2013 (6) TMI 911 - AT - Income Tax

Summary

Issues involved: Appeal and Cross Objection against the order of the Commissioner of Income Tax (Appeals)-I, Nashik dated 03.11.2011 regarding an addition made under Section 40(a)(ia) of the Income-tax Act, 1961 for the assessment year 2006-07.

Revenue's Appeal - Section 40(a)(ia) Disallowance:
The Revenue appealed against the deletion of an addition of Rs.1,09,44,818/- made by the Assessing Officer under Section 40(a)(ia) of the Act. The Assessing Officer disallowed the expenditure as the tax deducted at source was not deposited within the prescribed time limits. The CIT(A) deleted the disallowance based on a Tribunal decision. However, the Tribunal held that the CIT(A)'s decision was untenable based on a subsequent judgment of the Calcutta High Court, leading to the Revenue's success in the appeal.

Assessee's Cross Objection - Correct Status as AOP:
The assessee filed a Cross Objection resisting the disallowance, arguing that as a joint venture, it should be assessed as an Association of Persons (AOP) and not as a firm. The assessee pointed out the amendment in Section 194C of the Act and the CBDT Circular supporting its stance. The assessee contended that if assessed as an AOP, the provisions of Section 40(a)(ia) would not apply.

Assessment Status - Firm vs. AOP:
The assessee claimed that it should be assessed as an AOP, not a firm, despite mistakenly mentioning "firm" in the return of income. The Tribunal noted that the absence of a partnership agreement supports the assessee's claim. The correct status determination is crucial as it affects the tax liability. The Tribunal emphasized that the issue can be raised before the Tribunal even if not raised before lower authorities, citing legal precedent.

Decision and Remand:
The Tribunal found merit in the assessee's claim of being an AOP and remanded the matter to the Assessing Officer to determine the correct status as per law. The Assessing Officer was directed to consider the plea of the assessee on its merits, allowing the assessee to provide supporting material. The Cross Objection of the assessee was allowed for statistical purposes, and both the Revenue's appeal and the assessee's Cross Objection were allowed.