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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SRI MAHAVIR SINGH, JM AND SRI N.K. PRADHAN, AM (A.Y:2011-12) Income Tax Officer-27(2)(1), M/s KBL PIL Consortium, 4th Floor, Tower No.6, Vashi 14th Floor, Universal Majestic, Railway Station Complex, Vashi, Vs. P.L. Lokhande Marg, Navi Mumbai-400703 Govandi(W), Mumbai-400043 PAN No.AAAAK7818F Appellant .. Respondent CO No.223/Mum/2016 (In A.Y: 2011-12) M/s KBL PIL Consortium, Income Tax Officer-27(2)(1), 14th Floor, Universal Majestic, 4th Floor, Tower No.6, Vashi P.L. Lokhande Marg, Vs. Railway Station Complex, Vashi, Govandi(W), Mumbai-400043 Navi Mumbai-400703 PAN No.AAAAK7818F .. Appellant Respondent Revenue by .. Shri. M.V. Rajguru, DR Assessee by .. Shri. Margav Shukla, AR Date of hearing .. 03-01-2017 Date of pronouncement .. 03-01-2017 O R D E R PER MAHAVIR SINGH, JM:
This appeal by the Revenue and Cross Objection by assessee are arising out of the order of CIT(A)-25, Mumbai, in appeal No. CIT(A)-25/IT/172/14-15 dated 04-01-2016. The Assessment was framed by ITO-22(2)(1), Mumbai for the A.Y. 2011-12 vide order dated 21-03-2014 u/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
At the outset the learned Counsel for the assessee stated that both, the Revenues appeal as well as Cross Objection of the assessee are covered by the Tribunal’s decision in assessee’s own case for the A.Y. 2009-10 in & 6264/Mum/2012 order dated 27-03-2015. According to the learned Counsel for the assessee the only issue is estimation of profit rate on the actual executed work. The learned Counsel for the assessee took us through the order of Tribunal for the A.Y. 2009-10 for both Revenue’s appeal as well as assessee’s CO, wherein the assessee being a Special Purpose Vehicle in the form of joint venture meant for executing work for Municipal Corporation of BMC. Whatever work was allotted to assessee was subjected to its two members namely Kirloskar Brothers Ltd. and CO No.223/Mum/2016 Pratibha Industries Ltd. The learned Counsel for the assessee drew our attention to the findings of Tribunal in Para 6 which reads as under: -
“We have considered rival contentions, carefully gone through the orders of the authorities below and found from the record that KBL PIL Consortium is association of person of Pratibha Industries Limited and Kirloskar Brothers Limited. KBL PIL Consortium is awarded contract for construction of 900 MLD capacity water pumping station at Bhandup complex by Municipal corporation of Brihanmumbai. The above contract awarded was further sub contracted by assessee to members of AOP i.e. Pratibha Industries Limited and Kirloskar Brothers Limited in an agreed ratio. Vide order sheet noting dated 05.12.2011, assessing officer asked assessee to explain whether there was any intention to earn profit at the time of taking contract by invoking section 44AD claiming that a contractor has to show income under Income Tax Act. Further, assessee is also required to justify as to why revenue has not been recognized as stated in notes to account and architect certificate for completion of work. In response to above notice, assessee replied that assessee; being a special purpose vehicle in form of joint venture of which legal status being association of persons, has no resource to execute the project on its own and thus the same has been sub contracted to the capable members and running bills of work completion is certified by engineers of MCGM. Without showing any reason the AO stated that books of account and audited financials are not reliable and hence, he rejected the books of accounts and made addition based on estimation of net profit @ 10% of the gross receipt by rejecting books of account. The AO also disallowed water and sewerage charges treating that loss as reimbursement of expenses to sub-contractor. The AO also made addition of receivable on account of work contract tax refund. By the impugned order, the CIT(A) deleted the addition made by the AO by estimating profit at 10 of the gross receipts by observing that assessee is only special purpose vehicle in the form of joint venture. Whatever contracts was allotted to it, the same were distributed among two members, who have executed the work contract. Thus, there is no income in the hands of the assessee being a special purpose vehicle in the form of joint venture. The CIT(A) has relied on the decision of jurisdictional High Court in the case of M/s Ray Bel Consortium, of 2009, dated 25-06-2012, which is having exactly similar facts. We had gone through the decision of the Hon’ble jurisdictional High Court, wherein under the similar facts it was held that where existence of consortium is not doubted, income accrues in the hands of its members who actually execute the works. In the instant case work contracts have been executed by its two members and since contract allotted by Municipal Corporation of Brihan Mumbai was sublet to its two members, any income accrues in the hands of the two members only and not in the hands of the consortium which is special purpose vehicle for allotment of work. Similarly, the assessee has not paid any amount on account of water and sewerage charges to the Municipal Corporation but it was deducted out of its payment, therefore, the AO was not justified in disallowing the same on the plea of 40(a)(ia). Respectfully following the decision of the jurisdictional High Court in case of M/s Ray Bel Consortium (supra), we do not find any infirmity in the order of CIT(A) for deleting the addition made on account of profit estimation as well as disallowance of amount deducted by municipal corporation on account of water and sewerage charges. Further Page 2 of 3 CO No.223/Mum/2016 the CIT(A) has upheld the addition on account of tax refund which was deducted by Municipal Corporation of Brihan Mumbai. As per our considered view, the amount of income tax refund is not in the nature of income but was on account of refund of tax deducted by municipal corporation as no income accrued in respect of these contracts in assessee’s hand. This refund is also required to be passed on by the assessee to the two members of AOP. Accordingly, we direct the AO to verify the same and decide the issue afresh.”
The learned Counsel for the assessee took us through the order of CIT(A) wherein relief was granted on the bases of the order of Tribunal and issue relates to the same construction of 900 MLD capacity water pumping station at Bhandup, Mumbai. When this was confronted to the learned Sr. DR, he conceded the position and requested the Bench that the issue can be remitted back to the file of the AO in the light of the decision of the Tribunal’s order for the A.Y. 2009-10 and this order of Tribunal for the A.Y. 2009-10 was also followed in A.Y. 2010-11 in and CO No.164/Mum/2016 dated 05-12-2016.
As the facts and circumstances are identical in this year also, we also restore this issue back to the file of the AO to decide afresh in the light of the decision of Tribunal in A.Y. 2009-10. The appeal of the Revenue as well as Cross Objection of the assessee both are allowed for statistical purpose.
In the result, the appeal of Revenue as well as Cross Objection of assessee, both are allowed for statistical purpose. Order pronounced in the open court on 03-01-2017.