Commissioner Of Income Tax vs. M/S Som Datt Builders And Karan Development Services Pvt. Ltd.

THE HIGH COURT OF MADHYA PRADESH 1 ITA.34.2018 Commissioner of Income Tax Vs. M/s Som Datt Builders and Karan Development Services Private Limited (JV) Gwalior, 09/05/2018 Shri DPS Bhadoriya, learned counsel for the appellant. This appeal under Section 260-A of the Income Tax Act, 1961, (for brevity “the Act of 1961”), at the instance of appellant, takes exception to order dated 31.08.2017 passed by Income Tax Appellate Tribunal, Agra Bench Agra in Case ITA No.349/Agra/2015 whereby the Tribunal affirmed the order dated 13.05.2015 passed by the Commissioner of Income Tax (Appeals). The Tribunal was in seisin with the issue as to whether work performed by the joint venture members for their share of the obligation would create a relationship of contractor and sub-contractor between the joint venture and its members. Facts giving rise to the issue briefly were that in respect of assessment year 2012-13 the assessee joint venture assessed in the status of Association of Persons (AOP) formed for procurement of construction work of “Indira Sagar Projects Canals (Phase-IV)” by Som Datt Builders Pvt. Ltd (SDBPL) and Karan Development Services Pvt. Ltd (KDS), two companies registered under the Companies Act, 1956. During the year previous to the accounting year 2012-13, the assessee joint venture made payments of Rs.50,15,83,992/- to its said two constituents, on which no tax was deducted at source. THE HIGH COURT OF MADHYA PRADESH 2 ITA.34.2018 Commissioner of Income Tax Vs. M/s Som Datt Builders and Karan Development Services Private Limited (JV) The assessing officer disallowed the said amount under Section 40(a)(ia) of the Act of 1961 holding that the assessee was required to deduct tax at source on the payments so made under Section 194C of the Act. In appeal, the Commissioner of Income Tax (Appeals) deleted the disallowance by its order dated 13.05.2015. The Commissioner of Income Tax (Appeals) on the basis of material facts on record and judicial pronouncement found that joint venture cannot be treated as contractor and its constituents as sub- contractor and that joint venture has been only to procure contract and the contract has been executed by the constituents in the pre-determined sharing ratio as per agreement, consequently, held that the provisions of Section 194C of the Act of 1961 will not be applicable on the amount transferred by Joint Venture to its constituents and that no disallowance under Section 40(a)(ia) of the Act of 1961 is called for in respect of the amount of Rs.50,15,83,992/- transferred by the appellant to its constituents. In an appeal preferred by the department, the Appellate Tribunal affirmed the view of Commissioner of Income Tax (Appeals). After hearing learned counsel for the appellant at length and taking into consideration the law laid down by the Hon’ble Supreme Court in “Hindustan Coca Cola Beverage (P) Ltd Vs Commissioner of Income THE HIGH COURT OF MADHYA PRADESH 3 ITA.34.2018 Commissioner of Income Tax Vs. M/s Som Datt Builders and Karan Development Services Private Limited (JV) Tax [(2007) 8 SCC 463]” that members of Joint Venture having taken their receipts from the Joint Venture in their personal income tax returns and have paid taxes thereon, the assessee Joint Venture cannot be held as 'assessee in default' and no disallowance can be made under Section 40(a) (ia) of the Act of 1961, we do not perceive any illegality in the order passed by the Income Tax Appellate Tribunal, as would raise any substantial question of law. It is worth noting at this stage that, as observed by the Tribunal that under similar facts and circumstances the assessing officer in the subsequent years i.e. accounting years 2013-14 and 2014-15 has considered the entire legal position and has not made any disallowance under Section 40(a)(ia) of the Act of 1961 in case of joint venture. In view whereof, appeal fails and is dismissed. No cost. (Sanjay Yadav) (Ashok Kumar Joshi) Judge Judge pd Digitally signed by PAWAN DHARKAR Date: 2018.05.14 12:27:33 -07'00'