I.T.O. WD.3(1), THANE V. NCC ROHIT (JV), THANE

ITA 7558/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83467 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 09-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANURAG SRIVASTAVA
• Section: 194C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI . . , , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO.7558/MUM/2011 (A.Y. 2008-09) THE INCOME TAX OFFICER, WARD 3(1), LOWER GR.FLOOR, VARDAAN BLDG., W.I.E, THANE 400 602 VS. M/S.NCC ROHIT (JV) 101, MSRTC BLDG., 1 ST FLOOR, OPP.AMARGYAN, KHOPAT ROAD, THANE (W), PAN:AAAAN5606J (RESPONDENT) APPELLANT BY : SHRI ANURAG SRIVASTAVA RESPONDENT BY : NONE DATE OF HEARING : 05/08/2014 DATE OF PRONOUNCEMENT : 05 /08/2014 ORDER PER I.P.BANSAL, JM: THIS IS AN APPEAL FILED BY THE REVENUE AND IT IS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A-1, THANE DATED 30/08/2011 FOR ASSESSME NT YEAR . GROUND OF APPEAL READS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES THE ID. CIT(A) ERRED IN TREATING THAT NO CONTRACT HAS EXISTED BETWEEN ASSESSEE AOP AND ITS MEMBERS AN D THERE WAS NO LIABILITY ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE ON PAY MENT TO ITS MEMBERS IGNORING THE FACT THAT THE AOP IS A SEPARATE PERSON FROM THE MEMBER O F THE AOP AS PER PROVISIONS OF SEC. 2(31). THEREFORE, IT IS LIABLE TO DEDUCT TAX ON PAY MENT MADE TO THE MEMBERS OF AOP. 2. THE ASSESSEE IN THE PRESENT CASE HAS BEEN ASSESS ED AS ASSOCIATION OF PERSONS (AOP). IT IS A JOINT VENTURE WHICH WAS AWARDED CON TRACT WORK BY KALYAN & DOMBIVILI MUNICIPAL CORPORATION. IT IS THE CASE OF THE REVEN UE THAT THE PAYMENT MADE BY THE ASSESSEE TO M/S. ROHIT INFRA PROJECT PVT. LTD., WHI CH IS ONE OF THE CONSTITUENT OF THE ASSESSEE AOP WAS IN THE NATURE OF WORK CONTRACT, TH EREFORE, LIABLE FOR DEDUCTION OF ITA NO.7558/MUM/2011 (A.Y. 2008-09) 2 TAX. SINCE THE ASSESSEE HAD FAILED TO DEDUCT TAX THEREON THE SAME WAS DISALLOWED UNDER THE PROVISIONS OF SECTION 40A(IA) OF THE INCO ME TAX ACT, 1961 (THE ACT). 3. BEFORE LD. CIT(A) IT WAS THE CASE OF THE ASSESSE E THAT ASSESSEE BEING AOP WAS NOT UNDER AN OBLIGATION TO DEDUCT TAX FROM THE WO RK CONTRACT AS THE INCLUSION OF AOP AS A PERSON RESPONSIBLE FOR DEDUCTION OF TAX WA S FOR THE FIRST TIME BROUGHT INTO THE STATUTE BY FINANCE ACT, 2008. THUS, IT WAS PLE ADED THAT SINCE THERE WAS NO LIABILITY TO DEDUCT TAX, DISALLOWANCE UNDER SECTION 40A(IA) HAS WRONGLY BEEN MADE. RELIANCE WAS PLACED ON THE DECISION OF HONBLE HIMA CHAL PRADESH HIGH COURT IN THE CASE OF CIT VS. AMBUJA DARLA KASHLOG MANGU TRANSPOR T CO-OP. SOCIETY. LD. CIT(A) ACCEPTED SUCH SUBMISSION OF THE ASSESSEE AND HAS HE LD THAT ASSESSEE WAS NOT LIABLE FOR DEDUCTION OF TAX UNDER SECTION 40A(IA) OF THE A CT. LD. CIT(A) HAS ACCEPTED SUCH CLAIM OF THE ASSESSEE ON THE GROUND THAT NO CONTRAC T HAD EXISTED BETWEEN ASSESSEE AND AOP AND ITS MEMBERS, THEREFORE, THERE WAS NO LI ABILITY ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE. 4. NOTICE OF HEARING WAS SENT TO THE ASSESSEE. HOW EVER, NONE WAS PRESENT ON BEHALF OF THE ASSESSEE. THIS APPEAL WAS FIRST FIXE D FOR HEARING ON 4/08/2014, WHEN NONE APPEARED ON BEHALF OF THE ASSESSEE. LD. DR WAS REQUIRED TO BRING ON RECORD THE LEGAL POSITION REGARDING INCLUSION OF AOP IN SE CTION 194C AND CASE WAS ADJOURNED TO 05/08/2014. ON 05/08/2014 LD. DR HAS SUBMITTED COPY OF MEMORANDUM EXPLAINING THE PROVISION OF AMENDMENT. PARA 33 EXP LAINING THE AMENDMENT RELATING TO INCLUSION OF AOP DESCRIBE AS UNDER: 33. ENLARGEMENT OF SCOPE OF TDS UNDER SECTION 194 C TO COVER ASSOCIATION OF PERSONS AND BODY OF INDIVIDUALS.. 