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2023 (11) TMI 642 - AT - Income TaxTDS liability u/s. 194C - payment to members of AOP - Work received by the AOP executed by its members - relationship of principle to principle OR principle to agent - disallowance u/s. 40(a)(ia) - HELD THAT - As decided in Shraddha Mahalaxmi Joint Venture 2014 (12) TMI 347 - ITAT PUNE assessee therein also an AOP had received contracts which in turn was executed by the two members of the AOP. A contention was raised that the said assessee AOP was established for obtaining work and receiving payments against the work done by the members of AOP. The said payment was to be distributed in the agreed ratio between the two members of the AOP for carrying out the work. The Co-ordinate Bench held no deduction of TDS is warranted on the payments between the assessee and its members and deleted the addition made by the AO for violation u/s. 40(A)(ia) of the Act by placing reliance in the case of M/s. Swapnali RDS Joint Venture 2014 (12) TMI 320 - ITAT PUNE . CIT(A) correctly held that on verification of agreement between the members and held that the assessee was formed only to procure work contract and members therein executed the work in accordance with the memorandum of understanding as per their own risk, held the said relationship is of principle to principle but not as a principle to agent, or of employer employee, or of contractor sub-contractor. The CIT(A) by arriving such conclusion held deduction of TDS on the payments made by the assessee to its members does not arise. Decided against revenue.
Issues involved: Appeal by Revenue against CIT(A) order for assessment years 2008-09, 2009-10, and 2010-11.
Issue 1: Assessment Year 2008-09 The main question is whether the CIT(A) was justified in deleting the addition made by the AO for violation of non-deduction of tax u/s. 194C, resulting in disallowance u/s. 40(a)(ia) of the Act. The assessee, an AOP and civil contractor, had its income reassessed due to non-deduction of TDS on payments to members. The AO added the amount to the total income, but the CIT(A) disagreed, stating that the relationship between the assessee and its members was not that of contractor-subcontractor. The Tribunal, considering similar cases, upheld the CIT(A)'s decision, finding no fault in it. Issue 2: Assessment Years 2009-10 & 2010-11 The issues raised in these appeals are identical to the one in the assessment year 2008-09. The facts and circumstances being the same, the Tribunal applied the reasoning and decision from the earlier appeal to dismiss the appeals for these years as well. In conclusion, all the appeals by the Revenue were dismissed based on the findings and decisions made for the assessment year 2008-09. The Tribunal found no infirmity in the CIT(A)'s order and upheld the deletion of the addition made by the AO. The appeals for the subsequent years were also dismissed following the same reasoning.
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