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TMI Blog2015 (5) TMI 605X X X X Extracts X X X X X X X X Extracts X X X X ..... ng profit at 10 of the gross receipts by observing that assessee is only special purpose vehicle in the form of joint venture - Held that:- Respectfully following the decision of the jurisdictional High Court in case of M/s Ray Bel Consortium (supra), we do not find any infirmity in the order of CIT(A) for deleting the addition made on account of profit estimation as well as disallowance of amount deducted by municipal corporation on account of water and sewerage charges. Further the CIT(A) has upheld the addition on account of tax refund which was deducted by Municipal Corporation of Brihan Mumbai. As per our considered view, the amount of income tax refund is not in the nature of income but was on account of refund of tax deducted by municipal corporation as no income accrued in respect of these contracts in assessee’s hand. This refund is also required to be passed on by the assessee to the two members of AOP. Accordingly, we direct the AO to verify the same and decide the issue afresh. - Decided in favour of assessee for statistical purposes. - ITA No.6024/Mum/2012, ITA No.6264/Mum/2012 - - - Dated:- 27-3-2015 - Shri R.C.Sharma And Shri Sanjay Garg JJ. For the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Limited and Pratibha Industries Limited. In the return of income, assessee has shown Nil income on the plea that whatever contract receipts from Municipal Corporation of Brihan Mumbai, it has paid the corresponding amount to its two members to whom the entire work has been sub-contracted. The assessee submitted complete books of account, profit and loss account and balance sheet duly audited before the AO, however, the AO did not accept the books of account and made addition by estimating profit at 10% on gross receipts. The AO also disallowed expenses on account of water and sewerage charges. 5. By the impugned order the CIT(A) deleted the addition made by estimating profit at 10% on gross receipts after having the following observation :- 3.3. I have gone through the facts of the case and considered the same and to my understanding the undisputed facts in the case is that the appellant is a consortium of M/s.Kirloskar Brothers Ltd. and M/s.Pratibha Industries Ltd. and is working under the name and style of M/s.KBL PIL Consortium. The A.O. has gone through the Consortium Agreement as reproduced in the assessment order ,above and as per this the participation of M/s,Kirl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reject books of accounts, 3.5. Further, during the appellate proceedings, A.O vide his letter dated 15.06.2012 has submitted further which is reproduced as under.- Kindly refer to the above. In the above referred case, the books of accounts the above assessee were rejected and income was estimated @ 10% of gross sales shown by the assessee. The books and resultant Profit Loss accounts were rejected because they were not showing the Income or loss arise out of the composite project undertaken by the assessee from BMS to execute. The contention of the assessee was that the project was dissected in two parts between MIs Kriloskar Brothers ltd .and M/s Prathibha Industries Ltd, who are incidentally the members of the assessee AOP and income earned from the project will be considered in the hands of the members of the AOP separately In their hands and there is no need to show income In the hands of the assessee AOP. The above contention of the assessee was rejected because the assessee being an AOP was liable to be taxed as such and whatever income/loss the assessee earns from the project, should have been taxed in the hands of assessee only. Further, in a case where, one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant that if the expenses and receipts are not doubted the books should not have been rejected and no estimation of profit should have been made in their case. 3.7 As regards sub-contracting, the appellant has also relied upon decision given in the case of CIT Vs. M/s Ray Bel Consortium of Bombay High Court.The head notes of which are reproduced as under :- Genuineness of assessee firm- held to be Association of persons u/5.2(31)-the revenue generated by the respondent was passed on to the partners such that no profit accrued to the respondents-Held that-Assessee had not contrived a devise to evade or even avoid tax. The original intention itself was for the consortium members to bid for and perform the contract and to divide the profits arising there from among themselves in accordance with the Consortium Agreement. The members of the consortium constituted the firm. not as a devise to evade or even avoid tax, but upon the insistence of the MIDC the respondent satisfies the requisite tests of a partnership firm constituted in accordance with law - against revenue. 3.8. Here in this case when existence of Consortium is not doubted the only issue remains if lettin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also relied upon Merliyn Shipping case Merilyn Shipping Transport V.ACIT ITAT Special Bench, Visakhapatnarn Before D. Man Mohan (VP) S.V.Mehrotra (AM) and Mahavir Singh (JM) ITA No 477/V12/2008 Assessment Year 2005-2006 decided on 29.3.2012 Section 40(a)(ia) per majority Section 40(a)(ia) can apply only to expenditure which is outstanding as on 31st March and does not apply to expenditure which is paid during the previous year 4.3 In view of this, appellant was asked how water and sewerage can again be deducted when receipts are reflected at net basis already. The appellant has stated that it was a typing mistake. In view of this 1 have seen the ledger account for sales and found that appellant version is correct as same is supported by entries in the books where sales are credited for Rs, 15.14.55,058, subcontract at ₹ 14,01,30,719 and water and sewerage at ₹ 1,13,24,339. Then it is also noted that they all are shown as paid which is understandable being already deducted by MCGM from the bill. Following Merliyn Shipping case Merilyn Shipping Transport V.ACIT ITAT Special Bench, Visakhapatnam also these amount are to be allowed. In view of this, ground No.3,4,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO also disallowed water and sewerage charges treating that loss as reimbursement of expenses to sub-contractor. The AO also made addition of receivable on account of work contract tax refund. By the impugned order, the CIT(A) deleted the addition made by the AO by estimating profit at 10 of the gross receipts by observing that assessee is only special purpose vehicle in the form of joint venture. Whatever contracts was allotted to it, the same were distributed among two members, who have executed the work contract. Thus, there is no income in the hands of the assessee being a special purpose vehicle in the form of joint venture. The CIT(A) has relied on the decision of jurisdictional High Court in the case of M/s Ray Bel Consortium, ITA No.639 of 2009, dated 25-06-2012, which is having exactly similar facts. We had gone through the decision of the Hon ble jurisdictional High Court, wherein under the similar facts it was held that where existence of consortium is not doubted, income accrues in the hands of its members who actually execute the works. In the instant case work contracts have been executed by its two members and since contract allotted by Municipal Corporation of B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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