ITO, Ward-14(5), Hyd, Hyderabad V. Pallavi-MRKR JV, Hyd, Hyderabad

ITA 762/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6384 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-06-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 04-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R B NAIK
• Keywords: Retrospective amendment
• Section: 143(3); 142(1); 194C; 201(1)

Judgement Text

ITA NO 762 OF 2015 PALLAVI MRKV JV HYDERABAD PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER & SHRI PARTHA SARATHI CHAUDHURI, JUDICIAL MEMBER ITA NO.762/HYD/2015 (ASSESSMENT YEAR: 2011-12) INCOME TAX OFFICER WARD 14(5) , 6 TH FLOOR, C BLOCK, IT TOWERS, AC GUARDS HYDERABAD VS. M/S. PALAVI - MRKV JV PLOT NO.5, 1 ST FLOOR, DURGA ENCLAVE, ROAD NO.12, BANJARA HILLS, HYDERABAD PAN: AABAP 3720 E (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI R.B. NAIK, DR FOR ASSESSEE : SHRI K.C. DEVDAS DATE OF HEARING : 30 .06.2016 DATE OF PRONOUNCEMENT : 01 .0 7 .2016 O R D E R PER SHRI PARTHA SARATHI CHAUDHURI, J.M. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF THE LEARNED CIT (A)-IV HYDERABAD DATED 13.02.2015 F OR THE RELEVANT A.Y 2011-12. GROUNDS RAISED BY THE REVENUE READ AS UNDER: 1. THE CIT (A) ERRED IN HOLDING THAT THERE IS NO OBLIG ATION ON ASSESSEE TO DEDUCT TAX AT SOURCE UNDER SECTION 194C OF THE I.T. ACT, 1961 FROM THE PAYMENTS MADE T O ITS CONSTITUENTS. 2. THE CIT (A) ERRED IN DELETING THE DISALLOWANCE MADE U/S 40(A)(IA) ON THE AMOUNTS PAID TO ITS CONSTITUEN TS WITHOUT DEDUCTION OF TAX AT SOURCE AS REQUIRED U/S 194C OF THE I.T. ACT, 1961. 3. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. ITA NO 762 OF 2015 PALLAVI MRKV JV HYDERABAD PAGE 2 OF 6 2. GROUND NO.3 IS GENERAL IN NATURE AND HENCE NO AD JUDICATION IS NEEDED. GROUND NOS. 1 & 2 RELATES TO WHETHER TH E ASSESSEE IS UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE U/S 194 C OF THE ACT AND IF NOT DONE, WHETHER THE ASSESSEE FALLS WITHIN THE MISCHIEF U/S 40(A)(IA) OF THE ACT. 3. BRIEF FACTS ARISING IN THIS CASE ARE THAT THE AS SESSEE JOINT VENTURE FILED ITS RETURN OF INCOME FOR THE A.Y 2011 -12 IN THE STATUS OF AOP ON 3.10.2011 ADMITTING INCOME AT RS. NIL. TH E RETURN OF INCOME WAS PROCESSED U/S 143(1) AND REFUND OF RS.30 ,46,100 WAS ISSUED. SUBSEQUENTLY THE RETURN WAS SELECTED FOR SC RUTINY AND NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE DULY ISSUED ON THE ASSESSEE. THE ASSESSMENT WAS COMPLETED U/S 143(3) O F THE ACT ON 11.02.2014 BY ARRIVING AT A TOTAL INCOME OF RS.8,74 ,39,340 BY MAKING ADDITION OF RS.8,74,39,340 ON ACCOUNT OF DIS ALLOWANCE U/S 40(A)(IA) OF THE ACT. DURING THE COURSE OF ASSESSME NT PROCEEDINGS