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TMI Blog2017 (9) TMI 1239X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the appellant. From the perusal of the order passed by the Tribunal, the same cannot be said to be unreasoned, arbitrary or non speaking. From the close scrutiny of the order passed by the Tribunal, it is evident that it has perused the relevant records and has gone through the written submissions which were filed on behalf of the assessee. Therefore, it cannot be said that order passed by the Tribunal is unreasoned, arbitrary or non speaking. Accordingly, the second substantial question of law is answered. Addition invoking Section 40(a)(ia) - Held that:- With insertion of section proviso by Finance Act, 2012 to section 40(a)(ia) of the Act as otherwise also since the taxes have been paid by the joint ventures, the assessee could be held to be an assessee in default so as to disallow the amount attributed by the joint venture to the joint venturers in the ratio of 97:3 so as to invoke Section 40(a)(ia) of the Act. The aforesaid amendment is retrospective and is clarificatory in nature. For yet another reason, Section 40(a)(ia) of the Act is inapplicable to the fact situation of the case as no amount was payable by the assessee at the close of the year and if two v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission of two tenders for construction of two tunnels of Northern Railway on the Katra-Reasi Section of Udhampur-Srinagar-Baramullah rail link project. The agreement dated 23.07.2002 was for construction of tunnel No.10 whereas agreement dated 12.09.2002 was for construction of tunnel Nos. 8 and 9. It is the case of the appellant that the need for formation of the appellant arose as M/s TRG Industries (P) Ltd was not meeting the qualifying criteria laid down in the notice inviting tender floated by Northern Railways and it was only M/s Soma Enterprises Ltd. which had the necessary experience under the Notice Inviting Tender. 3. The contracts in question were allotted in the name of the appellant and the same were solely executed by M/S TRG Industries (P) Ltd and not by M/S Soma Enterprises Ltd, which is evident from the side agreements dated 09.06.2003 and 16.02.2004 entered between M/s TRG Industries (P) Ltd and M/s Soma Enterprises Ltd, subsequent to the obtaining of the tender in the name of the appellant. In fact, M/s Soma Enterprises Ltd had only enabled M/s TRG Industries (P) Ltd to obtain the contract, therefore it received 3 per cent of the contract value and M/s TRG I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,31,99,678/-, respectively. The assessing officer framed assessment under Section 143(3) of the Act by an order dated 28.12.2007 wherein the income of the appellant was computed at ₹ 12,09,55,137 as against the income which was declared to be nil by the appellant. The assessing officer disallowed the amount paid by the assessee to the joint venturers complying the provisions of Section 40(a)(ia) of the Act and held that the tax has been duly deducted at source on the payments made by the railway authorities treating the assessee as contractor and held that thereafter the assessee had sub contracted the execution of the work in the ratio of 97:3 and thus provisions of Section 40(a)(ia) of the Act are attracted. The assessee s submission that no income accrued to the appellant and there was diversion of income by overriding title was rejected. It was further held that contention of the assessee that it did not carry out any business during the year under assessment is so held to be factually incorrect. 6. Being aggrieved by the order dated 28.12.2006 passed under Section 143(3) of the Act, the appellant filed the appeal before the Commissioner of Income Tax (Appeals). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, therefore, the provisions of Section 194C(2) of the Act is not applicable. It is also argued that with the insertion of second proviso by Finance Act, 2012 to Section 40(a)(ia) of the Act, the joint venture could not be held to be an assessee in default so as to disallow the amount distributed by the joint venture to the joint venturers in the ratio of 97:3 so as to invoke Section 40(a)(ia) of the Act as the aforesaid amendment is retrospective in nature and the same is clarificatory. It is also submitted that if two views are possible, the view which favours the assessee has to be adopted even while disallowing under Section 40(a)(ia) of the Act. It is also urged that once income is assessed in the hands of joint venturers, no income can be assessed in the hands of joint venture. It is also submitted that the order of the Tribunal is contrary to well settled legal position as the Tribunal has taken a contrary view which has been taken by a co-ordinate bench of equal strength. It is also submitted that the contentions raised by the appellant have been overlooked by the Tribunal. In support of the aforesaid submissions, reference has been made to the decisions of the Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the employer. 10. This joint venture agreement shall cease to be in force in any of the following events: (i) The joint venture is not awarded the work; (ii) The joint venture is awarded the work by the employer and a more detailed joint venture agreement based on this has been signed. 11. Thus from the relevant clauses of the agreement, it is evident that the appellant was formed only for the purposes of submission of tender and it was agreed between the two companies namely M/S TRG Industries (P) Ltd and M/s Soma Enterprises Ltd that in case the joint venture is awarded the work by the employer, a more detailed joint venture based on the agreement shall be signed. Admittedly, M/s Soma Enterprises Ltd was the lead party of the joint venture and was supposed to execute the agreement. The appellant has admittedly not executed the agreement. 12. For the purpose of execution of the agreement, thereafter admittedly, the side agreements dated 09.06.2003 and 16.02.2004, were executed. It is pertinent to note that neither the existence nor the genuineness of side agreements has been disputed or even doubted by the revenue. There is no finding by the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it has perused the relevant records and has gone through the written submissions which were filed on behalf of the assessee. Therefore, it cannot be said that order passed by the Tribunal is unreasoned, arbitrary or non speaking. Accordingly, the second substantial question of law is answered. 14. 3rd Substantial Question of Law: Section 40(a)(ia) of the Act reads as under: (a) In the case of any assessee- [(i) any interest (not being interest on a loan issued for public subscription before the Ist day of April, 1938, royalty, fees for technical services or other sum chargeable under this Act, which is payable- (A) outside India; or (B) in India to a non-resident, not being a company or to a foreign company,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 Section 200: (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-co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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