ITO, GHAZIABAD vs. M/S. RGB TGHCL JV, GHAZIABAD

The issue raised in the present appeal is against the deletion of addition made u/s 40(a)(ia) of the Act at Rs.1.57 crores (approx.).

Briefly in the facts of the case the assessee was a joint venture firm consisting of its partners namely M/s. Tarunika Gaur Housing & Construction Ltd., 370 Pandit Park, Krishna Nagar, Delhi and M/s. R.G.

Buildwell Engineers Ltd., Durgapuri, Shahdara, Delhi having 10% & 90% respectively, interest in venture. The case of the assessee was picked up for scrutiny. The assessee was awarded contract for road construction of 35 KM from Antagarh to Bedma for a total cost of Rs.49,71,27,588/- in the State of Chhattisgarh. The assessee further submitted before Assessing Officer that an agreement has been made on 05.10.2010, between RGB- TGHCL, joint venture and M/s. Tarunika Gaur Housing & Constriction ltd., Delhi, sub contractor for construction of the road at a total cost of Rs.44,74,00,000/- for 35 KM long road from Antagar to Bedma, Chhattisgarh. The assessee clarified that the unsecured loan shown in the balance sheet was the advance which was received from PWD department, Chhattisgarh, to start the work of road construction and advance to contractor was the amount given to its sub contractor M/s. Tarunika Gaur Housing & Construction Ltd., Delhi, out of advance received from PWD Chhattisgarh. From the perusal of the balance sheet of the assessee, it had been found that assessee firm had paid Rs.1,57 crores (approx.) as road making charges to its sub contractor M/s. Tarunika Gaur Housing & Construction Ltd. and it was asked from the assessee whether any TDS had been made on above amount. The assessee clarified that the TDS amounting Rs.3,14,361/- had been deducted, but not paid to the credit of Central Government during the year. The assessee also clarified that it was the second year of starting the work of road construction. The road construction was started in the F.Y. 2010-11, because it had received a letter of acceptance of a bid vide its Memo No.3429/G/27- 28/09/LWE/Kankar dated 13.09.2010 from PWD department, Chhattisgarh. The Assessing Officer made an addition of Rs.1.57 crores (approx.) to the income of the assessee during the year on account of disallowance u/s 40(a)(ia) of the Act.

The CIT(A) allowed the claim of the assessee on the ground that tax on sum of Rs.1.57 crores (approx.) has been paid by M/s. Tarunika Gaur Housing & Construction Ltd., Delhi. The CIT(A) thus held that there was no liability on the assessee to deposit any tax at source and hence, no merit in making the disallowance u/s 40(a)(ia) of the Act.

The Ld.AR for the assessee pointed out that the 2nd proviso inserted u/s 43B of the Act was directory in nature as held by Hon’ble Delhi High Court in CIT vs. Ansal Land Mark Township (P) Ltd reported in 377 ITR 635 (Del.). He also pointed out where the deductee had paid the taxes and filed return of income, there was no merit in making any disallowance u/s 40(a)(ia) of the Act.

The Ld.DR for the Revenue on the other hand relied on the decision of Hon’ble High Court of Kerala in Shri Thomas George Muthoot vs CIT in order dated 03.07.2015.

We have heard the rival contentions and perused the record. The limited issue which arises in the present appeal is whether the assessee was 3

In the result, the appeal of the Revenue is dismissed.