AO NOTICED THAT THE JV ASSESSEE HAS GIVEN THE ENTIR E CONTRACT RECEIVED OF RS.13,24,39,340 TO ITS CONSTITUENT MEMB ER M/S. PALLAVI CONSTRUCTIONS. ASSESSEE WAS ASKED TO SUBMIT THE TDS PARTICULARS ON THE SAID CONTRACT PAYMENTS. THE ASSESSEE CONTEND ED THAT THE TDS PROVISIONS U/S 194C ARE NOT APPLICABLE TO THE C ASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AS THE DU TY OF THE JOINT VENTURE WAS ONLY BIDDING FOR THE CONTRACT BY FILING THE DECLARATION AND AFTER BIDDING, THE MEMBERS OF THE AOP EXECUTED THE CONTRACT AND RECEIVED THE CONTRACT RECEIPTS AND THEREFORE, T HAT THERE IS NO CONTRACT OR SUB-CONTRACT RELATIONSHIP EXISTED IN BE TWEEN THE JOINT VENTURE AND ITS MEMBERS. THE LEARNED AR OF THE ASSE SSEE RELIED ON THE FOLLOWING COURT DECISIONS: ITA NO 762 OF 2015 PALLAVI MRKV JV HYDERABAD PAGE 3 OF 6 (A) PUNJAB & HARYANA HIGH COURT ORDER IN THE CASE OF ES S KAY CONSTRUCTIONS COMPANY (267 ITR 618) (B) HIMACHAL PRADESH HIGH COURT ORDER IN THE CASE OF AM BUJA DARLA KASHLOG MANGU TRANSPORT COOPERATIVE SOCIETY ( 188 TAXMAN 134). (C) ITAT MUMBAI BENCH DECISION IN THE CASE OF SMC AMBIC A JC IN ITA NO.7698/M/2010 DATED 29.07.2011. 4. HOWEVER, THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AS THE PROVISIONS OF SECTION 194C ACCORDING TO THE AO WAS CLEARLY APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE AO OBSERVED THAT THE ASSESSEE IS HAVING A DIRECT RELATIONSHIP WITH T HE SUB CONTRACT FOR EXECUTION OF WORK AS PER CONTRACT AGREEMENT. TH EREFORE, THE ASSESSEE JV FALLS UNDER THE AMBIT OF SECTION 194C. ACCORDINGLY AN AMOUNT OF RS.8,74,39,340 WAS DISALLOWED U/S 40(A)(I A) AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. BEFORE THE LEA RNED CIT (A), THE ASSESSEE SUBMITTED THAT IT IS AN AOP WHICH WAS ONLY COLLECTIVE NAME FOR ITS MEMBERS AND THE CONTRACT ENTERED INTO BY THE AOP WAS ONLY FOR THE BENEFIT OF ITS MEMBERS. THERE WAS NO CONTRACT WHATSOEVER BETWEEN THE AOP AND ITS JV PARTNERS. IT WAS FURTHER SUBMITTED THAT THE MEMBERS OF THE AOP I.E. M/S PALL AVI CONSTRUCTIONS AND M/S MRKR CONSTRUCTIONS PVT LTD JO INED TOGETHER FOR THE PURPOSE OF PROCURING THE CONTRACT. THE ASSESSEE AOP NEITHER RETAINED ANY COMMISSION NOR GAINED ANY PROFIT, THEREFORE, SECTION 194C HAS NO APPLICATION TO THE A SSESSEES CASE. ASSESSEE FURTHER REFERRED TO THE DECISION IN THE CA SE OF HINDUSTAN COCA COLA BEVERAGES PVT LTD (293 ITR 226) WHEREIN I T WAS HELD THAT NO DISALLOWANCE U/S 40(A)(IA) COULD BE MADE IN VIEW OF THE FACT THAT THE TAX HAS BEEN PAID BY THE CONSTITUENT. IT IS THE CASE OF THE ASSESSEE SINCE THE ENTIRE AMOUNT TRANSFERRED TO THE CONSTITUENT HAS ITA NO 762 OF 2015 PALLAVI MRKV JV HYDERABAD PAGE 4 OF 