ITO, Ward 3(4), Pune v. M/s. Progressive Srinivasa JV,, Pune

ITA 665/PUN/2013 | 2009-2010
Pronouncement Date: 11-04-2014 | Result: Allowed

Appeal Details

RSA Number 66524514 RSA 2013
Assessee PAN AAAAP2103N
Bench Pune
Appeal Number ITA 665/PUN/2013
Duration Of Justice 1 year(s) 29 day(s)
Appellant ITO, Ward 3(4), Pune
Respondent M/s. Progressive Srinivasa JV,, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 11-04-2014
Appeal Filed By Department
Order Result Allowed
Bench Allotted A
Tribunal Order Date 11-04-2014
Assessment Year 2009-2010
Appeal Filed On 13-03-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 665/PN/2013 (ASSESSMENT YEAR 2009-10) ITO WARD-3(4) PUNE .. APPELLANT VS. M/S. PROGRESSIVE SRINIVASA JV SOMA HEIGHTS 3 SIDDHIVINAYAK SOCIETY KARVE ROAD PUNE-411004 PAN NO.AAAAP2103N .. RESPONDENT ASSESSEE BY : NONE REVENUE BY : SHRI P.L. PATHADE DATE OF HEARING : 09-04-2014 DATE OF PRONOUNCEMENT : 11-04-2014 ORDER PER R.K. PANDA AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 12-11-2012 OF THE CIT(A)-II PUNE RELATING TO ASSESSMENT YEAR 2009-10. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE IS A JOINT VENTURE BETWEEN PROGRESSIVE CONSTRUCTION LTD. AND SRINIVASA CONSTRUCTION LTD. AND THE RETURNS HAVE BEEN FILED IN THE STATUS OF AO P SINCE THE A.Y. 2001- 02 AT RS. NIL INCOME EVERY YEAR. THIS WAS BECAUSE THE CONTRACT REVENUE WAS DIRECTLY APPORTIONED BETWEEN THE TWO CO RPORATE ENTITIES I.E. MEMBERS OF THE JOINT VENTURE AND THERE WAS NO RECEI PT/EXPENDITURE AND NO PROFIT AND LOSS ACCOUNT IN THE CASE OF THE ASSES SEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBS ERVED THAT IN THE 2 RETURN THE ASSESSEE HAD CLAIMED THE STATUS AS FIRM AND THE DEED OF PARTNERSHIP WAS ALSO FILED. AS PER THE PARTNERSHIP DEED PROGRESSIVE SRINIVASA JOINT VENTURE WAS A PARTNERSHIP BETWEEN P ROGRESSIVE CONSTRUCTION LTD. AND SRINIVASA CONSTRUCTION LTD. T HE ASSESSEE HAS SHOWN NIL PROFIT IN THE CONTRACT ACCOUNT BY SHOWING DISTRIBUTION OF CONTRACT ACCOUNT RECEIPT OF RS.57 06 737/- TO SRINI VASA CONSTRUCTION LTD. THE ASSESSEE IS A SEPARATE LEGAL ENTITY WHICH HAS R ECEIVED CONTRACT FROM EXECUTIVE ENGINEER BHAMA ASKHED DAM DIVISION PUNE. THE CONTRACT RECEIPT REFLECTED IN THE CONTRACT ACCOUNT HAVE BEEN RECEIVED FROM THE SAID AUTHORITY. THE ASSESSEE HAS ASSIGNED THE WORK ALLOT TED TO SRINIVASA CONSTRUCTION LTD .THUS THIS ARRANGEMENT BETWEEN THE SE ENTITIES IS NOTHING BUT A CONTRACT AND THE ASSESSEE BEING A FIR M JOINT VENTURE IS LIABLE TO DEDUCTION OF TAX AT SOURCE UNDER SECTION 194C OF THE I.T. ACT ON THIS SUB CONTRACT. IT IS MENTIONED IN COLUMN NO. 26 OF TAX AUDIT REPORT AS TO WHETHER THE ASSESSEE HAS COMPILED WITH THE PR OVISION OF CHAPTER XVII B REGARDING DEDUCTION OF TAX AT SOURCE AS 'NA' . THUS NO TAX HAS BEEN DEDUCTED FROM THE SUB-CONTRACT ASSIGNED TO SRI NIVASA CONSTRUCTION LTD AS REQUIRED UNDER SECTION 194C OF THE I.T. ACT. SINCE THE ASSESSEE HAS HANDED OVER THE ENTIRE CONTRACT RECEIPTS ALONGW ITH THE CONTRACT WORK AWARDED TO IT WITHOUT DEDUCTION OF TAX AT SOURCE TH E AO HELD THAT THE PROVISION OF SEC. 40(A) (IA) OF THE I.T ACT ARE ATT RACTED AND THE