Income Tax Appellate Tribunal - Hyderabad
Ito,Ward 14(3),, Hyderabad vs Assessee on 13 January, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'A', HYDERABAD
BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER
AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA NO/ ASSESS- APPELLANT RESPODNENT/
___________ MENT CROSS OBJECTOR
CROSS OBJEC- YEAR
TION NO.
THEREIN
323/Hyd/2014 2010-11 Income-tax Officer, M/s. KCEL-MEIL(JV)
& Ward 14(3), Hyderabad Hyderabad
CO 29/Hyd/2014
(PAN AABAC 7129 H)
324/Hyd/2014 2010-11 Income-tax Officer, M/s. MEIL-MAYTAS-ABB-
& Ward 14(3), Hyderabad AAG(JV), Hyderabad
CO 30/Hyd/2014
(PAN AABAM 1584 F)
325/Hyd/2014 2010-11 Income-tax Officer, M/s. MEIL-KCCL-
& Ward 14(3), Hyderabad FLOWMORE (JV)
CO 31/Hyd/2014 Hyderabad
(PAN AABAM 1253 H)
326/Hyd/2014 2010-11 Income-tax Officer, M/s. MEIL-MAYTAS-
& Ward 14(3), Hyderabad KBL(JV)
CO 32/Hyd/2014 Hyderabad
(PAN AABAM 1251 F)
327/Hyd/2014 2010-11 Income-tax Officer, M/s. MEIL-SEW-MAYTAS-
& Ward 14(3), Hyderabad BHEL(JV), Hyderabad
CO 33/Hyd/2014
(PAN AABAM 1587 G)
328/Hyd/2014 2010-11 Income-tax Officer, M/s. MEIL-SEW-ABB-
& Ward 14(3), Hyderabad AAG (JV), Hyderabad
CO 34/Hyd/2014
(PAN AABAM 1585 E)
329/Hyd/2014 2010-11 Income-tax Officer, M/s. MEIL-RATNA-
& Ward 14(3), Hyderabad KBL(JV), Hyderabad
CO 35/Hyd/2014
(PAN AABAM 1252 G)
330/Hyd/2014 2010-11 Income-tax Officer, M/s. HCC-MEIL-CBE (JV)
& Ward 14(3), Hyderabad Hyderabad
CO 36/Hyd/2014
(PAN AAAAH 3287 R)
2 ITA No.323 to336/Hyd/2014 & Cos therein
M/s. KCEL-MEIL(JV), Hyderabad
and thirteen others
331/Hyd/2014 2010-11 Income-tax Officer, M/s. MEIL-KBL-WEG-(JV)
& Ward 14(3), Hyderabad Hyderabad
CO 37/Hyd/2014
(PAN AABAM 3374 P)
332/Hyd/2014 2010-11 Income-tax Officer, M/s. MEIL-MAYTAS-
& Ward 14(3), Hyderabad WPIL(JV), Hyderabad
CO 38/Hyd/2014
(PAN AABAM 1254 A)
333/Hyd/2014 2010-11 Income-tax Officer, M/s.HCC- MEIL-NCC-
& Ward 14(3), Hyderabad WPIL(JV), Hyderabad
CO 39/Hyd/2014
(PAN AAAAH 3848 N)
334/Hyd/2014 2010-11 Income-tax Officer, M/s. MEIL-GAYATRI-
& Ward 14(3), Hyderabad ZVS-ITT (JV), Hyderabad
CO 40/Hyd/2014
(PAN AABAM 3375 N)
335/Hyd/2014 2010-11 Income-tax Officer, M/s. MEIL-ZVS-PVSRSN-
& Ward 14(3), Hyderabad ITT(JV), Hyderabad
CO 41/Hyd/2014
(PAN AABAM 3376 R)
336/Hyd/2014 2010-11 Income-tax Officer, M/s. MEIL-IVRCL-HCC-
& Ward 14(3), Hyderabad WPIL (JV)
CO 42/Hyd/2014 Hyderabad
(PAN AABAM 1586 H)
Appellant by : Shri Ramakrishna Bandi
Respondents/ : Shri K.C.Devadas
Cross Objectors by
Date of Hearing 12.12.2014
Date of Pronouncement 13.01.2014
ORDER
Per Bench:
These fourteen appeals filed by the Revenue in the case of fourteen assessees are directed against a common order passed by the learned Commissioner of Income-tax(Appeals) II, Hyderabad dated 6.12.2013 and the same have been heard together and are being 3 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others disposed alongwith corresponding cross-objections filed by the assessee companies, being CO Nos.29 to 42/Hyd/2014, by a single consolidated order for the sake of convenience.
2. The solitary common issue involved in the appeals of the Revenue is whether the assessees in the present case, which are joint ventures/consortiums are required to deduct tax at source form the payments made to their constituent members on account of execution of contract work.
3. The assessees in the present case are joint ventures/consortiums formed by certain constituent members. The purpose of the formation of these joint ventures/consortium by the constituent members is to put their expertise and finances together so as to make themselves eligible to bid for bigger government contracts. Accordingly, various government contracts were secured in the names of joint ventures/consortium. On account of execution of the said contracts, payments were received by the joint ventures/consortiums during the year under consideration from the concerned government agencies after deduction of tax at source and the same were transferred to their constituent members as per their respective shares in the execution of contract without deduction of any tax at source. The consortium did not retain any commission/margin for themselves and accordingly filed 'nil' return of income for the year under consideration. The credit for tax deducted at source by the different government agencies was allowed to be claimed by the constituent members in accordance with Rule 37BA(2) of the Income-tax Rules.
4. A survey under S.133A was carried out in the business premises of the assessees on 13.11.2009. Based on the findings of the survey, the Assessing Officer was of the opinion that the payments made 4 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others by the joint ventures to their constituent members constituted payments made to the sub-contractors and the assessees(joint ventures), therefore, were liable to deduct tax at source from the said payments under S.194C of the Act. Since no such tax at source was deducted by the assessees, the Assessing Officer treated them as the assessees in default under S.201(1) of the Act in the capacity of Association of Persons and also levied interest under S.201(1A) of the Act, on the following grounds, as summarized by the learned CIT(A) in his impugned order-
"(a) The intention/common goal of the Joint Venture was to produce income from rendering the contract work. For this purpose the constituents of the joint venture formed an Association of Persons.
(b) All the constituents are jointly and severally responsible to the government for executing project.
(c) The government has awarded the contract treating the Joint Venture as a unit. The contract is not awarded to the individual members.
(d) The lead member is responsible for day to day management and coordination amongst constituents.
