INCOME TAX OFFICER, WARD-14(1), HYDERABAD vs. MADHUCON SINO HYDRO JV, HYDERABAD

4. Aggrieved with the order of Ld. AO, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) relying on the decision of ITAT in assessee's own case for A.Y. 2006-07, deleted the addition made by the Ld. AO, as per his observation under para nos.6.5 and 6.6 of his order, which are to the following effect :

4.1 Further, the Ld. CIT(A) also directed the Ld. AO to give credit for TDS deducted in the name of JV, to the constituents of JV, as per his observation at para no.7 of his order, which is to the following effect :

“6. From the aforecited extracted portion, it is very much clear that the Tribunal has held that where Joint Venture is formed only for the purpose of obtaining contracts and specific portions of the contract are to be completed by individual constituents independently, then it cannot be a case of the Joint Venture giving works contract to the constituents. The Tribunal has further held the profit of the project in such a case should be assessed in the hands of the individual constituents and not in the hands of the consortium AOP. There cannot be two opinion about the aforecited ratio laid down by the Coordinate Bench in assessee’s own case and we respectfully agree with the same. However, the assessee has also to prove that the Joint Venture has not executed the work and also not retained any profit. The entire work was executed by the constituents and the Joint Venture has paid the entire contract receipts received by it from the contractee to the constituents without retaining any portion of the profit by whatever name it may be called. Since the assessee has not submitted before us relevant bank accounts to show the details of payment received from the contractee and the payments made by the assessee Joint Venture to its constituents, we are not in a position to give any conclusive finding. It appears from the order of the CIT(A) that she has also not examined the bank accounts to find-out as to whether the assessee has made over the entire contract amount received from the contractee to the constituents of the Joint Venture who have executed the work. We, therefore, direct the Assessing Officer to verify the entire case as observed above and if it is established on verification of the bank account that the entire contract receipt received by the assessee Joint Venture was passed-on to the constituents of the Joint Venture without retaining any portion of profit out of the contract receipt, then the assessee cannot be treated to be a assessee in default for not deducting tax at source and therefore, the provisions of section 201(1) and 201(1A) will not be made applicable to the assessee. Accordingly, the appeal of the Revenue is allowed for statistical purposes.” On perusal of above, it is found that, this Tribunal has given the findings that, the payments made by the JV to its constituents are not in the nature of sub-contract and is not covered under the provisions of section 194C of the Act.

1. The order of Commissioner of Income Tax (Appeals) is erroneous both on facts and law.

2. The Ld. CIT(A) erred in rectifying the claim of TDS credit in the hands of assessee of Rs.1,84,02,365/-.

3. The Ld. CIT(A) erred in not appreciating the entire receipt are shown as income in the hands of assessee JV.

4. The Ld. CIT(A) erred in not appreciating the fact that assessee is eligible for credit of TDS as per provisions of section 199 of the Act.

5. The appellant may add or alter or mend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.”

“9. In the circumstances we hold that the Assessing officer erred in recasting the P&L of the AOP to bring in the works directly taken up by the constituents. Further the constituents have offered the income from their portion of the project as their income and offered the same for tax. This has been accepted by the Department. From the ratio of the decisions cited above, in the case of a JV/ Consortium formed specifically for the sole purpose of obtaining the contracts and specific portions of the projects are carried out by mutual agreement by specific constituents, the profits from the portion of the projects derived from the individual constituent can be offered by them for tax in their return. Once such income is assessed in their individual hands the Assessing officer cannot again bring to tax the entirety of the receipts in the hands of the Consortium. Consequently there cannot be any disallowance in the hands of the consortium any amounts receivable by the constituents towards their share of work on the ground that consortium has not deducted tax at source from such payment. The credit for the TDS made by the client will be available to the respective constituents who has offered income on which such TDS has been made, even though the certificate issued by the client is in the name of the Consortium.” 15.1 We also found that, the Ld. CIT(A) also following the aforesaid decision of this Tribunal has held that, the constituents are liable for credit of TDS and accordingly, he made the direction to the Ld. AO. Therefore, we do not find any merit in the argument of the Ld. AR. Accordingly, we uphold the order of Ld. CIT(A) and hereby make a direction to the Ld. AO to give the credit for the TDS to the constituents of JV although the TDS Certificate has been issued by the diductor in the name of the JV. Accordingly, the appeal of the assessee is dismissed.