AMOUNT PAID/CREDITED IS LIABLE TO BE DISALLOWED. HE THER EFORE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE PROVISIONS OF SECTION 40(A )(IA) SHOULD NOT BE ATTRACTED FOR FAILURE TO DEDUCT TAX AT SOURCE U/S.1 94C ONTHE SUB-CONTACT GIVEN TO SRINIVASA CONSTRUCTION LTD. 3 2.2 REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE ASSESSING OFFICER HELD THAT PROVISIONS OF SECTION 4 0(A)(IA) ARE ATTRACTED TO THE CASE OF THE ASSESSEE FOR FAILURE TO DEDUCT T AX U/S.194C ON THE SUB- CONTRACT GIVEN TO SRINIVASA CONSTRUCTION LTD. HE A CCORDINGLY MADE ADDITION OF RS.57 06 740/- TO THE TOTAL INCOME OF T HE ASSESSEE U/S.40(A)(IA). 3. IN APPEAL THE LD.CIT(A) FOLLOWING THE DECISION O F HIS PREDECESSOR IN THE CASE OF PROGRESSIVE RAMU DEVELOPERS AND RDS CONSTRUCTION JOINT VENTURE FOR A.Y. 2008-09 DELETED THE DISALLOWANCE M ADE BY THE ASSESSING OFFICER U/S.40(A)(IA) OF THE I.T. ACT. 3.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) E RRED IN RELYING ON THE DECISION OF HIS PREDECESSOR IN THE CASES OF OTHER JOINT VENTURES AND DELETED THE DISALLOWANCE MADE U/S.40(A)(IA) WITHOUT A PPRECIATING THE FACT THAT THE WORK CONTRACT ORDER ISSUED TO THE ASSESSEE WERE IN ASSESSEE'S NAME AND SO ALSO THE PAYMENTS WERE CREDITED TO T HE ASSESSEE'S ACCOUNT AND AS SUCH REALLOCATION OF THESE CONTRA CTS AMONG THE MEMBERS OF THE ASSESSEE WOULD AMOUNT TO SUB CONTRACTING. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN NOT APPRECIATING THAT THE ASSESSEE JOINT VENTURE WAS IN FULL CONTROL OF THE CONTRACT RESPONSIBLE FOR ITS COMPLETION SUBMITTING B ILLS RECEIVING PAYMENTS AND MAKING THOSE PAYMENTS TO ITS MEMBERS TOWARD S SUB CONTRACT ON WHICH TAX WAS DEDUCTIBLE U/S.194C. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) E RRED IN NOT CONSIDERING THAT IF THE SHARE OF PROFIT IS DETERMINED IN THE JOINT VENTURE AGREEMENT THEN IT CANNOT BE ANYTHING BUT AOP AND W HERE THE CHARGE IS ON THE INCOME OF THE AOP IN SUCH STATUS THE ASSESSING OF FICER HAS NO CHOICE BUT TO TAX IT IRRESPECTIVE OF THE FACT AS TO WHETHER SUCH SHARE OF PROFIT HAS BEEN OFFERED TO TAX OR TAXED IN THE HANDS OF MEMBERS OR NOT. RELIANCE IS PLACED ON DECISION OF HON.SUPREME COURT I N THE CASE OF CH.ACHAIAH (1996) 218 ITR 239 AND ON THE RULING OF AAR IN THE CASE OF GEOCONSULTANT ST GMBH IN 304 ITR 283. 4. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET R EFERRING TO THE DECISION OF THE TRIBUNAL IN THE CASE OF ITO VS. M/S . GAMMON 4 PROGRESSIVE JV VIDE ITA NO.65/PN/2011 ORDER DATED 2 2-08-2012 SUBMITTED THAT IDENTICAL ISSUE HAD COME UP BEFORE T HE TRIBUNAL AND THE TRIBUNAL HAD DISMISSED THE APPEAL FILED BY THE REVE NUE BY HOLDING THAT THERE WAS NO QUESTION OF ANY DISALLOWANCE UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE I.T. ACT. REFERRING TO THE SAID ORDER HE SUBMITTED THAT THE TRIBUNAL AFTER THOROUGHLY DISCUSSING THE I SSUE HAS DISMISSED THE APPEAL FILED BY THE REVENUE. SINCE THE FACTS IN TH E CASE DECIDED BY THE TRIBUNAL ARE IDENTICAL THEREFORE RESPECTFULLY FOL LOWING THE ABOVE DECISION THE GROUNDS RAISED BY THE REVENUE SHOULD B E DISMISSED. 5. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND WHILE SUPPORTING THE ORDER OF THE ASSESSING OFFICER FAIRL Y CONCEDED THAT THE ISSUE HAS BEEN DECIDED AGAINST THE REVENUE BY THE T RIBUNAL. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES PERUSED THE ORDER OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND AN I DENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN THE CASE OF M/S. GAM MON PROGRESSIVE JV(SUPRA). WE FIND THE TRIBUNAL VIDE ITA NO.65/PN/ 2011 ORDER DATED 22-08-2012 FOR A.Y. 2007-08 WHILE DECIDING THE ISSU E AGAINST THE REVENUE HAS HELD AS UNDER : 5. AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND MATE RIAL ON RECORD WE FIND THAT THE FIRST ISSUE IS REGARDING STATUS OF THE ASSESSEE. THE ASSESSING OFFICER HAS MENTIONED THE STATUS AS FIRM. HO WEVER IN THE EXPLANATION GIVEN THE ASSESSEE HAS MADE IT CLEAR THAT T HE STATUS IN WHICH THE RETURNS WAS FILED WAS THAT OF AN AOP. IT WAS EXPL AINED 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 FI LED 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. THER EFORE THIS ERROR MIGHT HAVE OCCURRED. THE ASSESSEE HAS ALSO FILED COMPUTA TION OF TOTAL INCOME ALONGWITH ACKNOWLEDGEMENTS FROM A.Y. 2002-03 TO A.Y. 2006-07 5 IN WHICH THE STATUS WAS REGULARLY SHOWN AS AOP AND EVEN IN THE APPLICATION FORM FOR ALLOTMENT OF PAN IT WAS SHOWN A S 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 APPLICABIL ITY OF PROVISIONS OF SECTION 194C SINCE TDS PROVISIONS ARE APPLICABLE TO ALL ENTITIES EXCEPT INDIVIDUALS AND HUF HAVING GROSS RECEIPTS OR TURNOVER F ROM BUSINESS OR PROFESSION BELOW THE PRESCRIBED LIMIT. 6. IT WAS FURTHER EXPLAINED ON BEHALF OF THE ASSESSEE TH AT JOINT VENTURE AS SUCH DOES NOT EXECUTE ANY CONTRACT WORK BUT WERE MERELY FORMED FOR OBTAINING CONTRACT WORK AND FOR RECEIVIN G THE PAYMENT WHICH WAS IMMEDIATELY DISTRIBUTED IN THE RATIO OF THE SHARE OF THE WORK DONE. THE ACTUAL SHARE IN THE JOINT VENTURE OF THE TOTAL W ORK ALLOCATED WAS 60% FOR M/S.GAMMON INDIA LTD. AND 40% FOR M/S.PROGRESSIVE C ONTRACTION LTD. IN THIS BACKGROUND IT WAS EXPLAINED THAT THE CO NTRACT ACCOUNT AND THE BALANCE SHEET OF THE JOINT VENTURE REVEALS NOTH ING BUT APPORTIONMENT OF CONTRACT RECEIPTS ASSETS AND LIABIL ITIES BETWEEN THE MEMBERS. THERE WAS NO EXPENDITURE BOOKED IN THE CONT RACT ACCOUNT NOR ANY PROFIT AND LOSS ACCOUNT PREPARED FOR THE PURPOSE SI NCE 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 COR RESPONDING TDS TO ITS MEMBERS IN THE RATIO OF THEIR WORK DONE BY INDIVI DUAL MEMBERS FOR WHICH THE APPOINTMENT CERTIFICATE WAS DULY ISSUED EVER Y YEAR BY THE ASSESSING OFFICER. IN THIS BACKGROUND IT WAS SUBMITTED T HAT THERE WAS NO RELATIONSHIP OF CONTRACTOR AND SUB-CONTRACTOR 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 W AS 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 TH E CORRESPONDING CONTRACT REVENUE IN THEIR RESPECTIVE RETURNS. IT WAS ALSO SUBMITTED THAT NIL INCOME ARISING IN THE HANDS OF THE AOP IS CONFIR MED BY THE ACTION OF THE ASSESSING OFFICER IN NOT ASSESSING ANY PROFIT/INCOME A RISING FROM THE CONTRACT APART FROM THIS DISALLOWANCE U/S. 40(A)(IA) O F THE ACT. THE ASSESSEE VIDE ITS SUBMISSIONS DATED 26.03.2010 AND 06.09.20 10 EXPLAINED THE DIFFERENCE BETWEEN REVENUE SHARING ARR ANGEMENT ENTERED INTO BY THE JOINT VENTURE VIS-A-VIS SUB-CONTRACT. IT WAS EXPLAINED ON BEHALF OF THE ASSESSEE THAT IN THE CASE OF SUB-CONTRACT THERE WAS A RELATIONSHIP OF PRINCIPAL AND AGENT WHEREAS IN THE SIT UATION OF REVENUE SHARING IT WAS ON A PRINCIPAL TO PRINCIPAL BASIS. FUR THER IN SUB- CONTRACTING THE CONTRACTOR RETAINS HIS SHARE OF PROFI T ALONGWITH THE TDS AND ONLY THE BALANCE IS PASSED ON TO SUB-CONTRACTOR. B UT IN JOINT VENTURE ASSESSEES DID NOT RETAIN ANY SHARE IN THE REVENUE WITH IT AND HAS PASSED THE ENTIRE GROSS REVENUE ALONGWITH TDS APPORTIONED FO R THEM. IT WAS SUBMITTED THAT THE DEPARTMENT HAS ALSO ISSUED TAX APPORT IONMENT 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 APPORTI ONMENT CERTIFICATE WAS ISSUED BY THE DEPARTMENT VIDE LETTER NO.PN/WD.3(4)/TC/07-08 DATED 26.11.2008 OF THE ASSESSIN G OFFICER IN WHICH THE ASSESSING OFFICER HAS ALLOWED APPORTIONMENT OF ENTIRE TDS OF RS.9 26 588/- DURING THE YEAR TO M/S.GAMMON INDIA LTD . SINCE ENTIRE WORK DURING THE YEAR WAS CARRIED OUT BY IT. SIMILAR LY 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 EN ABLING THEM TO CLAIM TDS IN RESPECTIVE CASES. THE ASSESSEE VIDE ITS SUBMI SSION DATED 22.04.2010 FURNISHED THE DETAILS WHICH REVEALED THAT GROSS REVENUE FROM THIS CONTRACT RECEIPTS BY JOINT VENTURE WAS ACCOUNTED FOR IN CASE OF EITHER OR BOTH OF THE TWO COMPANIES WHO WERE MEMBERS OF THE JOINT VENTURE IN ALL ASSESSMENT YEARS 2001-02 TO 2008-09. IT WAS FURTHER EXPLAINED BY 6 THE ASSESSEE THAT REVENUE SHARING WAS NOT EXACTLY 60:40 I N EACH YEAR SINCE IT DEPENDS ON THE RELATIVE WORK DONE IN THE PAR TICULAR YEAR. HAVING EXPLAINED THE DIFFERENCE BETWEEN CASES OF CONTRACT/SUB -CONTRACT IN THE BACKGROUND OF CLAUSES OF THE AGREEMENT THE ASSESSEE REL IED ON THE DECISION OF HON'BLE HIMACHAL PRADESH HIGH COURT IN TH E CASE OF CIT VS. AMBUJA DARLA KASHLOG MANGU TRANSPORT COOPERATIVE SOCI ETY (2009) 227 CTR 299 (HP). 7. IN THE BACKGROUND OF THE TAX APPORTIONMENT CERTI FICATES ISSUED BY THE ASSESSING OFFICER IT WAS STATED ON BEHALF OF THE ASSESSE E 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 C ONSCIOUSLY 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 06.09.2 010 MADE COMPARISON OF THE TAX RATES APPLICABLE TO DOMESTIC COM PANIES BEING JOINT VENTURE PARTNER IN THEIR INDIVIDUAL CAPACITY AND TH E 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 TH E AOP WOULD BE THE SAME IN THIS CASE. THIS WAS DUE TO APPLICABILITY OF SECT ION 167B OF THE ACT. THE ASSESSEE ALSO FILED DETAILS OF THE RETURNS OF IN COME OF THE TWO CORPORATE ENTITIES BEING JOINT VENTURE MEMBERS ALONG WITH ACKNOWLEDGEMENTS OF THEIR I.T. RETURNS WHICH REVEALE D THAT BOTH OF THEM HAD HUGE POSITIVE RETURNED INCOMES EVERY YEAR. FOR T HIS PAYMENT THE STAND OF THE ASSESSEE WAS THAT THE METHOD OF APPORTIONMEN T OF REVENUE TO THE MEMBERS WAS NOT TO TAKE ANY UNDUE BENEFIT OF L OSSES INCURRED BY THEM. THEREFORE IT WAS STATED THAT THERE WAS NO LOSS TO THE REVENUE AS A RESULT OF THIS METHOD ADOPTED BY THE ASSESSEE OF SHARING T HE GROSS REVENUE BY ITS MEMBERS WHICH WAS TAXED IN THEIR HAND S. HOWEVER THIS EXPLANATION OF THE ASSESSEE DID NOT FIND FAVOUR FROM TH E ASSESSING OFFICER. THE ASSESSEE HAS ALSO RAISED THE ISSUE OF CONSISTENC Y 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 APPORT IONMENT 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. 2 007-08. ON THE PRINCIPLE OF CONSISTENCY THE LD. AUTHORISED REPRESENTA TIVE 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 T HE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RADHASOAMI S ATSANG VS. CIT (1992) 193 ITR 321 (SC) WHEREIN IT WAS OBSERVED THAT STRICTLY SPEAKING THE PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO INCO ME TAX PROCEEDINGS SINCE EACH ASSESSMENT YEAR WAS A SEPARATE UNIT IN ITSELF AN D 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 WA Y 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 AL LOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. IT WAS ALSO CONTENDED TH AT HON'BLE KERALA HIGH COURT IN THE CASE OF MANJUNATH MOTOR SERVICE AN D CANARA PUBLIC CONVEYANCES 197 ITR 321 (KAR.) OBSERVED THAT METHOD ADOPTED BY THE ASSESSING OFFICER WOULD RESULT IN DOUBLE TAXATION OF THE SAME INCOME SINCE GROSS RECEIPTS DISTRIBUTED AMONGST THE TWO JOINT V ENTURE PARTNERS WAS INCLUDED AS RECEIPTS IN THEIR RESPECTIVE CASES AND T HE JOINT VENTURE PARTNERS HAD ALSO UTILISED THE TDS CREDITS ON THE BASIS OF APPORTIONMENT CERTIFICATE ISSUED BY THE ASSESSING OFFICER. IN VIEW OF THE ABOVE DISCUSSION CIT(A) WAS JUSTIFIED IN HOLDING THAT IN ABSEN CE OF ANY CONTRACT OR SUB-CONTRACT WORK BY JOINT VENTURE TO ITS MEMBER COMPANIES 7 PROVISIONS OF SECTION 194C WERE NOT APPLICABLE FOR THE PURPOSE OF TDS. THE TWO CORPORATE ENTITIES FORMING JOINT VENTURE WER E ALREADY BEING ASSESSED SINCE A.Y. 2000-01 ONWARDS ON THEIR RESPECTIVE SH ARES AND TDS APPORTIONMENT CERTIFICATES WERE ALSO ISSUED BY THE ASSESSIN G OFFICER EVERY YEAR FOR THESE EIGHT YEARS INCLUDING THE CURREN T ASSESSMENT YEAR TO ENABLE THEM TO CLAIM THE SAME IN THEIR OWN CASES. MOR EOVER THERE WAS NO PROFIT AND LOSS ACCOUNT IN THE ASSESSEES CASE AND THER E 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 ASSESSIN G OFFICER WILL ALSO RESULT IN DOUBLE TAXATION OF THE SAME CONTRACT RE VENUE WHICH IS IN VIOLATION OF THE KARNATAKA HIGH COURT DECISION REPOR TED 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 TR IBUNAL HAS OBSERVED AS UNDER: 6. WE HAVE NOTED THAT IT IS AN ADMITTED POSITION THA T NO WORK IS CARRIED OUT BY THE AOP IT HAS ACTED AS A CONDUIT BET WEEN THE MSRDC AND THE TWO PERSONS CONSTITUTING THIS AOP SO FAR AS THEIR SEPA RATE AND NEATLY IDENTIFIED WORK AREAS ARE CONCERNED. A MERE EXISTEN CE OF AN AOP CANNOT LEAD TO TAXABILITY IN THE HANDS OF THE AOP UNLESS THE AOP RECEIVES MONIES IN ITS OWN RIGHT. WE HAVE NOTED THAT HON'BLE AUTHOR ITY OF ADVANCE RULINGS WAS IN SEISIN OF A MATERIALLY IDENTICAL SITUATI ON IN THE CASE OF VAN OORD ACZ BV IN RE(248 ITR 399) IN WHICH TWO CONTRAC TORS JOINED HANDS FOR CARRYING OUT NEATLY IDENTIFIED SEPARATE WORK WHI CH WAS A PART OF COMPOSITE CONTRACT AWARDED TO THE AOP BUT THE TAXAB ILITY OF INCOME FROM SUCH CONTRACT WAS HELD TO BE TAXABLE IN THE HAN DS 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 T HAT THE APPLICANT CANNOT BE TREATED AS A PARTNERSHIP WHICH CA N 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 PU RPOSE OR COMMON ACTION AND THE OBJECT OF THE ASSOCIATION MUST BE TO PRODUCE INCOME JOINTLY. IT IS NOT ENOUGH THAT THE PE RSONS 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 CO-OPERATION IN THEIR RELATIONSHIP WITH THE CHENNAI PORT TRUST. THE INTENTI ON WAS NOT TO CARRY OUT ANY BUSINESS IN COMMON ONLY A PART OF THE JOB WILL BE DONE BY VOACZ ACCORDING TO ITS TECHNICAL SKILL AND CA PABILITY. THE OTHER PART OF THE CONTRACT WILL BE EXECUTED BY HCC. THE TOTAL VALUE OF THE CONTRACT WAS RS. 2 62 01 03 120. THE APPLICANT 'S SHARE OF WORK WAS VALUED AT RS. 44 52 78 920 (17 PER CENT OF T OTAL VALUE). THE ASSOCIATION WITH THE HCC WAS NOT WITH THE OBJECT O F EARNING THIS INCOME BUT FOR CO ORDINATION IN EXECUTING THE C ONTRACT SO THAT HCC COULD ALSO MAKE ITS OWN PROFIT. HHC'S WORK AND INC OME ARISING THEREFROM WAS QUITE SEPARATE 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 PAR TY. THE ASSOCIATION OF THE PETITIONER COMPANY WITH HCC WAS UND OUBTEDLY 8 FOR MUTUAL BENEFIT BUT SUCH ASSOCIATION WILL NOT MAKE THEM A SINGLE ASSESSABLE UNIT AND LIABLE TO TAX AS AN AOP. FOR E XAMPLE 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 W ILL NOT MAKE THE THREE PERSONS LIABLE TO BE TAXED AS AN AOP IF EAC H ONE HAS A DESIGNED AND INDEPENDENT ROLE TO PLAY IN THE BUILDIN G PROJECT. IN THE INSTANT CASE THE APPLICANT HAS STATED THAT THE APP LICANT HAS MADE ITS OWN ARRANGEMENT FOR EXECUTION OF WORK INDEP ENDENT 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 C ANNOT BE TREATED AS AN AOOP FOR THE PURPOSE OF LEVY OF INCOME- TAX. THE APPLICANT WILL BE LIABLE TO BE TAXED AS A SEPARATE AN D INDEPENDENT ENTITY. THE QUESTION NO.1 IS ANSWERED ACCORDINGLY.' 7. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS SO E XPRESSED BY THE HON'BLE AUTHORITY FOR ADVANCE RULING. WE ADO PT THE REASONING OF THE HON'BLE AAR AND RESPECTFULLY FOLLO WING THE SAME APPROVE THE CONCLUSION ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. IN VIEW OF THE ABOVE DISCUSSION WE ARE NOT INCLINED T O INTERFERE IN THE FINDING OF THE CIT(A) WHO HAS DIRECTED THE ASSESSING OFF ICER TO DELETE THE ADDITION. THE SAME IS UPHELD. 6.1 SINCE FACTS OF THE PRESENT APPEAL ARE IDENTICAL TO FACTS OF THE CASE CITED ABOVE THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL CITED (SUPRA) AND IN ABSENCE OF ANY CONTRARY MATERI AL BROUGHT TO OUR NOTICE AGAINST THE ORDER OF THE TRIBUNAL WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE DISALLOWANCE MADE U/S.40 (A)(IA) OF THE I.T. ACT. WE ACCORDINGLY UPHOLD THE SAME. GROUNDS RAIS ED BY THE REVENUE ARE ACCORDINGLY DISMISSED. 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED PRONOUNCED IN THE OPEN COURT ON 11-04-2014. SD/- SD/- (R.S. PADVEKAR) (R.K. PAND A) JUDICIAL MEMBER ACCOUN TANT MEMBER PUNE DATED: 11 TH APRIL 2014 SATISH 9 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-II PUNE 4 CIT-II PUNE 5. THE D.R A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT PUNE BENCHES PUNE