(e) Thus, the Joint Venture has the attributes of common objectives and unified management.
(f) Thus, in view of the above characters of the Joint Venture where there is a common purpose of producing the income and there is unified management, Joint Venture has to be treated as Association of Persons and the payments made to constituents are equivalent to payments made to sub-contractors therefore, liable to TDS u/s. 201(1) and u/s. 201(1A)."
5. Against the orders passed by the Assessing Officer under S.201(1) and S.201(1A) of the Act, appeals were preferred by the assessees before the learned CIT(A), who initially upheld the orders passed by the Assessing Officer under S.201(1)/S.201(1A), treating the 5 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others assessees as in default for their failure to deduct tax at source from the payments made to their constituent members. On further appeals filed by the assessees, the Tribunal vide its order dated 30.5.2012 passed in ITA Nos. 63 to 76/Hyd/0212, restored the matter back to the file of the learned CIT(A) to decide the same afresh, with the following directions-
"We have also perused the decision of the Visakhapatnam Bench of the Tribunal in the case of ITO V/s. UAN Raju Constructions (2011) 48 SOT 178) (Vsptnm) and Mumbai bench decision of the Tribunal in the case of SMC Constructions V/s ITO(2011)TIOL 597-
ITAT-Mum. Relating to TDS matters in respect of works contracts transferred between the JV and its constituents/Members. The Tribunal upheld the proposition that the Consortium of JV formed only to procure contract works and that the said contract work was executed by the constituent/member, there is no merit in presuming that the JV is a contractor and its members were sub- contractors for the purpose of applying TDS provisions and the provisions of S.40(a)(ia). The CIT(A) is directed to keep in mind the ratio of these decisions also, while re-examining these maters afresh. Accordingly, impugned orders of the CIT(A) are set aside and all these matters are restored to the file of the first appellate authority for fresh adjudication on all the issues involved in the appeals before him, in view of our above discussion and in accordance with law and after giving reasonable opportunity of hearing to the assessees."
6. During the course of set aside proceedings, elaborate submissions were made on behalf of the assessees before the learned CIT(A) in support of their cases as a whole, challenging the orders passed by the Assessing Officer under S.201(1)/S.201(1A) treating them as assessees in default, and the said submissions, as summarized by the learned CIT(A) in her impugned orders, were as under-
(a) The appellant is a Joint Venture comprising of its constituents. It had taken up irrigation works mostly with the Government of Andhra Pradesh. The work involved is highly technical and requires both expertise and finances.
(b) The gross receipts received by Joint Venture are distributed among its constituents in proportion to their shares. The arrangement between the Joint Venture and its constituents 6 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others was for smooth implementation of its work as per the stipulations of the Government.
(c) The execution of work by constituents of Joint Venture was an internal arrangement for smooth and timely execution of work deploying their expertise and capital. There is no contract between the Joint Venture and its constituents. It is the Joint Venture which is liable to the Government for any breach of contract but not its constituents.
(d) As per the law there cannot be a contract between the Joint Venture and its constituents as there is no distinction between the Joint Venture and its constituents.
(e) Although the Joint Venture was always conscious that no TDS is deductible as per law, the TDS was deducted as per the direction of the Assessing Officer and the same was taken as credit by constituents. This was done as a measure of prudence to avoid any future dispute and penal action/ The concession under incorrect assumption of law cannot be treated as words of statute. It is well recognized principle that there is no estoppel against law, the appellant places reliance on the following case laws;
(i) CIT V/s. VMRP Firm 56 ITR 67 1974 ...if a particular income is not exigible to tax under the statute, the ITO has no power to impose tax on the same.
(ii) In the case of A.Venkat Ramaiah 57 ITR 185V, the Hon'ble Supreme Court held that.... Even in cases where the assessee himself had offered the income to tax, if it is not taxable as per the statute, the amount cannot be brought o tax.
(iii) Bharat General Re-insurance Co. Ltd. 81 ITR 303 Delhi
(iv) S.R.Koshti Vs. CIT 193 CTR 518(Gujarat) wherein it is held that tax can be collected only on profit under the Act. If an assessee, under a mistake, was over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes are collected.
(f) In the absence of liability to deduct TDS, interest u/s.
201(1A) is not leviable. Since the Joint Venture constituents 7 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others have already taken credit for TDS, the issue to that extent may be treated as final.
(g) That there is no agreement between the Joint Venture and its constituents. There is only a memorandum of understanding among Joint Venture constituents distributing and allocating the work. By no means these agreements can be held as agreement for contract between the Joint Venture and its Constituents
(h) Though the Joint Venture has not retained any profit/commission when the amounts was paid to its constituents. The Joint Venture always filed a nil return of income and the profits accrued to constituents were offered in their respective income-tax returns.
(i) The Joint Venture is an entity which is not governed by Indian Partnership Act or any other statute. There is no definition of Joint Venture in Income-tax Act.
(j) Reliance is placed on the following precedents.
(i) Gaurangalal Chatterjee (2001)(15 Taxmann 653)
(ii) ITO Vs/. OUN Raju Constructions Visakhapatnam (2011) TIOU 5542 Vizag
(iii) S.M.Ambica JV Vs. ITO (2011) (TIOL) 597 ITAT Mumbai
(iv) CIT V/s. Skay Construction Cojmpany 2004, 140 Taxmann 442(P&H)
(k) During the course of current proceedings, the appellant took the stand that the TDS was made by Joint Venture on these constituents on account of survey on 13.11.2009 on being compelled by the Assessing Officer and such payments were made to Government account under protest.
(l) That the Government has already deducted TDS on joint venture. If the joint venture again has to deduct TDS on constituents, it amounts to double deduction. At every step TDS and AP Value Added Tax has to be deducted resulting in serious liquidity problems."
8 ITA No.323 to336/Hyd/2014 & Cos thereinM/s. KCEL-MEIL(JV), Hyderabad and thirteen others
7. The assessees also furnished the following details and documents before the learned CIT(A) in support of their cases-
(a) Copy of income-tax return of joint Venture
(b) Computation of income of Joint Venture alongwith annual accounts, 3CD report
(c) Joint Venture Agreement before bidding for the contract.
(d) A copy of the conditions specified by the Government both financial and technical at the time of bidding which runs into more than 500 pages (as it is not possible to submit copies for all the Joint Ventures a sample copy was submitted in the case of MEIL-MAYTAS-AVB-ANVRTIZ (JV)}
(e) Copy of the Joint Venture Agreement among constituents subsequent to award of contract by the government. Sample copy of MEIL, IVRCL-HCC was submitted and the appellant informed that in all the existing cases the terms of agreements are more or less similar.
