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TMI Blog2018 (2) TMI 2010X X X X Extracts X X X X X X X X Extracts X X X X ..... Since, the issues involved in both the appeals are identical, these appeals are taken up together for adjudication and are disposed of vide this common order. For the sake of convenience, facts are taken from ITA No. 35/PUN/2016. ITA No. 35/PUN/2016 2. The brief facts of the case as emanating from the records are: The assessee is a Joint Venture of M/s. Shraddha Energy Infraprojects Pvt. Ltd. and Prasad & Company Ltd. The assessee JV was formed as special purpose of vehicle for making a bid for construction of dam at Charthane for Khura- Varoda Sinchan Yojana. The work was allotted to the assessee. The assessee received ₹ 38 Crores as contract charges. The contract charges were distributed between the constituent members of JV i.e. the assessee, for executing the work. The assessee for the impugned assessment year filed its return of income on 01.08.2012 declaring total income as 'Nil'. The case of the assessee was selected for scrutiny. During the course of scrutiny assessment proceedings, the Assessing Officer disallowed ₹ 38 Crores paid by assessee to its members u/s. 40(a)(ia) of the Income Tax Act, 1961 ( hereinafter referred to as 'the Act'). 3. Aggrieved by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be distributed in the agreed ratio between the two members of the AOP for carrying out the work. The true ratio in the instant case is 1:0. Such assignments of the work to the members as per the Memorandum of Understanding agreed upon is not equivalent to sub- contract per se and thus the assessee AOP was not liable to deduct tax at source out of the amount distributed amongst the members of the AOP in the agreed ratio of respective share. The Assessing Officer, while deciding the chargeability of income in the hands of the assessee did observe that in the case of M/s. Swapnali RDS Joint Venture (supra), similar addition under section 40(a)(ia) has been made for the assessment year 2008-09 which has been deleted by the Pune Bench of the Tribunal. However, the Department has not accepted the order of the Tribunal and to keep the issue alive, the amount paid by the AOP to its member without deduction of tax is disallowed and added back to the total income of the assessee in terms of section 40(a)(ia) of the Act. We notice that in the identical facts and circumstances, the Co- ordinate Bench of the Tribunal in the case of ITO vs. Shraddha & Mahalaxmi Joint Venture and Others (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the above submissions and material on record, we find that the first issue is regarding status of the assessee. The Assessing Officer has mentioned the status as firm. However, in the explanation given, the assessee has made it clear that the status in which the returns was filed was that of an AOP. It was explained that in the returns of income since beginning till the A.Y. 2006- 07, the status was mentioned as AOP only, i.e., when the returns were filed manually. However, from A.Y. 2007-08, when electronic filing had to be done, due to computer error the status appeared as 'firm' on the ITR acknowledgement, whereas in the computation of total income, it was correctly mentioned as AOP. It was explained that I.T.Return Form No.5 was actually applicable for firms, AOPs and BOIs. Therefore, this error might have occurred. The assessee has also filed computation of total income alongwith 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 ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on a principal to principal basis. Further, in sub-contracting, the contractor retains his share of profit alongwith the TDS and only the balance is passed on to subcontractor. But in joint venture, assessees did not retain any share in the revenue with it and has passed the entire gross revenue alongwith TDS apportioned for them. It was submitted that the Department has also issued tax apportionment certificates every year during the past eight years to enable the two members to claim the TDS credits in their respective cases. Even in the current assessment year, it was noticed that tax apportionment certificate was issued by the Department vide letter No.Pn/Wd.3(4)/TC/07-08 dated 26.11.2008 of the Assessing Officer in which the Assessing Officer has allowed apportionment of entire TDS of ₹ 9,26,588/- during the year to M/s.Gammon India Ltd., since entire work during the year was carried 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer. The assessee has also raised the issue of consistency stating that the same method was being accepted by the Department in the past 8 to 10 years including A.Y. 2007- 08 in which tax apportionment certificate was also being issued. It was contended that this aspect has not been considered in the assessment order u/s.143(3) for A.Y. 2007-08. On the principle of consistency, the Ld. Authorised Representative relied on the decision of Hon'ble Bombay High Court in the case of Gopal Purohit (2010) 228 CTR 582 (Bom.) and assessee also relied on the decision of the Hon'ble Supreme Court in the case of Radhasoami Satsang vs. CIT (1992) 193 ITR 321 (SC) wherein it was observed that strictly speaking the principle of res judicata does not apply to income tax proceedings since each assessment year was a separate unit in itself and what is decided in one year may not apply in the following year. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied separate work which was a part of composite contract awarded to the AOP, but the taxability of income from such contract was held to be taxable in the hands of the respective contractors. While holding so Hon'ble Authority for Advance Ruling observed as follows: "7. So far as question Nos. 1 and 2 are concerned the parties have specifically ruled out constitution of any partnership between them. There is no sharing of profits or loss. They have specifically provided in the agreement that each party will bear its own loss and retain its profits as and when such profits or loss arise. Having regard to the agreement we are of the view that the applicant cannot be treated as a partnership which can only be created by an agreement. Nor can it be treated as an AOP. In order to constitute an AOP there will have to be common purpose or common action and the object of the association must be to produce 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 relationsh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o our knowledge on behalf of Revenue. 4. Facts being similar, so following same reasoning we are not inclined to interfere with the finding of the CIT(A) who has rightly held that there is no question of disallowance made u/s. 40(a)(ia) of the Act. Same is upheld." 11. Since the facts are, mutatis mutandis, identical to the facts and issue decided by the Tribunal in M/s. Swapnali RDS Joint Venture (supra), therefore, following the parity of reasoning, we uphold the order of the CIT(A). Consequently, the grounds of appeal raised by the Revenue are dismissed." 10.2 Respectfully following the decision of the Co-ordinate Bench of the Tribunal in the case of ITO vs. Shraddha & Mahalaxmi Joint Venture and Others (supra), we are inclined to hold against the Revenue. We simultaneously find that the case of the assessee is fully supported by CBDT Circular No.07/2016 (supra) and judicial opinions expressed in the case of SMSLUANRCL (JV) (supra) and Linde AG, Linde Engineering Division and Anr. (supra). 10.3 We also simultaneously take affirmative note of the argument on behalf of the assessee that rigours of section 40(a)(ia) are diluted in the facts of the case since the payee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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