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TMI Blog2016 (11) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... , it has been shown as the income by the assessee in the return of income. Same is the situation for the respective share of Sri Bapuji who has shown its income of the amount received by it. Under these circumstances, it is not possible for us to agree with the submission of the learned counsel appearing for the appellant-revenue that the finding of the Tribunal that it was of joint venture between the assessee and Sri Bapuji was contrary to the material or based on conjectures and surmises. - Decided in favour of assessee. Addition u/s 40a(i)(a) - Held that:- In the present case, when the assessee has not claimed any amount towards expenditure pertaining to the contract amount which has been received by the assessee, there would not be any scope for disallowing any amount towards the expenditure. The Tribunal has followed the decision of this Court in case of CIT vs. Balaji Engineering Construction Works (2008 (1) TMI 564 - KARNATAKA HIGH COURT). When the issue is already covered by the decision of this Court, it cannot be said that any substantial questions of law would arise for consideration. - ITA NOS.103-104/2011, ITA NOS.155-156/2011, ITA NO.343/2012, 70/2014, 71/2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntions, we find that the only dispute is whether the agreement between the assessee and Sri Bapuji is a sub- contract or an agreement by which the income is diverted by overriding title. There is no dispute that the contract was awarded to the assessee and Sri Bapuji has executed the work awarded to the assessee. Having gone through the agreements between both the parties, it is observed that it is the assesee who has submitted the tender while it is Sri Bapuji who has deposited the requisite EMD. Both the parties have opened a joint Bank account even prior to entering into agreement. It is also evident that Sri Bapuji is authorized to operate the said account. From these facts, it is to be examined if it is diversion of income by overriding title or it is mere application of income. The learned Departmental Representative had submitted that the CIT(A) had misconstrued the judicial precedent in coming to the conclusion that there is a diversion of income by overriding title. We have gone through the decisions quoted by the CIT(A) and the oldest and most authoritative decision quote by him is in the case of CIT Vs. Sitaldas Tirathdas (1961) 41 ITR 367 wherein it has been observed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, it cannot be said that the assessee was only lending his name whereas in the letter and spirit the contract is to be executed and the receipts enjoyed by Sri Bapuji. Therefore, as the contract, assessee is entitled to receive the contract receipts and it is thereafter that Sri Bapuji is entitled to receive the same. Thus, it is a clear case of application of income and not diversion of income by overriding title as held by the CIT(A) . In view of the same, the order of the CIT(A) is set aside on this point. However, there is another angle to this issue. The assessee has only received commission from Sri Bapuji who has executed the contract. From the facts of the case detailed above, it looks like a joint venture from the inception and not a sub-contract. The agreement between the assessee and Sri Bapuji is prior to the award of the contract and both of them have opened a joint account to enable Sri Bapuji to appropriate the receipts. Thus it can be seen that it is more in the nature of a joint venture and is not a sub-contract. In such a case, the assessee would not be liable to deduct tax at source. As this angle of the issue has not been looked into by the authorities b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceed to consider the disallowance u/s 40a(ia). Sec.40(ia) provide as under: Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head profits gains of business or profession . (a) .. (ia) any interest commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub- contractor, being resident for carrying out any work including supply of labour for carrying out any work on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid during the previous year or in the subsequent year before the expiry of the time prescribed under sub-section (1) of sec.200 . From a plain reading of the provision it is clear that the amounts specified under clause (ia) is not allowable as s deduction in computing the income chargeable under the head profits and gains of business or profession . Similarly, in sub-sec. (3) if sec. 40-a, it is provided that no deduction shall be allowed in respect of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the Tribunal ought not to have concluded that it was in the nature of joint venture and in his submission, the Tribunal ought to have found that it was a sub-contract. 9. In our view, we cannot accept the submission of the learned counsel for the appellant-revenue for two- fold reason; one is that, there is enough material to show that the amount received of the contract was directly shared by the assessee and Sri Bapuji as per their proportionate share and the second is that: it was not a matter where the money/the amount realized of the contract was apportioned as the income of the assessee and thereafter, the portion of it or a major portion was paid by the assessee to Sri Bapuji. When after receipt of the contract amount, the shares are identified and taken by both the parties of the joint venture, it cannot be said as a sub-contract. There is no material brought to our notice by the learned counsel for the appellant-revenue that there was any contract entered into by the assessee to assign the work to Bapuji as sub-contractor. Further, additional aspect is that, when the respective share is received by the assessee, it has been shown as the income by the assessee in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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