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2014 (5) TMI 930 - AT - Income TaxAllowability of deduction u/s 80IA(4) of the Act - Joint venture for the purpose of getting a contract Held that - The assessee is found eligible even after considering the deviations from the original agreement - the substance is found more important than the form - The contents of the agreement is not important but the joint venture partner, who executed the work in reality is held relatable for deduction - the deduction u/s 80IB(4) is available either to the JV, who is the actual signatory to the agreement or to the constituents of the JV without having separate agreement - the final executor of the contract is relevant for availing benefit u/s 80IB(4) of the Act - The implied principle in matters of granting deduction under these provisions revolves around the concept i.e., substance is more important than the form and thus, failure to draw a separate agreement with NHAI does not disqualify the assessee from claiming the deduction - the SIIL executed the contract on behalf of M/s. Supreme - MBL JV - the NHAI does not have objections against the assessee executing the contract the order of the CIT(A) is set aside Decided in favour of Assessee. Deletion made u/s 68 of the Act Held that - The AO has not properly appreciated the facts relevant to the transaction - M/s. Achiever Trading Pvt. Ltd is the supplier to the assessee and they have commercial transactions - assessee gives advances to the supplier of material - The amounts appearing in the bank accounts of the assessee as per the Achiever Trading Pvt. Ltd as a source in the said advances given by the assessee, the same is not reviews by the Revenue - it is not proper to doubt the identity and genuineness of the transactions there was no error in the order of the CIT(A) Decided against Revenue.
Issues Involved:
1. Allowability of deduction under Section 80IA(4) of the Income Tax Act. 2. Deletion of addition under Section 68 of the Income Tax Act. Issue-wise Detailed Analysis: 1. Allowability of Deduction under Section 80IA(4): The primary issue concerns the allowability of deduction under Section 80IA(4) of the Income Tax Act to the assessee, who is a constituent of a joint venture (JV) formed solely for obtaining a contract. The assessee executed 60% of the contract. The Assessing Officer (AO) denied the deduction, reasoning that the JV, not the assessee, was the signatory with the National Highways Authority of India (NHAI), and the assessee acted as a sub-contractor. The AO's conclusion was based on the agreement compliance under Section 80IA(4)(1)(b). During appellate proceedings, the assessee argued, citing the Tribunal's decision in ITO vs. UAN Raju Construction, that constituents of a JV are entitled to deductions if they execute the work awarded to the JV. The CIT (A) upheld the AO's decision, stating that only the JV, a separate taxable entity, is entitled to the deduction. In the Tribunal's review, the assessee cited several cases, including Transstory (India) Ltd vs. ITO and B.T. Patil and Sons Belgaum Constructions (P) Ltd vs. ACIT, where deductions were allowed based on the substance of the transaction rather than the form. The Tribunal emphasized that the execution by the assessee on behalf of the JV was crucial, and the absence of a separate agreement with NHAI did not disqualify the deduction. Therefore, the Tribunal reversed the CIT (A)'s decision, allowing the assessee's appeals. 2. Deletion of Addition under Section 68: The second issue pertains to the deletion of an addition of Rs. 2,27,80,000/- under Section 68 of the Income Tax Act. The AO added this amount, suspecting it to be loans from M/s. Achiever Trading Pvt. Ltd., deemed non-genuine based on an Inspector's report. The assessee contended that the amounts were returns of unutilized trade advances, not loans, and provided ledger extracts to substantiate this. The CIT (A) analyzed the ledger extracts and confirmed the genuineness of the transactions, noting that the amounts received were returns of advances given by the assessee. The CIT (A) directed the deletion of the addition, finding the sources for the credits explained. The Tribunal, upon review, found no infirmity in the CIT (A)'s findings. It agreed that the AO had not properly appreciated the facts and that the transactions with M/s. Achiever Trading Pvt. Ltd. were genuine commercial transactions. Therefore, the Tribunal upheld the CIT (A)'s decision, dismissing the Revenue's appeal. Conclusion: The Tribunal concluded that the assessee is entitled to the deduction under Section 80IA(4) as the final executor of the contract and upheld the deletion of the addition under Section 68, confirming the genuineness of the transactions. The appeals by the assessee were allowed, and the Revenue's appeal was dismissed.
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