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2018 (2) TMI 2010 - AT - Income TaxTDS u/s 194C - disallowance u/s.40(a)(ia) - payments made by assessee joint venture to its members - HELD THAT - As decided in assessee s own case assignments of the work to the members as per the Memorandum of Understanding agreed upon is not equivalent to sub- contract per se and thus the assessee AOP was not liable to deduct tax at source out of the amount distributed amongst the members of the AOP in the agreed ratio of respective share. - Decided in favour of assessee.
Issues Involved:
1. Non-deduction of TDS under Section 194C of the Income Tax Act. 2. Disallowance under Section 40(a)(ia) of the Income Tax Act. Detailed Analysis: 1. Non-deduction of TDS under Section 194C of the Income Tax Act: The primary issue in the appeals was the non-deduction of TDS under Section 194C by the assessee Joint Venture (JV) on payments made to its constituent members. The JV was formed for the specific purpose of bidding on a construction project and subsequently received ?38 Crores as contract charges, which were distributed among its members. The Assessing Officer disallowed this amount under Section 40(a)(ia) for non-deduction of TDS. The Department argued that TDS was deducted in the name of the JV, and both constituent members shared the receipts. They contended that the members should have followed Rule 37BA to substitute their names in the TDS certificate. The assessee countered by citing previous Tribunal decisions in similar cases, including its own for earlier assessment years, where it was established that such payments did not constitute a subcontract and thus were not subject to TDS under Section 194C. The Tribunal had previously ruled that the JV merely acted as a conduit for receiving and distributing payments and did not perform any work itself, which negated the requirement for TDS. 2. Disallowance under Section 40(a)(ia) of the Income Tax Act: The Tribunal examined whether the provisions of Section 40(a)(ia) were applicable. It was noted that the JV received the contract from a third party, executed by its members, and distributed payments based on an agreed ratio. The Tribunal referred to earlier decisions, including those involving similar JVs, where it was held that such distributions were not subcontracts and thus not subject to TDS. The Tribunal reiterated that the JV was formed for obtaining work and receiving payments, which were then distributed among its members. The Tribunal found that these distributions did not amount to subcontracts, and hence, the JV was not liable to deduct TDS under Section 194C. The Tribunal also referenced CBDT Circular No.07/2016 and judicial precedents supporting the view that the JV was not an "assessee in default" since the payees had filed returns disclosing the receipts and offered the income for taxation. Conclusion: The Tribunal upheld the findings of the Commissioner of Income Tax (Appeals) and dismissed the Department's appeals. It was concluded that the JV was not required to deduct TDS under Section 194C for payments made to its members and that the disallowance under Section 40(a)(ia) was not applicable. The Tribunal's decision was consistent with previous rulings in similar cases, affirming that the JV's actions were in compliance with the Income Tax Act. Order Pronounced: The order was pronounced on Wednesday, the 28th day of February, 2018, dismissing both appeals filed by the Revenue.
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