33.1 SUB-SECTION (1) OF SECTION 194C OF THE INCOME- TAX ACT PROVIDES FOR DEDUCTION OF INCOME-TAX AT SOURCE FROM ANY SUM CREDITED OR PAID TO A RESIDENT CONTRACTOR FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYI NG OUT ANY WORK) IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND THE GOVERNMENT, LOCAL AUTHORITIES, STATUTORY CORPORATIONS. COMPANIES. CO-OPERATIVE SOCIETIES, ST ATUTORY AUTHORITIES ENGAGED IN PROVIDING HOUSING ACCOMMODATION, REGISTERED SOCIETI ES, TRUSTS, UNIVERSITIES, FIRMS AND THOSE INDIVIDUALS/HUFS WHO ARE REQUIRED TO GET THEI R ACCOUNTS AUDITED UNDER SECTION 44AB. A NUMBER OF SPECIAL PURPOSE VEHICLES (SPVS) A RE BEING SET-UP TO EXECUTE LARGE WORKS CONTRACTS. SOME OF THESE SPVS ARE STRUCTURED AS JOINT VENTURES(JVS)/CONSORTIUMS ITA NO.7558/MUM/2011 (A.Y. 2008-09) 3 IN THE NATURE OF AN ASSOCIATION OF PERSONS (AOP) OR BODY OF INDIVIDUALS (BOL). SINCE THE PROVISIONS OF SECTION 194C CURRENTLY DO NOT SPECIFI CALLY REQUIRE AN AOP OR BOI TO DEDUCT TAX AT SOURCE, THERE IS SCOPE FOR LEAKAGE OF REVENU E. 33.2 THEREFORE SECTION 194C OF THE INCOME-TAX ACT, HAS BEEN AMENDED AND IT NOW STIPULATES THAT THE FOLLOWING ASSOCIATION OF PERSON S (AOPS) OR BODY OF INDIVIDUALS (BOIS), WHETHER INCORPORATED OR NOT SHALL BE LIABLE TO DEDU CT INCOME-TAX AT SOURCE AT THE TIME OF CREDIT OR PAYMENT OF SUCH SUM TO THE ACCOUNT OF THE CONTRACTOR UNDER SUBSECTION (1) OF SECTION 1 94C: (A) WHOSE GROSS SALES/RECEIPTS OR TURNOVER FROM BUS INESS OR PROFESSION EXCEEDS THE LIMIT SPECIFIED UNDER SECTION 44AB: (B) WHOSE GROSS SALES/RECEIPTS OR TURNOVER FROM BUS INESS OR PROFESSION DOES NOT EXCEED THE LIMIT SPECIFIED UNDER SECTION 44AB BUT WHO AR C SPECIFICALLY MENTIONED UNDER CLAUSES (A) TO (J) OF SUBSECTION 1). 33.3 APPLICABILITY: THIS AMENDMENT HAS BEEN MADE AP PLICABLE WITH EFFECT FROM 1ST JUNE, 2008. HOWEVER, LD. DR RELIED UPON THE ORDER PASSED BY AO. 5. WE HAVE HEARD LD. DR. THE AOP HAS BEEN INCLUDED IN THE LIST OF SPECIFIED PERSON WHO ARE REQUIRED TO DEDUCT TAX ONLY W.E.F. 1 /6/2008. THE IMPUGNED ASSESSMENT YEAR IS ASSESSMENT YEAR 2008-09 REGULATI NG THE PERIOD FROM 1/4/2007 TO 31/03/2008. THEREFORE, DURING THE YEAR UNDER CONSI DERATION, THE AOP WAS NOT A PERSON UNDER AN OBLIGATION TO DEDUCT TAX UNDER THE PROVISIONS OF SECTION 194C. ACCORDINGLY, WE DECLINE TO INTERFERE IN THE ORDER P ASSED BY LD. CIT(A) AND DEPARTMENTAL APPEAL IS DISMISSED. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/08/201 4 ! ' #$ % &'( 05/08/2014 ' ) SD/- SD/- ( /SANJAY ARORA ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; &' DATED 05/08/2014 ITA NO.7558/MUM/2011 (A.Y. 2008-09) 4 ! ! ! ! ' '' ' *+, *+, *+, *+, -,$+ -,$+ -,$+ -,$+ / COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. *0./ / THE RESPONDENT. 3. 1 ( ) / THE CIT(A)- 4. 1 / CIT 5. ,2) *+' , , / DR, ITAT, MUMBAI 6. )3 4 / GUARD FILE. !' !' !' !' / BY ORDER, 0,+ *+ //TRUE COPY// 5 55 5 / 6 6 6 6 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . ' . ./ VM , SR. PS