In An Appeal Preferred By The Department, Theappellate Tribunal Affirmed The View Of Commissionerof Income Tax (Appeals v. Commissioner Of Income

THE HIGH COURT OF MADHYA PRADESH 1 ITA.35.2018Commissioner of Income TaxVs.M/s Som Datt Builders and Karan Development Services Private Limited (JV) Gwalior, 09/05/2018 Shri DPS Bhadoriya, learned counsel for theappellant. This appeal under Section 260-A of the IncomeTax Act, 1961, (for brevity “the Act of 1961”), at theinstance of appellant, takes exception to order dated31.08.2017 passed by Income Tax Appellate Tribunal,Agra Bench Agra in Case ITA No.350/Agra/2015whereby the Tribunal affirmed the order dated13.05.2015 passed by the Commissioner of Income Tax(Appeals). The Tribunal was in seisin with the issue as towhether work performed by the joint venture membersfor their share of the obligation would create arelationship of contractor and sub-contractor betweenthe joint venture and its members. Facts giving rise to the issue briefly were that inrespect of assessment year 2012-13 the assessee jointventure assessed in the status of Association of Persons(AOP) formed for procurement of construction work of“Omkareshwar Project Canal System (Phase-II)” bySom Datt Builders Pvt. Ltd (SDBPL) and KaranDevelopment Services Pvt. Ltd (KDS), two companiesregistered under the Companies Act, 1956. During theyear previous to the accounting year 2012-13, theassessee joint venture made payments ofRs.30,94,08,387/- to its said two constituents, on whichno tax was deducted at source. THE HIGH COURT OF MADHYA PRADESH 2 ITA.35.2018 Commissioner of Income TaxVs.M/s Som Datt Builders and Karan Development Services Private Limited (JV) The assessing officer disallowed the said amountunder Section 40(a)(ia) of the Act of 1961 holding thatthe assessee was required to deduct tax at source onthe payments so made under Section 194C of the Act. In appeal, the Commissioner of Income Tax(Appeals) deleted the disallowance by its order dated13.05.2015. The Commissioner of Income Tax(Appeals) on the basis of material facts on record andjudicial pronouncement found that joint venture cannotbe treated as contractor and its constituents as sub-contractor and that joint venture has been only toprocure contract and the contract has been executedby the constituents in the pre-determined sharing ratioas per agreement, consequently, held that theprovisions of Section 194C of the Act of 1961 will notbe applicableon the amount transferred by JointVenture to its constituents and that no disallowanceunder Section 40(a)(ia) of the Act of 1961 is called forin respect of the amount of Rs.30,94,08,387/-transferred by the appellant to its constituents. In an appeal preferred by the department, theAppellate Tribunal affirmed the view of Commissionerof Income Tax (Appeals). After hearing learned counsel for the appellant atlength and taking into consideration the law laid downby the Hon’ble Supreme Court in “Hindustan CocaCola Beverage (P) Ltd Vs Commissioner of Income THE HIGH COURT OF MADHYA PRADESH 3 ITA.35.2018Commissioner of Income TaxVs.M/s Som Datt Builders and Karan Development Services Private Limited (JV) Tax [(2007) 8 SCC 463]” that members of JointVenture having taken their receipts from the JointVenture in their personal income tax returns and havepaid taxes thereon, the assessee Joint Venture cannotbe held as 'assessee in default' and no disallowance canbe made under Section 40(a) (ia) of the Act of 1961,we do not perceive any illegality in the order passed bythe Income Tax Appellate Tribunal, as would raise anysubstantial question of law. It is worth noting at this stage that, as observedby the Tribunal that under similar facts andcircumstances the assessing officer in the subsequentyears i.e. accounting years 2013-14 and 2014-15 hasconsidered the entire legal position and has not madeany disallowance under Section 40(a)(ia) of the Act of1961 in case of joint venture. cost. In view whereof, appeal fails and is dismissed. No pd It is worth noting at this stage that, as observedby the Tribunal that under similar facts andcircumstances the assessing officer in the subsequentyears i.e. accounting years 2013-14 and 2014-15 hasconsidered the entire legal position and has not madeany disallowance under Section 40(a)(ia) of the Act of1961 in case of joint venture. cost. In view whereof, appeal fails and is dismissed. No pd Digitally signed by PAWAN DHARKAR Date: 2018.05.14 12:30:49 -07'00' (Sanjay Yadav) (Ashok Kumar Joshi) Judge Judge