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TMI Blog2016 (3) TMI 966X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance u/s. 40(a)(ia) made by the Assessing Officer cannot be sustained. In effect, the method adopted by the Assessing Officer will also result in double taxation of the same contract revenue which is in violation of case Commissioner Of Income-Tax Versus Manjunatha Motor Service And Canara Public Conveyances [1991 (6) TMI 23 - KARNATAKA High Court ] - Decided in favour of assessee - ITA No. 1501/PN/2014 - - - Dated:- 19-2-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee : Shri Nikhil Pathak For The Revenue : Shri Hitendra Ninave ORDER PER VIKAS AWASTHY, JM : The appeal has been filed by the Revenue against the order of Commissioner of Income Tax (Appeals)-II, Pune dated 30-04-2014 for the assessment year 2010-11. 2. The Revenue has assailed the findings of the Commissioner of Income Tax (Appeals) by raising following grounds in the appeal: 1) The learned Commissioner of Income-tax (Appeals) erred 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 without appreciating the fact that the work contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ementioned constituents of J.V. The assessee has been filing return of income in the status of AOP since assessment year 2003-04 at NIL. In the impugned assessment year the assessee filed return of income on 27-09-2010 declaring NIL income. In the course of scrutiny assessment the Assessing Officer held that the assessee has not deducted tax at source on the payments made to the constituents of J.V. The Assessing Officer accordingly disallowed the sum of ₹ 67,67,681/- u/s. 40(a)(ia) of the Income Tax Act, 1961. In first appeal, the Commissioner of Income Tax (Appeals) followed his own order in the preceding assessment year i.e. assessment year 2009-10 and deleted the disallowance u/s. 40(a)(ia). Hence, the present appeal. 6. We find that the issue raised by the Revenue in the present appeal is similar to the issue raised in the appeal before the Tribunal in the assessment year 2009-10. The relevant extract of the order of Tribunal dated 27-12-2013 in ITA No. 2121/PN/2012 is reproduced here-in-below: 2. At the outset of hearing, learned Authorized Representative pointed out that this issue is covered in favour of assessee by the order of ITAT, Pune in assessee s own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kground 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 Profit and Loss Account prepared for the purpose since there did not arise any profit or loss to the assessee per se. The Joint venture transferred not only the gross revenue but also the corresponding TDS to its members in the ratio of their work done by individual members for which the appointment certificate was duly issued every year by the Assessing Officer. In this background it was submitted that there was no relationship of contractor and subcontractor between the joint venture and its two members. Therefore, there was no question of applicability of TDS provisions u/s.194C of the Act. The assessee also explained why a returns were filed by the joint venture as AOP. It was explained that it was done to pass on the credit of TDS to the members on the basis of tax apportionment certificates who have accounted for the corresponding contract revenue in their respective returns. It was also submitted that Nil income arising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perative 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 joint venture as well as to their respective Assessing Officers, which shows that the Assessing Officer has applied his mind and consciously accepted the fact that the joint venture AOP was for the distribution of receipts amongst its constituents in proportion of their work sharing. Therefore, there was no applicability of provisions of TDS u/s.40(a)(ia) of the Act. 8. Further, the assessee, vide its submission dated 06.09.2010, made comparison of the tax rates applicable to domestic companies, being joint venture partner in their individual capacity and the tax rates applicable to the AOP. However, in submission dated 21.10.2010, it was explained that tax rates in the case of domestic company and the AOP would be the same in this case. This was due to applicability of section 167B of the Act. The assessee also filed details of the returns of income of the two corporate entities being joint venture members, alongwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 respective shares and TDS apportionment certificates were also issued by the Assessing Officer every year for these eight years including the current assessment year to enable them to claim the same in their own cases. Moreover, there was no Profit and Loss Account in the assessee s case and there was no claim of any expenditure. Therefore, there was no question of any disallowance under the provisions of section 40(a)(ia) of the Act. Moreover, disallowance u/s. 40(a)(ia) made by the Assessing Officer cannot be sustained. In effect, the method adopted by the Assessing Officer will also result in double taxation of the same contract revenue which is in violation of the Karnataka High Court decision reported in 197 ITR 321 (Kar.). This view is fortified by the decision of the ITAT Pune Bench in ITO vs. Rajdeep PMCC Infrastructure, wherein the Tribunal has observed as under: 6. We have noted that it is an admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 benefit but such association will not make them a single assessable unit and liable to tax as an AOP. For example, a building contractor may associate with a plumber and an electrician to execute a building project. All these persons are driven by profit-making motive. But that by itself will not make the three persons liable to be taxed as an AOP if each one has a designed and independent role to play in the building project. In the instant case, the applicant has stated that the applicant has made its own arrangement for execution of work independent from that of HCC. There is no control or connection between the work done by the applicant and HCC. 8. On the facts hereinabove, the applicant and HCC cannot be treated as an AOOP for the purpose of levy of incometax. The applicant will be liable to be taxed as a separate and independent entity. The question No.1 is answered accordingly ..... 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