2017 (11) TMI 1873 - AT - Income Tax

TDS u/s 194C - Disallowance u/s 40(a)(ia) - assessee JV had assigned the work allotted to its member companies - as per AO arrangement between the assessee and the entities was nothing but a contract - HELD THAT - As decided in assessee's own case 2017 (8) TMI 1595 - ITAT PUNE 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.

Summary

Issues Involved:
1. Whether the Ld.CIT(A) was correct in law and on facts in deleting the addition made by the AO on account of work receipts of ?23,85,52,584/- shared by the Joint Venture members, u/s 40(a)(ia) of the I.T. Act, 1961.

Detailed Analysis:

1. Background and Facts:
The appeal filed by the Revenue is against the order of the Commissioner of Income Tax (A) – 3, Pune, dated 12.11.2015, for the assessment year 2012-13. The assessee is a Joint Venture (JV) formed for the purpose of acquiring project work, specifically the “Jihe Kathapur Lift Irrigation Scheme.” The assessee filed its return of income for A.Y. 2012-13 declaring nil taxable income. The case was selected for scrutiny, and the assessment was framed u/s 143(3) of the Act, determining the total income at ?23,85,52,580/-. The AO disallowed the amount under Sec. 40(a)(ia) of the Act due to non-deduction of TDS. The Ld.CIT(A) decided the issue in favor of the assessee, leading to the present appeal by the Revenue.

2. AO's Findings:
During the assessment proceedings, the AO observed that the assessee received contract receipts of ?23,85,52,584/-, which were distributed among the JV members. The AO considered this distribution as a sub-contract and held that the assessee was liable to deduct TDS u/s 194C of the Act. Since no tax was deducted, the AO applied the provisions of Sec. 40(a)(ia) and disallowed the amount.

3. Ld.CIT(A)'s Decision:
The Ld.CIT(A) observed that there was no contractor-contractee relationship between the JV and its members. The income was to be taxed in the hands of the members, not the JV. The Ld.CIT(A) relied on the ITAT Pune Bench's decision in similar cases and the High Court of Andhra Pradesh's judgment in CIT Vs Bhooratnam & Company, which emphasized that the revenue cannot retain TDS without credit being available to anybody.

4. Tribunal's Analysis:
The Tribunal reviewed the rival submissions and material on record. It noted that an identical issue arose in the assessee's own case for A.Y. 2010-11 and 2011-12, where the Tribunal dismissed the Revenue's appeals. The Tribunal in the case of Shraddha & Mahalaxmi Joint Venture and Swapnali RDS Joint Venture held that the JV was not liable to deduct TDS as the distribution of work was not equivalent to a sub-contract. The Tribunal upheld the Ld.CIT(A)'s decision, dismissing the Revenue's grounds.

5. Conclusion:
The Tribunal found no distinguishing features in the present case compared to earlier years. The Revenue failed to provide any contrary binding decision or evidence that the earlier orders were set aside or stayed by the High Court. Thus, the Tribunal upheld the Ld.CIT(A)'s order, dismissing the Revenue's appeal.

6. Final Order:
The appeal of the Revenue is dismissed. The order was pronounced on the 15th day of November, 2017.