO. 5943/DEL/2016 FOR THE ASSESSMENT YEAR 2012-13 VIDE ORDER DATED 28.02.2017 WHEREIN IT HAS BEEN HELD AS UNDER: 4. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE RECORD OF THE CASE. ADMITTEDLY, THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 40A(2)(B) AS THE CONTRACT HAD BEEN GIVEN TO ASSOCIATED PARTY. I FIND THAT UNDER IDENTICAL CIRCUMSTANCES THE TRIBUNAL IN THE CASE OF KEC-ASIAKOM UB (JV) (SUPRA) HAS OBSERVED AS UNDER:- 4. I HAVE HEARD THE LD. AR AND PERUSED THE RELEVANT MATERIAL ONRECORD. NONE IS PRESENT ON BEHALF OF THE REVENUE. IN FACT, THERE IS NOONE TO ATTEND THE PROCEEDINGS FROM THE SIDE OF THE REVENUE IN ALL THE CASES FIXED BEFORE THE BENCH TODAY. THE LD. AR INSISTED THAT THE APPEAL BE DISPOSED OF. I AM AGREEABLE WITH THE CONTENTION OF THE LD.AR AND, ACCORDINGLY, PROCEEDING TO DISPOSE OF THE INSTANT APPEAL EX PARTE QUA THE REVENUE. 5. IT IS NOTICED THAT THE AO MADE DISALLOWANCE U/S 40A(2)(B) OF THE ACT BY OPINING THAT THE ASSESSEE SHOULD HAVE EARNED INCOME FROM SUB-CONTRACTING. AT THIS STAGE, IT IS RELEVANT TO NOTE THE PRESCRIPTIONOF THE RELEVANT PART OF SECTION 40A(2), WHICH IS AS UNDER:- 40A(2)(A) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REFERREDTO IN CLAUSE (B) OF THIS UB-SECTION, AND THE ASSESSING OFFICER IS OF OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE 11 BUSINESS OR PROFESSION OF THE ASSESSEE OR THE BENEFIT DERIVED BY OR ACCRUING TO HIM THEREFROM, SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED AS A DEDUCTION. 6. ON GOING THROUGH THE MANDATE OF THE ABOVE PROVISION, IT IS CLEAR THAT THE DISALLOWANCE UNDER THIS SECTION IS MADE IN RESPECT OF THE EXPENSES INCURRED OR PAYMENTS MADE WHICH ARE NOT DEDUCTIBLE. THIS SECTION HAS NO APPLICATION TO INCOME ASPECT OF THE ASSESSEE. AS THE AO HAS MADE DISALLOWANCE U/S 40A(2)(B) IN RESPECT OF INCOME WHICH THE ASSESSEE IN HIS OPINION OUGHT TO HAVE EARNED RATHER THAN CERTAIN EXPENSES INCURRED, I AM OF THE CONSIDERED OPINION THAT THE PROVISIONS OF THIS SECTION ARE NOT ATTRACTED. I, THEREFORE, UPHOLD THE IMPUGNED ORDER ON THIS SCORE DELETING THE DISALLOWANCE. 5 . RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF KEC-ASIAKOM UB (JV) (SUPRA), I ALLOW THE CLAIM OF ASSESSEE. 10. SO, RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER, I DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 11. IN ITA NOS. 7045 & 7046/DEL/2017, IDENTICAL ISSUE HAVING SIMILAR FACTS ISINVOLVED, THEREFORE, THE FINDINGS GIVEN IN THE FORMER PART OF THIS ORDER SHALL APPLY MUTATIS MUTANDIS. 12. IN THE RESULT, THE APPEALS OF THE DEPARTMENT ARE DISMISSED. 7. IN VIEW OF THE AFORESAID FACTUAL AND LEGAL DISCUSSION WE DO NOT FIND ANY MERIT IN THE APPEAL FILED BY THE REVENUE. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH AUGUST, 2021, IMMEDIATELY AFTER CONCLUSION OF THE HEARING OF THE MATTER IN VIRTUAL MODE. SD/- SD/- (N.K.BILLAIYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17/08/2021 12 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI