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2014 (12) TMI 320 - AT - Income TaxStatus of the assessee Held that - Following the decision in ITO Vs. Gammon Progressive-JV 2014 (12) TMI 313 - ITAT PUNE The assessee has made it clear that the status in which the returns was filed was that of an AOP - when electronic filing had to be done, due to computer error the status appeared as firm on the ITR acknowledgement,whereas in the computation of total income, it was correctly mentioned as AOP - assessee has also filed computation of total income along with acknowledgements from A.Y. 2002-03 to A.Y. 2006-07 in which the status was regularly shown as AOP and even in the application form for allotment of PAN it was shown as AOP, each of the two parties has agreed to bear its own loss or retain its own profit separately - Both have agreed to execute the job together for better co-operation in their relationship with the Chennai Port Trust - If the cost incurred by the HCC or the applicant was more than their income,each party will have to bear its loss without any adjustment from the other party - the applicant and HCC cannot be treated as an AOP for the purpose of levy of income-tax - The applicant will be liable to be taxed as a separate and independent entity. Disallowance of contract receipts u/s 40(a)(ia) Held that - Following the decision in ITO Vs. Gammon Progressive-JV 2014 (12) TMI 313 - ITAT PUNE CIT(A) was justified in holding that in absence of any contract or sub-contract work by joint venture to its member companies, provisions of section 194C were not applicable for the purpose of TDS - The two corporate entities forming joint venture were already being assessed since A.Y. 2000-01 onwards on their respective shares and TDS apportionment certificates were also issued by the AO every year for these eight years including the current assessment year to enable them to claim the same - there was no Profit and Loss Account in the assessee s case and there was no claim of any expenditure - there was no question of any disallowance under the provisions of section 40(a)(ia) - disallowance u/s. 40(a)(ia) made by the AO cannot be sustained - the finding of the CIT(A) cannot be interfered who has rightly held that there is no question of disallowance made u/s. 40(a)(ia) of the Act Decided against revenue.
Issues Involved:
1. Status of the assessee (AOP vs. firm) 2. Applicability of TDS provisions under section 194C 3. Consistency in the method of revenue sharing and tax treatment 4. Double taxation concern Detailed Analysis: 1. Status of the Assessee (AOP vs. Firm) The first issue addressed was the status of the assessee. The Assessing Officer (AO) had identified the status as a firm, but the assessee clarified that the returns were filed as an Association of Persons (AOP). The status was consistently shown as AOP in manual filings from A.Y. 2002-03 to A.Y. 2006-07, but due to a computer error, it appeared as 'firm' in electronic filings from A.Y. 2007-08 onwards. The CIT(A) confirmed the status as AOP, noting that the error was not relevant for the applicability of section 194C, which applies to all entities except individuals and HUFs below the prescribed turnover limit. 2. Applicability of TDS Provisions under Section 194C The assessee explained that the joint venture did not execute any contract work but was formed to obtain contract work and distribute payments among its members. The joint venture transferred gross revenue and TDS to its members based on their work share, negating any contractor-subcontractor relationship. Thus, the provisions of section 194C were deemed inapplicable. The CIT(A) upheld this view, noting that no expenditure was booked, and no Profit and Loss Account was prepared, as there was no profit or loss to the assessee per se. 3. Consistency in the Method of Revenue Sharing and Tax Treatment The assessee argued that the method of revenue sharing had been consistently accepted by the Department for the past 8-10 years, including the issuance of tax apportionment certificates. The CIT(A) agreed, citing the principle of consistency and referencing the Hon'ble Bombay High Court's decision in Gopal Purohit and the Hon'ble Supreme Court's decision in Radhasoami Satsang vs. CIT. The CIT(A) concluded that the method adopted did not result in any undue benefit or loss to the revenue, as the gross revenue was taxed in the hands of the joint venture members. 4. Double Taxation Concern The CIT(A) noted that the AO's method would result in double taxation, as the gross receipts distributed among the joint venture partners were already included in their respective cases, and TDS credits were utilized based on apportionment certificates. This view was supported by the Karnataka High Court's decision in Manjunath Motor Service and Canara Public Conveyances. The ITAT Pune Bench also supported this view in ITO vs. Rajdeep & PMCC Infrastructure, where it was held that the AOP acted merely as a conduit and did not carry out any work itself. Conclusion: The Tribunal upheld the CIT(A)'s decision, confirming that there was no question of disallowance under section 40(a)(ia) of the Act. The appeal filed by the Revenue was dismissed, and the CIT(A)'s direction to delete the addition was upheld. The judgment emphasized the consistent treatment of the assessee's status as AOP, the inapplicability of section 194C, the principle of consistency in revenue sharing, and the avoidance of double taxation.
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