2015 (3) TMI 279 - HC - Income Tax

Taxability of income earned by the joint venture company - ITAT held the entire income of JVC in the hand of one of the members of the assessee company - Held that - If the TDS claim was not erroneous, the income could have been shown in the account of joint venture/ assessee. If leave to withdraw was being sought with some ulterior motive, the income would have been reflected in the account of joint venture/ assessee. The consideration either by the Assessing Officer or Appeal authorities does not show this position. On the other hand, the Assessing Officer has worked out income tax at 3% of the contract value at the hands of joint venture/assessee. Such guess work would not have been essential, had the assessee actually received the amounts and those amounts would have been reflected in the books of account. The department would have procured some material to show receipts by assessee towards contract. There is no finding of receipt of any income by joint venture assessee on account of said contract. The finding of fact, therefore, reached by the Commissioner of Income Tax (Appeals)I, Nagpur CIT(A) and sustained by ITAT, cannot be said to be perverse. No substantial questions of law arising out of impugned order - Decided against assessee.

Summary

Issues:
1. Taxation of income earned by joint venture company.
2. Application of legal principles in taxation.

Analysis:

Issue 1: Taxation of income earned by joint venture company
The High Court addressed the issue of whether the entire income earned by a joint venture company should be taxed in the hands of one of the members of the assessee company. The Income Tax Appellate Tribunal (ITAT) found that the joint venture did not execute the contract work, which was done by one of its constituents, SMS Infrastructure Limited. The receipts for the project work were reflected in the books of SMS Infrastructure Limited, and the income was disclosed in their return, accepted by the Assessing Officer. The High Court observed that some income could not have been taxed again in the hands of the joint venture/assessee. The appellant argued that the assessment should have been done for the entire sum received by the joint venture and then for the part paid to SMS Infrastructure Limited. The court noted the change in legal position due to an amendment to the Income Tax Act of 1961 compared to the Act of 1922, emphasizing that the Assessing Officer cannot refuse to tax the right person because the wrong person has been taxed.

Issue 2: Application of legal principles in taxation
The appellant contended that the Assessing Officer should have taxed the joint venture company for the entire sum received and then for the part paid to SMS Infrastructure Limited. The court considered the findings of the ITAT as concurrent findings of fact and not perverse. The joint venture had filed a return of income and claimed TDS, but later sought to withdraw the TDS claim, citing an oversight. The court noted that if the TDS claim was not erroneous, the income should have been reflected in the joint venture's account. The Assessing Officer's guesswork in determining income tax at 3% of the contract value was deemed unnecessary if the actual receipts had been reflected in the books of account. The court upheld the findings of fact by the Commissioner of Income Tax (Appeals) and ITAT, concluding that the questions raised by the appellant did not arise for determination and were not substantial questions of law.

In conclusion, the High Court rejected the Income Tax Appeal, emphasizing that the findings of fact supported the decision, and no costs were awarded.