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TMI Blog2014 (12) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... d Commissioner of Income-tax (Appeals) erred in failing to appreciate that the work contract orders issued to the assessee by the contractee were in its name and so also the payments were credited to the assessee's account. As such, re-allocation of these contracts among the members of the assessee amounts to sub-contracting. 5. The learned Commissioner of Income-tax (Appeals) erred in failing to appreciate that as the payments made by the assessee to members were clearly towards sub-contract, tax was deductible from such payments u/s 194C and in view of the assessee's failure to do so, the Assessing Officer was perfectly justified in applying the provisions of sec. 40(a)(ia) of the Income-tax Act, 1961. 6. The learned Commissioner of Income-tax (Appeals) erred in ignoring the fact that the assessee AOP was in full control of the contract and it was the responsibility of the assessee to submit the bills to and receive payments from MKVDC ltd. which in turn was passed on by the assessee to the coventurers. 7. The learned Commissioner of Income-tax (Appeals) erred in not considering the landmark judgement of the Hon'ble Supreme Court in the case of Ch. Achaiah (1996) 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t receipts were distributed between the partners of the joint venture and the work executed was also shared by them. The contract receipts were distributed in accordance with the work carried out by the joint venture partners. Since the joint venture has not made any payment for contract/sub-contract, the question of TDS did not arise. It was also explained on behalf of the assessee that assessee had been following this method consistently since A.Y. 2000-01 and in respect of similar AOPs this aspect was accepted in assessment proceedings in the earlier years. The Assessing Officer observed that since the work has been received by the assessee but passed on to M/s.Gammon India Ltd., the transaction was covered u/s.194C for deduction of tax. Due to violation of the same, the Assessing Officer disallowed the amount of Rs. 4,12,49,749/- u/s.40(a)(ia) which was the entire contract receipts received by joint venture during the year and passed on to M/s.Gammon India Ltd. 3. Matter was carried before the first appellate authority. Various contentions were raised and CIT(A) after analysing the facts under the relevant laws, granted relief to the assessee. Same has been opposed before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acknowledgements from A.Y. 2002-03 to A.Y. 2006-07 in which the status was regularly shown as AOP and even in the application form for allotment of PAN it was shown as AOP. The CIT(A) noticed from the record that status was shown as AOP. However, it was not very much relevant for the purpose of applicability of provisions of section 194C since TDS provisions are applicable to all entities except individuals and HUF having gross receipts or turnover from business or profession below the prescribed limit. 6. It was further explained on behalf of the assessee that joint venture as such does not execute any contract work but were merely formed for obtaining contract work and for receiving the payment, which was immediately distributed in the ratio of the share of the work done. The actual share in the joint venture of the total work allocated was 60% for M/s.Gammon India Ltd. and 40% for M/s.Progressive Contraction Ltd. In this background it was explained that the contract account and the Balance Sheet of the joint venture reveals nothing but apportionment of contract receipts, assets and liabilities between the members. There was no expenditure booked in the contract account nor any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied out by it. Similarly, there has been apportionment to either of the two companies or to both the companies in the earlier years also by the Assessing Officer for enabling them to claim TDS in respective cases. The assessee, vide its submission dated 22.04.2010, furnished the details which revealed that gross revenue from this contract receipts by joint venture was accounted for in case of either or both of the two companies who were members of the joint venture in all assessment years 2001-02 to 2008-09. It was further explained by the assessee that revenue sharing was not exactly 60:40 in each year since it depends on the relative work done in the particular year. Having explained the difference between cases of contract/sub-contract, in the background of clauses of the agreement, the assessee relied on the decision of Hon'ble Himachal Pradesh High Court in the case of CIT vs. Ambuja Darla Kashlog Mangu Transport Cooperative Society (2009) 227 CTR 299 (HP). 7. In the background of the tax apportionment certificates issued by the Assessing Officer, it was stated on behalf of the assessee that the Assessing Officer has marked copy of this certificate to the members of the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear. It was further contended that where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. It was also contended that Hon'ble Kerala High Court in the case of Manjunath Motor Service and Canara Public Conveyances, 197 ITR 321 (Kar.) observed that method adopted by the Assessing Officer would result in double taxation of the same income since gross receipts distributed amongst the two joint venture partners was included as receipts in their respective cases and the joint venture partners had also utilised the TDS credits on the basis of apportionment certificate issued by the Assessing Officer. In view of the above discussion, CIT(A) was justified in holding that in absence of any contract or sub-contract work by joint venture to its member companies, provisions of section 194C were not applicable for the purpose of TDS. The two corporate entities forming joint venture were already being assessed since A.Y. 2000-01 onwards on their respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uce income jointly. It is not enough that the persons receive the income jointly. In the instant case, each of the two parties has agreed to bear its own loss or retain its own profit separately. Both have agreed to execute the job together for better cooperation in their relationship with the Chennai Port Trust. The intention was not to carry out any business in common, only a part of the job will be done by VOACZ according to its technical skill and capability. The other part of the contract will be executed by HCC. The total value of the contract was Rs. 2,62,01,03,120. the applicant's share of work was valued at Rs. 44,52,78,920 (17 per cent of total value). The association with the HCC was not with the object of earning this income but for co ordination in executing the contract so that HCC could also make its own profit. HHC's work and income arising therefrom was quite separate and independent of the applicant's work and income. If the cost incurred by the HCC or the applicant was more than their income, each party will have to bear its loss without any adjustment from the other party. The association of the petitioner company with HCC was undoubtedly for mutual ..... X X X X Extracts X X X X X X X X Extracts X X X X
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