2018 (11) TMI 1944 - AT - Income Tax

TDS u/s 194C - assessee an AOP and engaged in contract works - payment towards sub-contracts which were given on back-to-back basis to the JV partners - assessee submitted that the Joint Venture (JV) and its constituent members do not have a contractor and sub-contractor relationship between them and hence there is no liability on the JV to deduct tax at source - HELD THAT - Having regard to the rival contentions and the material on record we find that the similar issue had arisen in the assessee s own case in the earlier assessment years and this Tribunal has held that there is no contractor and sub-contractor relationship between the assessee and its constituent members of JV and therefore we see no reason to interfere with the order of the CIT(A) which is an order passed by following the decision of the ITAT. Decided against revenue.

Summary

Issues: Revenue's appeal against CIT(A)'s order for AY 2011-12 - Disallowance under section 40(a)(ia) for TDS on sub-contracts.

Analysis:
1. The Revenue appealed against the CIT(A)'s order for the Assessment Year 2011-12, challenging the deletion of disallowance under section 40(a)(ia) for Tax Deducted at Source (TDS) on sub-contracts. The Revenue contended that the CIT(A) erred in holding that there was no contract-subcontract relationship between the assessee and its constituents, thus questioning the invocation of section 194C and section 40(a)(ia) of the Income Tax Act, 1961.

2. The assessee, an Association of Persons (AOP) engaged in contract works, filed its income tax return for the relevant year, disclosing income. During assessment proceedings, the Assessing Officer (AO) observed that the assessee had made payments for sub-contracts without deducting TDS on the entire amount. The AO required the assessee to explain why disallowance under section 40(a)(ia) should not be applied to the untaxed portion of the sub-contract payments. The assessee contended that as there was no contractor-subcontractor relationship between the Joint Venture (JV) and its members, TDS was not applicable under section 194C.

3. The CIT(A) allowed the assessee's appeal, relying on a previous decision of the ITAT in the assessee's case for the AYs 2009-10 and 2010-11. The Revenue, dissatisfied with the CIT(A)'s decision, brought the matter before the ITAT for adjudication.

4. During the ITAT proceedings, the Departmental Representative supported the lower authorities' orders, while the Assessee's Counsel backed the CIT(A)'s decision and presented relevant documents, including the ITAT's decision for the AY 2010-11 and a circular from the Department of Company Affairs. The Assessee's Counsel argued that the JV constituted a partnership firm, and as per the ITAT's previous ruling, direct payments to JV members were not subject to TDS.

5. After considering the arguments and evidence, the ITAT noted that a similar issue had been addressed in the assessee's prior cases, where it was established that no contractor-subcontractor relationship existed between the assessee and its JV members. Consequently, the ITAT upheld the CIT(A)'s order, which aligned with the ITAT's previous decision.

6. Ultimately, the ITAT dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the disallowance under section 40(a)(ia) concerning TDS on sub-contracts. The judgment emphasized consistency with prior decisions and the absence of a contractor-subcontractor relationship between the assessee and its JV members, leading to the rejection of the Revenue's contentions.

End of Analysis.