INCOME TAX OFFICER WARD -1, AKOLA vs. M/S BALKRISHANA TRADERS , NAGPUR

आदेश / ORDER

PER S.S. VISWANETHRA RAVI, JM :

5. We note that the assessee is an AOP and civil contractor. The assessee filed its return of income declaring a total income of Rs.2,91,670/- which was processed u/s. 143(1) of the Act vide order dated 04-11-2009. Thereafter, the said assessment was reopened by issuing notice u/s. 148 of the Act and the reasons of which the AO reproduced the at pages 1 and 2 of the assessment order. On perusal of the same, we note that the AO found an amount of Rs.3,27,97,031/- was debited to the profit and loss account and credited to the account of the members of the assessee. For non-deduction of TDS on such payment to members, the AO added an amount of Rs.3,27,97,030/- to the total income of the assessee for non-deduction of tax u/s. 194C of the Act. We note that during the course of assessment proceedings, it was explained that the assessee was formed as a joint venture by M/s. Oberai Constructions and M/s. G.M. Kothari to obtain tender for road construction. It was decided that the road construction work will be executed by the members of the assessee vide memorandum of understanding. The said memorandum of understanding was also filed before the AO and contended no relationship of contractor and sub-contractor between the assessee and its two members, no applicability of the TDS provisions u/s. 194C of the Act. However, the AO found the said explanation as not acceptable and held that the assessee and its members are different entities for the purpose of Income Tax Laws and the payment made by the assessee to its members is a contract and covered u/s. 194C of the Act. The CIT(A) opined by verification of agreement between the members and held that the assessee was formed only to procure work contract and members therein executed the work in accordance with the memorandum of understanding as per their own risk, held the said relationship is of principle to principle but not as a principle to agent, or of employer – employee, or of contractor – sub- contractor. The CIT(A) by arriving such conclusion held deduction of TDS on the payments made by the assessee to its members does not arise. The ld. AR placed on record memorandum of understanding dated 30-12-2006 and reiterated the same submissions as made before the AO by referring to above said memorandum of understanding. We note that the CIT(A) also examined the same in detail which is evident from para 6.11 of the impugned order. Further, the ld. AR placed on record order dated 28-11- 2014 passed by this Tribunal in batch of cases, lead case being Shraddha & Mahalaxmi Joint Venture in and submits that the facts and circumstances of the said case are identical to the facts of the present case and referred to para 10 of the said order. On perusal of the same, we note that the issue raised therein is as same as the issue raised in the present appeal where an amount was disallowed for violation of section 40(a)(ia) of the Act. Further, it is noted that the assessee therein also an AOP had received contracts which in turn was executed by the two members of the AOP. A contention was raised that the said assessee AOP was established for obtaining work and receiving payments against the work done by the members of AOP. The said payment was to be distributed in the agreed ratio between the two members of the AOP for carrying out the work. The Co-ordinate Bench held no deduction of TDS is warranted on the payments between the assessee and its members and deleted the addition made by the AO for violation u/s. 40(A)(ia) of the Act by placing reliance in the case of M/s. Swapnali RDS Joint Venture in vide order dated 26-09-2012.

6. Coming to the facts on hand as discussed above, we are of the opinion the facts and circumstances of the present case are as same and identical to the facts in the case of Shraddha & Mahalaxmi Joint Venture (supra) and by following the order of Tribunal in the said case, we agree with the reasons recorded by the CIT(A) in paras 6.9 to 6.11 of the impugned order. Therefore, we find no infirmity in the order of CIT(A) and it is justified. Thus, the grounds raised by the Revenue fails and are dismissed. & 03/NAG/2019, A.Ys. 2009-10 & 2010-11

Order pronounced in the open court on 31st October, 2023.