6 ALREADY BEEN PAID TO THEM, NO AMOUNT REMAINED PAYAB LE AS ON 31.03.2011 AND THEREFORE, SECTION 40(A)(IA) WOULD N OT HAVE ANY APPLICATION BASED ON THE DECISION OF THE ITAT VISAK HAPATNAM SPECIAL BENCH DECISION IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORT VS. ACIT (146 TTJ 1). THE LEARNED CIT (A) HELD THAT AS PER VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE ASSESSEE, THERE IS NO OBLIGATION ON ASSESSEE TO DEDUCT THE TDS ON T HE PAYMENTS MADE TO ITS CONSTITUENT. ACCORDINGLY NO DISALLOWANC E U/S 40(A)(IA) CAN BE MADE. THE ADDITION WAS THEREFORE, DELETED. 5. BEING AGGRIEVED, THE REVENUE IS ON FURTHER APPEA L BEFORE US. AT THE TIME OF HEARING, THE LEARNED DR RELIED ON TH E ORDER OF THE AO, WHEREAS THE LEARNED AR NOT ONLY REITERATED THE SUBM ISSIONS PLACED BEFORE THE FIRST APPELLATE AUTHORITY BUT ALSO BROUG HT OUR ATTENTION TO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP PVT. LTD (2015) 377 ITR 63 5 (DEL.) WHEREIN THE HIGH COURT HAS HELD THAT THE INSERTION OF THE SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CUR ATIVE IN NATURE AND IT HAS RETROSPECTIVE EFFECT FROM APRIL 1, 2005, BEI NG THE DATE FROM WHICH SUB-CLAUSE (IA) OF SECTION 40(A) WAS INSERTED BY THE FINANCE (NO.2) ACT, 2004. THE FIRST PROVISO TO SECTION 201( 1) OF THE ACT HAS BEEN INSERTED TO BENEFIT THE ASSESSEE. IT ALSO STAT ES THAT WHERE A PERSON FAILS TO DEDUCT TAX AT SOURCE ON THE SUM PAI D TO A RESIDENT OR ON THE SUM CREDIT TO THE ACCOUNT OF A RESIDENT, SUCH PERSON SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPE CT OF SUCH TAX IF SUCH RESIDENT HAS FURNISHED HIS RETURN OF INCOME U/ S 139. WHAT IS COMMON TO BOTH PROVISOS TO SECTIONS 40(A)(IA) AND 2 01(1) OF THE ACT IS THAT AS LONG AS THE PAYEE OR RESIDENT HAS FILED ITS RETURN OF INCOME DISCLOSING THE PAYMENT RECEIVED BY AND IN WH ICH THE ITA NO 762 OF 2015 PALLAVI MRKV JV HYDERABAD PAGE 5 OF 6 INCOME EARNED BY IT IS EMBEDDED AND HAS ALSO PAID T AX ON SUCH INCOME, THE ASSESSEE WOULD NOT BE TREATED AS A PERS ON IN DEFAULT. THE AR FURTHER RELIED ON THE DECISION OF THE COORDI NATE BENCH HYDERABAD IN ITA NOS.323 TO 336 AND CO 29 TO 42 OF 2014 IN THE CASE OF KCEL-MEIL (JV) HYDERABAD DATED 13.01.2014 W HEREIN IT WAS HELD BY THE TRIBUNAL AT PARA 30 AS UNDER: 30. KEEPING IN VIEW THE ABOVE DISCUSSION, WE FIND OURSELVES IN AGREEMENT WITH THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE COMMON IS SUE INVOLVED IN THE PRESENT CASES IS SQUARELY COVERED I N FAVOUR OF THE ASSESSEE BY AT LEAST THREE DECISIONS OF THE COORDINATE BENCHES OF THIS TRIBUNAL WHERE IN A SIMI LAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE, INVOLVING SIMILAR FACTS AND