PRINCIPAL COMMISSIONER OF INCOME TAX-3 vs. M/S. JMC TAHER ALI (JV)

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TAXAP/459/2018HC GujaratGJHC24020602201807 May 2018Bench: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages

AI SummaryDismissed

What did the High Court hold?

The High Court, in its order, noted that the impugned order of the Tribunal relied on its earlier judgment in the case of the same assessee. This earlier judgment was considered by the High Court in Tax Appeal No. 393 of 2018, where the Revenue's appeal was dismissed. In that prior case, the High Court observed that a consortium of two entities formed a joint venture for project execution. A supplementary agreement dated February 8, 2008, between the two JV members stipulated that one member, JCM, was responsible for all losses and profits, bore all financial rewards and risks, provided the bank guarantee, operated the bank account, and was responsible for all statutory compliances. The Tribunal had concluded that only one member was essentially responsible for the risks and execution of work with total control. The High Court broadly agreed with the Tribunal's view and found no question of law arising, dismissing the Revenue's appeal. Consequently, the present Tax Appeal was also dismissed on the same grounds.

What were the facts?

The Revenue is in appeal against the Income Tax Appellate Tribunal's order dated September 26, 2017. The appeal concerns assessment years not explicitly stated in the provided text. The dispute involves the deletion of an addition made by the Assessing Officer (AO) of Rs. 2,32,93,900, which was estimated at 11.59% of gross receipts. The Tribunal relied on its previous judgment concerning the same assessee. This prior judgment was considered by the High Court in Tax Appeal No. 393 of 2018, where the Revenue's appeal was dismissed. The core of the dispute revolves around the income attributable to a joint venture (JV) and the role of a supplementary agreement executed between JV members.

What were the issues?

1. Whether the Appellate Tribunal was correct in law and fact in upholding the CIT(A)'s decision to delete the addition of Rs. 2,32,93,900, estimated by the AO at 11.59% of gross receipts? (Question of law and fact) 2. Whether the Appellate Tribunal was correct in law and fact in holding that the CIT(A) rightly concluded that income from a contract awarded by the principal did not accrue to the assessee AOP, notwithstanding the JV document executed for bidding, thus making the assessee not liable for the estimated income on the contract? Assessee's Contentions: Not recorded in the provided text. Revenue's Contentions: The Revenue argued that a supplementary agreement executed between JV members could not override the initial agreement document executed at the time of bidding for the contract. The Revenue contended that the income from the contract awarded by the principal should be considered as accrued in the hands of the assessee AOP.

AI-generated summary — verify with the full judgment below

C/TAXAP/459/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 459 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX-3 Versus M/S. JMC TAHER ALI (JV) ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 07/05/2018 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal dated 26.09.2017 raising following questions for our consideration: “[A] Whether the Appellate Tribunal was right in law and on facts in upholding the decision of the CIT(A) and thereby deleting the addition made by the A.O. by estimating the net profit at Rs.2,32,93,900/ being 11.59% of gross receipts ? [B] Whether the Appellate Tribunal was right in law and on facts in holding that CIT(A) was right in holding that the income from the contract awarded by the principal cannot be said to have been accrued in the hands of the assessee AOP notwithstanding JV document executed for bidding and thus, the assessee was not liable for income estimated on the contract awarded ?” 2. The perusal of the impugned order of the Tribunal would show that it had relied on its earlier judgment in case of this very assessee. Such Page 1 of 2

C/TAXAP/459/2018 ORDER judgment of the Tribunal was considered by this Court in Tax Appeal No.393 of 2018. Revenue's appeal was dismissed in following terms: “2. Materials on record would suggest that the consortium of joint venture of two entities was constituted for execution of a project. A supplementary agreement dated 8.2.2008 between the two joint venture members was executed in which JCM, one of the members of the joint venture, was responsible for all the loss and profits. It was this JCM alone who had taken over the financial rewards and risks. The bank guarantee would be provided by JCM alone. The bank account would also be operated by JCM alone. JCM would be responsible for compliance of all statutory requirements. It was under these circumstances that the Tribunal came to the conclusion that only one member of the joint venture was essentially responsible for the risks and for execution of the work with total control over the project. The Tribunal, therefore, confirmed the view of CIT (Appeals) and rejected the revenue's contention that such further agreement could not have overridden the initial agreement document executed at the time of bidding for the contract. We are broadly in agreement with the view of the Tribunal. No question of law arises. Tax Appeal is dismissed.” 3. In the result, this Tax Appeal is also dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH Page 2 of 2

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