8. After considering the submissions made by the assessees as well as the relevant documentary evidence placed on record before her, the learned CIT(A) observed that the Government agency as per the relevant agreements were clearly dealing with only one entity termed as 'contractor', which was joint venture. She noted that in the agreement running into more than 500 pages, no reference was made either to joint venture or its constituents, and the reference all through was by the expression 'contractor' as a single entity and as such, in the eyes of these government agencies, the constituents were non-existing and they had no locus standi. She held that although declarations under Rule 37BA(2) were given by the joint ventures as deductees to the deductor for giving credit of TDS to the constituents, the Joint Venture, as per the agreements with the government agencies, was under obligation to 9 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others inform to the government agencies about any work to be done by the sub-contractors at the time of putting the bids, which was not done.
9. The learned CIT(A) further noted from the past assessment records that the joint venture, had always been deducting tax at source from the payments made to its constituents and even as per clause 6.5(h) of the Joint Venture agreement dated 21.2.2009, the joint venture was required to deduct tax at source from the payments made to the constituents. The learned CIT(A) also noted from the annual accounts of the joint venture that the expression 'sub-contractor' was always used by the assessee while referring to the constituents. After having recorded all the adverse findings against the assessee rejecting the various contentions raised on behalf of the assessees, the learned CIT(A) however finally held, for the following reasons given, in paragraph 11 of her impugned order, that the assessees could not be treated as in default as per S.201(1) of the Act-
"11. To summarize, the Joint Venture in this group of cases obtained the contract from the Government. The Government deducted the TDS on Joint Ventures. The Joint Ventures in turn deducted on its constituents. The constituents had filed their Income Tax Returns and taken the credit for the TDS deducted by the Joint Ventures. As per the agreement entered amongst constituents, none of them has any control over the other. Each of them is executing the contract as specified in the agreement. The capital, the finance, the expertise, the profit, of each constituent is independent. The purpose of forming the Joint Venture is to make it eligible to bid for a contract. The constituents are carefully chosen so that together they qualify for a particular contract of Government. In ths scenario, the judicial precedents are predominantly in favour of the appellant stating that in cases where there is no contract between Joint Venture and its constituents, the provisions of section 194C are not applicable. Therefore, the appellant cannot be deemed to be in default as per section 201.", 10 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others
10. After having held that the assessees could not be treated as assessees in default under S.201(1), the learned CIT(A) held that the assessees were still liable for payment of interest under S.201(1A) and relying on the decision of the Apex Court in the case of Hindustan Co-cola Beverages Ltd. V/s. CIT (293 ITR 226), she held that since the TDS made by the joint venture was the money belonging to the government and the same was not paid within the prescribed time limits, it was logical that the Joint Venture should pay interest under S.201(1A) of the Act for using the government money. Aggrieved by the order of the learned CIT(A) giving relief to the assessee in terms of S.201(1), the Revenue has preferred the present appeals before the Tribunal, whereas the assessees have filed the cross objections challenging the order of the learned CIT(A) confirming the levy of interest under S.201(1A).
11. The Learned Departmental Representative submitted that there were two agreements entered into between the consortium and their constituent members, one before securing the tender and the other after securing the tender. He contended that these agreements specifically entered into between the assessee-consortiums and their constituent members for distribution of the work for execution of contracts are in the nature of works contracts, as envisaged in S.194C. He contended that such contracts, in any case, can be verbal also and the fact that the work secured by the assessee-joint ventures was ultimately entrusted to the constituent members for execution clearly shows that there was a contract between them, since it is not possible without such contract, either written or verbal, to entrust the work of execution on mutual terms and conditions.
12. The Learned Departmental Representative further contended that the government agencies, who entrusted the contract to the consortiums, never recognized the constituent members of the 11 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others consortium, as they were not parties to any agreement entered into with the government agencies. He submitted that the contract for execution of work was between the principal and the joint ventures of the constituents, and since the constituent members were not parties to the agreement/contract between the principal and the joint ventures, there has to be a separate agreement/contract between the joint venture who got the contract and their constituents, who executed the contract. He contended that the obligation to perform the contract was on the joint venture, and it was not possible without there being any contract/agreement to entrust that work/obligation to the constituent members. He contended that the agreement entered into between the joint venture and their constituent members post tender to distribute the work of execution of contract thus assumes significance and the same clearly constitutes a contract between the joint venture and its constituent members to entrust the work of execution, thus attracting the provisions of S.194C of the Act. In support of these contentions, he relied on the decision of the Authority for Advance Ruling reported at Geoconsult ZT GmbH, In re (304 ITR 283)-AAR.
13. The Learned Departmental Representative also pointed out that the entire contract receipts received from the principal on execution of work belonged to the joint ventures/consortiums and the same indeed was recognised by them by crediting such receipts to their Profit & Loss Account. He pointed out that even the payments made by the consortiums/joint ventures to its constituent members on account of execution of work were claimed as expenditure by them, treating the same as payments made to the sub-contractors. He contended that the relationship of contractor and sub-contractor thus was recognised and accepted by the joint ventures/consortiums in their books of account and this treatment given by the joint ventures/consortiums in the books of account is sufficient to show that the tax at source was required to be 12 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others deducted by the assessee-JVs from the payments made to their constituent members as per the provisions of S.194C.
14. The learned counsel for the assessee, on the other hand, invited our attention to the relevant portion of the order passed by the Tribunal in the first round and pointed out that a specific direction was given by the Tribunal to the learned CIT(A) to decide the issue involved in these cases afresh in the light of the decision of the Visakhapatnam Bench of ITAT in the case of ITO V/s. UAN Raju Constructions (supra) and Mumbai Bench of the Tribunal in the case of SMC Ambica (supra). He also invited our attention to paragraph 11 of the impugned order of the learned CIT(A) to point out that the learned CIT(A) as per the directions of the Tribunal decided the issue in favour of the assessee, holding that there was no relationship of contractor and subcontractor between the assessee-joint ventures and their constituent members, so as to attract the provisions of S.194C, relying on the decisions of the Visakhapatnam Bench of the ITAT in the case of ITO V/s. UAN Raju Cosntrucito0ns (supra) as well as Mumbai Bench of the Tribal in the case of SMC Ambika JV V/s. ITO (supra). He contended that the facts involved in both these cases decided by the coordinate benches of the Tribunal are similar to the facts of the present cases and the learned CIT(A) therefore, was fully justified in following the said decisions of the Tribunal to decide the issue in favour of the assessee. Reliance was also placed by the learned counsel for the assessee on the decision of the Punjab and Haryana High Court in the case of ESS KAY Constructions (167 ITR 618) in support of the assessee's case and submitted that the decision rendered in the said case by the Hon'ble Punjab and Haryana High Court involving similar facts and circumstances, has been followed by the Mumbai Bench of the Tribunal in the case of SMC Ambika JV (supra), to decide a similar issue in favour of the assessee.13 ITA No.323 to336/Hyd/2014 & Cos therein
M/s. KCEL-MEIL(JV), Hyderabad and thirteen others
15. The Learned counsel for the assessee contended that the issue involved in the present case thus is squarely covered in favour of the assessee by the two decisions of the Tribunal as well as the decision of the Hon'ble Punjab and Haryana High Court in the case of ESS KAY Constructions (supra), wherein a similar issue was decided in favour of the assessee involving similar facts and circumstances of the case. He invited our attention to the comparative statement prepared and furnished at pages 10 to 14 of his paper book to point out that the facts involved in the present case as well as the clauses of agreements are not only similar, but stronger than the cases decided by the Tribunal in favour of the assessee on a similar issue. As regards the treatment given by the assessee recognizing the entire contract receipts as their income and payments made to the constituent members towards execution of contract, as expenditure treating the same as payment to sub-contracts, the learned counsel for the assessee submitted that nomenclature used in the accounts or treatment given in the books of account is not conclusive to decide the nature of payments or relationship between the two parties. He also pointed out that this aspect has already been considered in one of the decisions rendered by the coordinate Bench in the case of Hindustan Ratna JV V/s. ITO (ITA No.372/Hyd/2013) dated 18th December, 2013, while deciding a similar issue in favour of the assessee. He placed on record a copy of the said decision rendered by the Tribunal and submitted that the entire contract receipts received by the joint venture were passed on to the constituent members by the assessee in these cases, without keeping any profit, as in the case of Hindustan Ratna JV. (supra).
16. In the rejoinder, the Departmental Representative submitted that the case-laws cited by the learned counsel for the assessee are distinguishable on facts in as much as the joint ventures in these cases were formed to secure the contracts only, and the execution was done 14 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others separately by the constituent members. He submitted that the basis of such bifurcation of work was very clear and the same was very much known to the principal, who entrusted the contract. He also submitted that the contract receipts in those cases did not belong to the JVs and the same were recognized by the constituent members and not by the joint ventures.
17. We have considered the rival submissions and also perused the relevant material on record. The common issue involved in the present cases is whether in the facts and circumstances of the cases, the assessees which are joint ventures are required to deduct tax at source from the payments made to their constituent members on account of execution of their respective shares of work. It is observed that this issue earlier had come up for consideration before the coordinate bench of this Tribunal in the first round, and keeping in view the various contentions raised on behalf of the assessee, which were found to be not properly adjudicated by the learned CIT(A), this issue was remitted back by the Tribunal to the learned CIT(A) for fresh adjudication in accordance with the provisions of S.250(6). While doing so, the Tribunal in paragraph No.12 of its order dated 30th May, 2012 (supra) took note of the two decisions cited on behalf of the assessee, one of the Visakhapatnam Bench of the Tribunal in the case of UAN Raju Constructions (supra) and the other by the Mumbai Bench of the Tribunal in the case of SMC Ambika JV (supra). On a perusal of the above two decisions, the Tribunal observed that the same were relating to TDS matters in respect of works contracts transferred between the JV and its constituent members, wherein the proposition upheld was that the consortium of JV was formed only to procure contract works, and since the said contract was executed by the constituent/members, there was no merit in presuming that the JV is a contractor and its constituent-members are sub- contractors for the purpose of applying TDS provisions and the provisions 15 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others of S.40(a)(ia). Keeping in view this proposition propounded by the Tribunal in its two decisions, the learned CIT(A) was specifically directed by the Tribunal to keep in mind the ratio of these decisions also and reexamine the matter afresh.
18. As per the directions of the Tribunal, the learned CIT(A) in paragraph No.10 of her impugned order considered and discussed inter alia the decisions of the Tribunal in the case of UAN Raju Constructions (supra) and SMC Ambika JV (supra) as under-
"10. The judicial precedents on the issue are as under :
a) ITO vs. UAN Raju Constructions (2011) 48 SOT 178 (Visakhapatnam Trib).
In this case, the Hon'ble Tribunal had dealt with the issue 'whether Joint Venture has to deduct TDS on constituents' elaborately. The facts of the case were identical to that of the appellant. The important observations/references made by the Hon'ble Tribunal are as under:
(i) That the Joint Ventures are not governed by Indian Partnership Act, 1932. There is no statute which governs a Joint Venture. Hence, the relationship between Joint Venture and its Members has to be decided on the terms of agreement. Though the Joint Venture agreement generally fall in category of Association of Persons under Income Tax Act, 1961. Yet their assessability in the status of AOP is not free from doubt.16 ITA No.323 to336/Hyd/2014 & Cos therein
M/s. KCEL-MEIL(JV), Hyderabad and thirteen others
(ii) A joint venture is to be distinguished from a relationship of an independent contractor, the latter being one who, exercising an independent employment, contracts to do work according to his own methods and without being subject to the control of his employer except as to the result of the work, while a joint venture is a special combination of two or more persons where, in some specific venture, a profit is jointly sought without any actual partnership or corporate designation.
(iii) In concluding remarks, the Hon'ble Tribunal held as under-
"Thus on an understanding of the concept of the "Joint Venture" and the terms of agreement between the members of the present case, we are of the view that in the instant case, the consortium of Joint Venture has been formed only to procure the contract works. By way of the agreement, the parties have only regulated the relation-
ship inter se with respect to their joint responsibility that existed in relation to the Principal, viz., M/s. Konkan Railway.
In reality, the parties have divided the contract works between themselves and they have executed their share of work on their own risks. It is pertinent to note here that the AO has not given any finding on the issues like that each member had authority to interfere with or control the work executed by the other member; that both the members have jointly executed the project and thus produced the income jointly. In our opinion, the finding on the lines stated above is crucial to determine the issue of availability of income in the hands of Joint Venture-AOP. On the contrary, the AO is 17 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others on record that the each of the members has declared the income derived from their respective share of contract works in their hands. In this kind of situation, we do not find merit in the presumption made by the AO that the Joint Venture is the "Main Contractor" and the members are the "Sub-contractors". Once this pre-
sumption has been found to be wrong, then the question of estimation of income by way of Sub-contractor commission does not arise. So also the question of deduction of tax under section 194C(2) of the Act and the disallowance under section 40(a)(ia) does not arise. In view of the foregoing discussions, we do not find any infirmity in the decision reached by the Learned. CIT(A)."
b) SMC Ambika jV vs. ITO 2011-TIOL0=-597-Hon'ble ITAT-
Mum.
In this case, the issue was whether TDS was deductible by Association of Persons, when the entire amounts received were transferred to the Accounts of Members without keeping any commission or profit? It was held that there was no contract or sub-contract relationship between JV and its partners. Therefore, section 194C(2) has no application.
c) CIT V/s. Ambuja Grla Kash - 31 DTR 49(HP) In this case, the issue was whether an Association of persons formed by the truck operators, has to deduct TDS when the payments were made to truck operators, when the TDS was already deducted on AOP. The Hon'ble Tribunal held that in the instant case the companies entered into contracts for transportation of goods with the society. The society is nothing but conglomeration of truck operators. The society is formed to ensure that work is provided to all truck operators on equitable basis. There is no contract between society and 18 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others members. Therefore, provisions of section 194C(2) are not attracted.
d) In the following cases the Hon'ble Supreme Court held that there is substantial question of law involved in determining whether the AOP was liable to deduct tax on its members and the matter was remanded to respective High Courts:
a. CIT vs. Sirmour Truck Operators Union (2009) 313 ITR 27 (Se).
a. CIT vs. Bilaspur District Truck Operators Transport Cooperative Society (2009) 225 CTR (SC) 260.
e) Gourangalal Chatterjee and Others vs. ITO & Others (2001) 247 ITR 737 (Cal). In this case two partnership firms were formed as a Joint Venture. The Department assessed the income in the hands of two partnership firms. It was held that the Department cannot proceed against the Joint Venture treating the same as Body of Individuals.
f) CIT vs. Eskay Construction Co. (2004) 267 ITR 618 (P&H) . .In this case it was held that if there is no contract between the assessee and a sister-concern, the provisions of section 194C are not applicable.
11. ......"
19. As discussed and noted by the learned CIT(A), the facts involved in the case of UAN Raju Constructions (supra) were found to be identical compared to the case of the assessees herein. She also considered the concluding remarks of the Tribunal on a similar issue in the case of UAN Raju Constructions (supra) as well as in the case of SMC 19 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others Ambika JV (supra), and finally held that these judicial precedents are directly in favour of the assessee.
20. At the time of hearing before us, the learned Departmental Representative has contended that the two decisions of the Tribunal in the case of UAN Raju Constructions (supra) and SMC Ambika JV (supra) cited on behalf of the assessee and relied upon by the learned CIT(A) to decide the issue in favour of the assessee in her impugned order, are distinguishable on facts in as much as the joint ventures in these cases were formed just to secure the contracts, but the work of execution was bifurcated amongst the constituent members on a definite basis, which was known even to the principal. He has also contended that the contract receipts in those cases did not belong to the joint venture and the same were recognised as their own turnover by the constituent members. On a careful perusal of the decisions rendered by the Tribunal in these two cases, we are not able to agree with these contentions of the learned Departmental Representative.
21. In the case of UAN Raju Constructions (supra), the assessee was joint venture of a company and proprietary concern. The joint venture was formed in order to combine their respective individual resources, since it would enable to participate in the tender process, which would ultimately help in getting the major contract work. The joint venture obtained contract from Konkan Railway Corporation and the same was divided between the two parties in an agreed ratio. In the accounts of the joint venture, the gross receipts of relevant accounting year were credited to the Profit & Loss Account and the value of works allotted to both the members, which was equal to the gross receipts, was debited to the Profit & Loss Account. Thus, no income was shown in the hands of the joint venture and the returns of income were filed in both the relevant years in the status of Association of Persons, declaring 'NIL' 20 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others income. Keeping in view these facts and circumstances of the case, the Assessing Officer was of the view that the assessee AOP should be treated as main contractor and the members to whom the work was allotted should be treated as sub-contractor. He therefore, held inter alia that the assessee was required to deduct tax at source from the payments made to the members, and since no such tax was deducted by the assessee AOP from the contract amount of Rs.31,54,425, he made disallowance of that amount by invoking the provisions of S.40(a)(ia).
22. The facts of the case of UAN Raju Constructions (supra), as narrated above, show that the same are similar to the facts of the present case and in our opinion, there is no material distinction in the facts of the present case as compared to the facts in the case of UAN Raju Constructions (supra). In the present case, the purpose of forming the consortium was stated in the original consortium agreement, sample of which is placed in paper-book, in clause 3 as under-
"3. PURPOSE OF THE CONSORTIUM :
3.1. The parties hereby have agreed to collaborate and to form a Consortium under the name and style of the MEIL-SEW-
MAYTAS-BHEL (CONSORTIUM), HYDERABAD and with an intention of pooling up their respective qualifications and to synergize and exploit the respective experience and expertise in the respective fields for the purpose of securing the contract and in relation thereto to assist each other and utilize their expertize, experience and knowledge, as may be necessary, for the bidding and if awarded, for successful implementation, conduct and completion of the works. The parties hereby agree to co-operate and act in good faith, fairness and equity as between themselves.
21 ITA No.323 to336/Hyd/2014 & Cos thereinM/s. KCEL-MEIL(JV), Hyderabad and thirteen others 3.2 In the event, the Consortium is successful in the tender for the work, the parties herein shall enter into a detailed agreement defining the nature of their association, as the case may be, and shall reduce into writing thereunder, their respective scope of works, responsibilities, liabilities and all other aspects that have not been specifically covered hereunder."
It is clearly manifest from the above clause of the original consortium agreement that the consortium/joint venture was formed with an intention of pooling up their respective qualifications and to synergize and exploit the respective experience and expertise in the respective fields for the purpose of securing the contract. It was also agreed that in the event, the Consortium is successful in the tender for the work, the parties therein shall enter into a detailed agreement defining the nature of their association, as the case may be, and shall reduce into writing thereunder, their respective scope of works, responsibilities, liabilities and all other aspects that have not been specifically covered thereunder. Accordingly, the detailed consortium agreement was entered into between the members on 31st January, 2009 after securing the contract and the work of execution was distributed amongst the consortium members defining the scope of work, operation and general application in clause No.2.3 and 3.1 to 3.7 as under-
"2. PURPOSE OF AGREEMENT 2.1 ......
2.2 ....22 ITA No.323 to336/Hyd/2014 & Cos therein
M/s. KCEL-MEIL(JV), Hyderabad and thirteen others 2.3. The parties would bear the responsibility of the project scope in the following ratio-
MEIL : Rs.1504.705 Crores - 46%
SEW : Rs. 981.328 Crores - 30%
MAYTAS : Rs.654.218 Crores - 20%
BHEL : Rs.130.843 Crores - 04%
3. SCOPE OF WORK, VARIATIONS AND GENERAL
OBLIGATIONS.
3.1 The Parties have agreed that SEW & MAYTAS shall bear the
responsibility to execute the Civil works of the Project and all other works limiting to the above mentioned value in clause 2.3.
3.2. MEIL shall execute the entire Hydro mechanical & Electrical work of the project including embedded parts with installation.
3.3 The Contract envisages an operation & Maintenance period of 15 years. The parties shall be responsible for the Operation and maintenance of the scope of work executed by them.
3.4 The site establishment for the project viz. Offices, camp for employees/labour, laboratory facilities, workshops etc., pertaining to the scope of Civil works shall be provided by SEW. Similarly, the site establishment for the hydro mechanical and electrical work shall be provided by MEIL.
3.5 It is agreed that common cost, including but not limited to cost for the financial and legal advice for common interest of the parties shall be borne by the parties in proportion to the contract price corresponding to its scope of work, provided that items and amounts of common cost shall be mutually agreed by the parties before incurring the costs.
3.6. Each Party undertakes that the supplies, work and services to be provided by it shall be complete for the purposes of the Contract, 23 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others so that the supplies, work and services provided by all the Parties together shall comprise the entire Work. Without prejudice to the generality of the foregoing and subject to the provisions of this clause 3 of each party's scope of work 3.7. Without prejudice to the provisions of other clauses in this Agreement, each Party shall be solely and entirely responsible in particular (but without limitation)
(a) for the sufficiency of the Tender and Contract prices for its SCOPE OF WORK and responsibilities;
(b) for the due performance of its SCOPE OF WORK in accordance with the terms of the Contract; and
(c) for the timely execution of its SCOPE OF WORK in accordance with the Contract programme (as may be varied or extended in accordance with the Contract).
(d) for investigation, design, goods services, fuel, power con sumables and works, which though not expressly stipulated in the contract may reasonably be inferred to form part of its SCOPE OF WORK or to be necessary for the performance of such SCOPE OF WORK, except to the extent:
(i) Such things which are expressly provided within the SCOPE OF WORK of another Party for such purpose, or
(ii) the Employer agrees on a VARIATION to cover the additional cost of providing such things, or
(iii) The Employer allocates or agrees that such a thing shall be EXTRA WORK to the provisions in the Contract.
3.8....."
23. The above clauses of the detailed consortium agreement clearly show that the contract work was distributed among the members 24 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others of the consortium on a definite basis and although it was not specifically recognized or acknowledged by the principal, copy of the original consortium agreement having been filed along with the tender document, the said principals were fully aware of the purpose of forming the consortium. In any case, there is nothing in the order of the Tribunal passed in the case of UAN Raju Constructions (supra) to show that the basis of the distribution of work amongst the members of the consortium was known to and recognised by the principals, as sought to be contended by the Learned Departmental Representative. On the other hand, the entire contract receipts were paid by the principal to the joint venture in that case, like in the present case, and the same were subsequently passed over to the constituent members in the ratio of their respective share of work. The contract receipts so received by the joint venture were credited to its Profit & Loss Account and the entire amount of such receipts subsequently distributed to the members was debited to the Profit & Loss Account, leaving no profit or income to the joint venture.
24. In the case of UAN Raju Constructions (supra), clause 9 of the consortium agreement dealt with the resources and had specifically stated that each member of the joint venture shall provide plant and equipment required for execution of their portion of the contract and such plant and machinery shall not become the asset of the joint venture. After taking note of this clause in paragraph No.11.1 of its order, the Tribunal held that there was thus no clear provision in the joint venture agreement providing any joint execution of the project and the joint realization of profits. In the present case, clause 14 of the detailed consortium agreement dealt with joint and several liability of the members, which specifically provided that each party shall be responsible to mobilise its part of resources required for the project, for example, engineers, technicians, man-power, plant machinery, Lab and Survey 25 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others equipment and financial resources required to complete its scope of the contract in time as per the accepted time schedule.
25. In the case of UAN Raju Constructions (supra), there was Clause 3(a) in the consortium joint venture agreement, which provided that the members of the joint venture would share in a prescribed percentage, the profits arising out of the joint venture. In spite of this specific clause, the Tribunal held that in reality, the members of the joint venture had shared the work only and there was no profit or loss in the joint venture. As already noted by us, the detailed consortium agreement in the present case provided for sharing of the responsibility of the project in the prescribed percentage and not the profit arising out of the joint venture, and this being so, we agree with the contention of the learned counsel for the assessee that the facts involved in the present case are little more favourable to the assessee than the facts in the case of UAN Raju Constructions (supra).
26. It is thus clear that the facts involved in the case of UAN Raju Constructions (supra) were materially similar to the facts involved in the present case and as held by the Tribunal in that case, after taking into consideration such facts, it was clear from the terms of the agreement between the members of the joint venture that the consortium of joint venture had been formed only to procure the contract works and by way of the agreement, each party had only regulated the relationship into joint responsibility that existed in relation to the principal. It was held that the members of the joint venture in reality had divided the contract works between themselves and they having executed their respective share of work on their own risk and having declared income from their respective share of work in their hands, it was not a case where the joint venture was the main contractor and the members were the sub- contractors, as presumed/alleged by the Assessing Officer. It was held 26 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others that the question of deduction of tax at soruce under S.194C(2) of the Act by the joint venture from the payments made to the members, thus, did not arise and there was no case of disallowance under S.40(a)(ia).
27. Even in the case of SMC Ambika JV (supra), the facts involved were similar to the facts of the present case inasmuch as the agreement between the members of the AOP had clearly specified that the AOP was formed to bid for the work of Thane Municipal Corporation and that the members were to share the expense as well as the responsibility for the execution of the project in the ratio of 51 and 49%. For the relevant year, the AOP credited the entire contract receipts from Thane Municipal Corporation to its Profit & Loss Account and after debiting the payments made to the members towards their share of work, the profit was declared at Rs.NIL. The AOP did not carry any work by itself and the entire work was carried out by the members of the AOP. The entire project thus was executed by the AOP partners and the AOP was formed only for bidding the tender and getting the contract for the AOP partners for execution. Keeping in view these facts of that case, which are similar to the facts of the present case, the Tribunal held that there was no contractor or subcontractor relationship existed between the AOP and its joint venture partners and S.194C(2) had no application.
28. At the time of hearing before us, the Learned Departmental Representative has relied on the decision of the Authority for Advance Ruling in the case of Geoconsult ZT GmbH, In re (supra) in support of the Revenue's case on the issue under consideration. It is however, observed that the issue involved in that case before the AAR was altogether different than the issue involved in the present case. In the said case, a company incorporated in Austria formed a joint venture with two Indian companies specializing in providing project consultancy services. The Road Development Corporation of Himachal Pradesh had awarded a 27 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others contract to the Austrian company to provide consultancy services for the development of seven tunnels in Simla as well as other areas of Himachal Pradesh. The three parties who formed the joint venture, had agreed to collaborate for all work associated with the consultancy services for feasibility design of the road tunnels. The contract was between the three partners of the joint venture and the Corporation and provided that any income earned by the venture would be the income of the venture and not of the individual partners. The agreement between the three parties to the joint venture provided inter alia that (i) Each member was responsible for fulfilling the obligation under the contract; (ii) each member had unrestricted access to any work carried out by the members in connection with the project; and (iii) in the event of insolvency of any member, the other members were irrevocably appointed to act for that member in all matters, they being jointly and severally responsible on its behalf. As between the members of the joint venture, the distribution of fees received from the Corporation was in the ratio of 50%, 20% and 30% and each member had to bear its own costs and expenses In these facts and circumstances involved in the case of Geoconsult ZT GmbH (supra), ruling was sought from the AAR on the question whether the joint venture could be treated as an Association of Persons under S.2(31)(v) of the Income-tax Act, 1961. It was held by the AAR that the joint venture constituted an Association Of Persons in consonance with S.2(31)(v) read with the Explanation thereto, and the assessment of Association of Person thus was mandatory irrespective of the ultimate division of profits amongst the members of the joint enterprise. It is thus clear that the issue involved before the AAR in the case of Geoconsult ZT GmbH (supra) was entirely different from the issue involved in the present case and the ratio of the said decision cannot be of any help to support the Revenue's stand on the issue involved in the present case.
28 ITA No.323 to336/Hyd/2014 & Cos thereinM/s. KCEL-MEIL(JV), Hyderabad and thirteen others
29. It is observed that Hyderabad bench of the Tribunal also had an occasion to deal with a similar issue in the case of Hindustan Ratna JV (supra) in the context of disallowance made under S.40a(ia) involving similar facts and circumstances as involved in the present case and the same was decided by Tribunal in favour of the assessee after considering all the relevant aspects of the matter in detail in paragraphs 14 to 22, which read as under-
"14. We have heard the arguments of both the parties, perused the record and have gone through the orders of the authorities below. As seen from the record, the Partnership Deed dated 31/08/2007 placed at pages 175 to 177 of paper book, the firm was formed with two partners, viz., HES Infra Pvt. Ltd. and Ratna Infrastructure Projects Pvt. Ltd. for the purpose of carrying the business of works contracts to act and submit prequalification application to submit bid if prequalified and execute the contracts. In the way of executing the contract works, Assessee got contract from various Governments and distributed the works among two partners and executed the work and the payment has been received by the partnership firm M/s Hindustan Ratna JV. Appreciation of facts shows that M/s HES Infra Pvt. Ltd. and Ratna Infrastructure Projects Pvt. Ltd. are not sub-contracts, per- se, but, they are partners of M/s Hindustan Ratna JV. These partners might have entered into agreements with the partnership firm wherein they are partners so as to execute the works. The partners might have maintained their books of account as if they are paying and receiving monies from the partnership firm where they are partners. As always admitted, the format of an agreement or the style of accounts by themselves do not decide the true character of relationship of parties in a business and the nature of transactions relating to the business. What is to be applied is the rule of Pith (Form) and substance. One has to see the real nature of the relationship and character of transactions, necessarily looking beyond the formalities of agreements and accounts. For that matter for calculation, it is not the format of agreements and the manner of accounting alone that decide the issue. The deciding factor is the real intention of the parties, the actual conduct of the parties and the nature of activities and the overall relationship of the concerned parties.
15. In the present case, the modus of obtaining the Government contracts, the sequence and frequency of execution of the contracts clearly show that the assessee as a partnership firm secured contracts and given to its partners with a collective responsibilities and liabilities jointly and severally liable towards 29 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others the owners for the execution of the contracts in accordance with the contract of the business as per clause (g) of the partnership deed. They have demarcated the nature of the contracts into principal contracts and sub-contracts for the purpose of identifying the work handled by the partners and for the purpose of accounting contract receipts and payments.
16. In order to establish a relationship of contractor and sub- contractor, in addition to a formal agreement, it is necessary to show that the parties have acted in such a manner conducive to uphold a contractor-sub contractor relationship when there is a strong case of interlacing of finance and funds, interdependence of responsibilities, interconnection of activities. It is very difficult to come to a conclusion that the assessee were acting in the status of contractors vis-a-vis sub-contractors. A more rational finding would be that the parties were executing the contracts through joint effort, as a group of partners.
17. Defacto speaking, when there is no basis for coming to a conclusion that there existed a relationship of contractor vis-a-vis sub-contractor, it is useful to look into the principle embodies in section 20 of the Indian Contract Act of 1872. This section provides that where both parties to an agreement are under a mistake as to a matter of fact, essentially to the agreement, the agreement is void. In the present case, the question is mainly focussed on the contractual relationship of the assessee and its partners. This principle embodies in the section 20 of the Indian Contract Act has great relevance. It turns out that the formats of the agreement entered into with the partners and the styling of accounts prepared by them are products of mistakes of fact, and therefore, the agreement is not to be relied on to hold that the assessee is acting in the status of contractors vis-a- vis sub- contractors. Therefore, it is to be seen that the question of TDS in the present case cannot be considered only on the basis of the agreements entered into between the assessee and its partners.
18. The liability u/s.194C(2) is cast on the assessees only when they are in fact and in substance acting in the relationship of contractors and sub contractors. Dehors the agreements and accounts, when it is found that they are acting jointly, for the purpose of their contract business, there cannot be a relationship of contractor and sub- contractor and there may not be an occasion to invoke Section 194C(2). When the said provision relating to deduction of tax at source is not applicable for the assessee for the reasons stated above, violation uls.40(a) (ia) does not arise. If that is the case, payments made under the nomenclature of "sub- contractors" are not liable to be disallowed.30 ITA No.323 to336/Hyd/2014 & Cos therein
M/s. KCEL-MEIL(JV), Hyderabad and thirteen others
19. It is also useful to refer to Section 70 of the Contract Act which deals with the obligation of the person enjoying the benefit of non- gratuitous act. In other words, it is the case of 'Unjust Enrichment'. For the mistakes and follies committed by the assessees, it may not be justified on the part of the Revenue to insist that the assessees were making payments to sub- contractors and they were bound by Section 194C(2) and consequently by Section 40(a)(ia).
20. Therefore, if the payments are recorded by the assessee as sub-contract payments' as a result of actual misconception, that should not make way for unjust enrichment by the Revenue.
21. Being so, if any partner use the property of the assessee firm, benefit derived from that property shall go to the common pool of the assessee firm, which is for the common advantage to all the partners. If any partner carries on any business by using name and goodwill of the firm, profit derived from that business shall be the income of assessee's firm. Further, no partner is entitled to carry on any business which is in the nature of competing with the business of the assessee firm. The partners are jointly and severally responsible for any acts done by them though individually and jointly. If the partners carry on any business contrary to the provisions of partnership deed or partnership Act, they are not entitled to that profit or loss derived from such transactions it does not belong to individual partners and on the other hand it belongs to the firm as a whole.
22. In view of the above discussion and considering the facts and circumstances of the case, we are of the view that the relationship created by the Partnership Deed dated 31 st August, 2007 and partners cannot be considered as sub-contractors of the firm and they are jointly and severally liable towards the owners for the execution of the contract commitments in accordance with the contract conditions. Being so, the provisions of section 194C cannot be attracted so as to treat them as sub-contractors of the firm thereby invoking the provisions of section 40(a)(ia). In other words, we can safely conclude that there is no sub-contract between JV and the constituents and since the JV has been formed only to procure contract works from the Government and the contract is being executed by the constituent partners in their sharing ratio 60:40 as per the terms of JV, it cannot be said that the JV is a contractor and its constituents are sub- contractors. Accordingly, we set aside the orders of the revenue authorities and delete the disallowance of Rs. 111,09,23,018/- made by the Assessing Officer by invoking the provisions of section 40(a)(ia) of the Act. "31 ITA No.323 to336/Hyd/2014 & Cos therein
M/s. KCEL-MEIL(JV), Hyderabad and thirteen others
30. Keeping in view the above discussion, we find ourselves in agreement with the contention of the learned counsel for the assessee that the common issue involved in the present cases is squarely covered in favour of the assessee by at least three decisions of the coordinate benches of this Tribunal where in a similar issue has been decided in favour of the assessee, involving similar facts and circumstances of the case. We therefore, find no infirmity in the impugned order of the learned CIT(A), whereby she held following two of the three decisions of the Tribunal, viz. of the Visakhapatnam Bench in the case of UAN Raju Constructions (supra) and of the Mumbai Bench in the case of SMC Ambika JV (supra), that there being no relationship of contractor and subcontractor between the assessee AOP/joint venture and its constituent members, tax at source was not required to be deducted from the payments made by the assessee AOP to its members, as per the provisions of S.194C(2), and consequently, there was no question of treating the assessees as in default under S.201(1). We therefore, uphold the impugned order of the learned CIT(A) and dismiss these appeals filed by the Revenue.
31. As regards the common issue involved in the Cross objections filed by the assessees relating to the charging of interest under S.201(1A), the same, in our opinion, is consequential to the issue involved in the appeals of the Revenue, which has been decided by us in favour of the assessee. As held by us, the provisions of S.194C(2) being not attracted in the case of payments made by the assessees to its constituent members, there was no question to treat the assessees as in default under S.201(1). It therefore, follows that no interest under S.201(1A) can be charged on the assessees. The Cross Objections filed by the assessees are accordingly allowed.
32 ITA No.323 to336/Hyd/2014 & Cos thereinM/s. KCEL-MEIL(JV), Hyderabad and thirteen others
32. To sum up, appeals of the Revenue are dismissed and Cross objections of the assessees are allowed.
Order pronounced in the court on 13th January, 2015 Sd/- Sd/-
(Saktijit Dey) (P.M.Jagtap)
Judicial Member. Accountant Member.
Dt/- 13th January, 2015
Copy forwarded to:
1. M/s. KCEL-MEIL(JV), S-2 Technocrat Industrial Estates, Balanagar, Hyderabad
2. M/s. MEIL-MAYTAS-ABB-AAG(JV), S-2 Technocrat Industrial Estates, Balanagar, Hyderabad Hyderabad
3. M/s. MEIL-KCCL-FLOWMORE (JV), S-2 Technocrat Industrial Estates, Balanagar, Hyderabad
4. M/s. MEIL-MAYTAS-KBL(JV), S-2 Technocrat Industrial Estates, Balanagar, Hyderabad
5. M/s. MEIL-SEW-MAYTAS-BHEL(JV), S-2 Technocrat Industrial Estates, Balanagar, Hyderabad
6. M/s. MEIL-SEW-ABB-AAG (JV), S-2 Technocrat Industrial Estates, Balanagar, Hyderabad
7. M/s. MEIL-RATNA-KBL(JV), S-2 Technocrat Industrial Estates, Balanagar, Hyderabad
8. M/s. HCC-MEIL-CBE (JV), S-2 Technocrat Industrial Estates, Balanagar, Hyderabad
9. M/s. MEIL-KBL-WEG-(JV), S-2 Technocrat Industrial Estates, Balanagar, Hyderabad
10. M/s. MEIL-MAYTAS-WPIL(JV), S-2 Technocrat Industrial Estates, Balanagar, Hyderabad
11. M/s.HCC- MEIL-NCC-WPIL(JV), S-2 Technocrat Industrial Estates, Balanagar, Hyderabad 33 ITA No.323 to336/Hyd/2014 & Cos therein M/s. KCEL-MEIL(JV), Hyderabad and thirteen others
12. M/s. MEIL-GAYATRI-ZVS-ITT (JV), S-2 Technocrat Industrial Estates, Balanagar, Hyderabad
13. M/s. MEIL-ZVS-PVSRSN-ITT(JV), S-2 Technocrat Industrial Estates, Balanagar, Hyderabad
14. M/s. MEIL-IVRCL-HCC-WPIL (JV), S-2 Technocrat Industrial Estates, Balanagar, Hyderabad
15. Income-tax Officer, Ward-14(3), Hyderabad
16. Commissioner of Income-tax(Appeals) II, Hyderabad
17. Commissioner of Income-tax I, Hyderabad
18. DR, ITAT, Hyderabad