CIRCUMSTANCES OF THE CA SE. WE THEREFORE, FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LEARNED CIT(A), WHEREBY SHE HELD FOLLOWING TWO OF T HE THREE DECISIONS OF THE TRIBUNAL, VIZ. OF THE VISAKHAPATNAM BENCH IN THE CASE OF UAN RAJU CONSTRUCTIONS (SUPRA) AND OF THE MUMBAI BENCH IN TH E CASE OF SMC AMBIKA JV (SUPRA), THAT THERE BEING NO RELATIONSHIP OF CONTRACTOR AND SUBCONTRACTOR BETWEE N THE ASSESSEE AOP JOINT VENTURE AND ITS CONSTITUENT MEMB ERS, TAX AT SOURCE WAS NOT REQUIRED TO BE DEDUCTED FROM THE PAYMENTS MADE BY THE ASSESSEE AOP TO ITS MEMBERS, A S PER THE PROVISIONS OF 5.194C(2), AND CONSEQUENTLY, THERE WAS NO QUESTION OF TREATING THE ASSESSEES AS IN DEF AULT UNDER 5.201(1). WE THEREFORE, UPHOLD THE IMPUGNED O RDER OF THE LEARNED CIT(A) AND DISMISS THESE APPEALS FIL ED BY THE REVENUE 6. WE HAVE PERUSED THE FACTS AND CIRCUMSTANCES IN T HE CASE, SUBMISSIONS PUT FORTH BEFORE US BY THE RESPECTIVE P ARTIES HEREIN, THE JUDICIAL DECISIONS RELIED ON AND WE ARRIVE AT O UR CONSIDERED VIEW THAT THE CASE OF THE ASSESSEE IS COVERED BY VARIOUS JUDICIAL DECISIONS PLACED BEFORE US. AS PER THE HON'BLE DELH I HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP P LTD (SUPRA), ONCE THE PAYEE HAD FILED HIS RETURN AND OFFERED THE SUM RECEIVED TO TAX, ITA NO 762 OF 2015 PALLAVI MRKV JV HYDERABAD PAGE 6 OF 6 NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) AND THE A SSESSEE WOULD NOT BE TREATED AS AN ASSESSEE IN DEFAULT. FURTHER T HE DECISION OF THE COORDINATE BENCH AT HYDERABAD REFERRED ABOVE, WE OB SERVE THAT THE PROVISIONS OF SECTION 194C(2) IS NOT ATTRACTED IN T HE CASE OF PAYMENTS MADE BY THE ASSESSEES TO ITS CONSTITUENT M EMBERS, THERE WAS NO QUESTION TO TREAT THE ASSESSEES IN DEFAULT U /S 201(1) AND THE SPECIAL BENCH DECISION IN THE CASE OF MERILYN S HIPPING & TRANSPORT (SUPRA) ONCE THE ENTIRE AMOUNT HAS BEEN P AID AND NOTHING REMAINED PAYABLE, THEN SECTION 40(A)(IA) W OULD NOT HAVE ANY APPLICATION. RESPECTFULLY FOLLOWING THE ABOVE J UDICIAL PRONOUNCEMENTS AND DECISIONS, WE ARE OF THE VIEW TH AT THE RELIEF GRANTED TO THE ASSESSEE BY THE ORDER OF THE CIT (A) IS JUST AND PROPER AND THEREFORE SHALL BE SUSTAINED. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST JULY, 2016. S D/ - S D/ - (B. RAMAKOTAIAH) (PARTHA SARATHI CHAUDHURI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 1 ST JULY, 2016. VNODAN/SPS COPY TO: 1. INCOME TAX OFFICER, WARD 14(5) , 6 TH FLOOR, C BLOCK, IT TOWERS, AC GUARDS HYDERABAD 2. M/S. PALAVI-MRKV JV, PLOT NO.5, 1 ST FLOOR, DURGA ENCLAVE, ROAD NO.12, BANJARA HILLS, HYDERABAD 3. CIT(A) 4 HYDERABAD 4. CIT-VI HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER