IN INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM ITA Nos.2200 & 2201 PN 2014 Assessment Years : 2010-11 & 2011-12 Income Tax Officer, Ward 3(1), Pune. . Appellant Vs. M s Shraddha & IHP Joint Venture, Padmalaya Project, CTS No.1206A 1, Plot No.887A, Shraddha House, Shirole Road, Pune 411 004. PAN : AACAS5182L . Respondent Appellant by : Shri Sandeep Garg (CIT) Respondent by : Shri Kishor Phadke Date of Hearing : 26.09.2016 Date of Pronouncement: 07.10.2016 ORDER PER ANIL CHATURVEDI, AM : Both appeals by Revenue are directed against consolidated order of Commissioner of Income Tax (Appeals)-II, Pune, dated 30.09.2014 for assessment years 2010-11 & 2011-12. 2. Both appeals relating to same assessee on similar issue were heard together and are being disposed of by this consolidated order for sake of convenience. However, reference is being made to facts in ITA No.2200 PN 2014 in order to adjudicate issue. 2 ITA Nos.2200 & 2201 PN 2014 3. relevant facts as culled out from materials on record are as under :- 3.1 Assessee is AOP Joint Venture of M s Shraddha Energy & Infraprojects Pvt. Ltd. and Indian Hume Pipe Co. Ltd. and is engaged in business of civil constructions. assessee filed its return of income for assessment year 2010-11 on 01.10.2010 declaring total taxable income at Nil. case was selected for scrutiny and thereafter assessment was framed under section 143(3) of Income Tax Act, 1961 (in short Act ) vide order dated 03.01.2013 and total income was determined at Rs.15,55,39,150 -. Aggrieved by order of Assessing Officer, assessee carried matter before ld. CIT(A), who vide consolidated order dated 30.09.2014 (in Appeal No.PN CIT(A)-II ITO Wd- 3(1) 218 2013-14 & PN CIT(A)-II ITO Wd.3(1) 554 2013-14 98) decided issue in favour of assessee. Aggrieved by order of ld. CIT(A), Revenue is now in appeal before us and has raised following grounds :- 1. order of Ld. CIT(A) is contrary to law and to facts and circumstances of case. 2. Ld. CIT(A) erred in holding that in absence of any contract or sub- contract work by Joint Venture to its members, provisions of section 194C were not applicable for purpose of TDS without appreciating fact that work contract order was issued in name of assessee (JV) and payments were also credited to assessee's account and henceforth re- allocation of contract between members of JV would amount to sub-contracting. 3. Ld. CIT(A) erred in not appreciating that assessee Joint Venture was in full control of contract, responsible for its completion, submitting bills, receiving payments and making those payments to its members towards sub-contract on which tax was deductible u s 194C. 4. Ld. CIT(A) erred in considering that if share of profit is determined in Joint Venture Agreement, then it cannot be anything by AOP and where charge is on income of AOP, in such status, AO has no choice but to tax it irrespective of fact as to whether such share of profit has been offered to tax or taxed in hands of members or not. Reliance is placed on decision of Hon'ble Supreme Court in case of Ch. Achaiah (1996) 218 ITR 239 and on ruling of Aar in case of Geo- consultant ST GMBH in 304 ITR 283. 3 ITA Nos.2200 & 2201 PN 2014 5. Ld. CIT(A) ought to have dismissed appeal of assessee and allowed appeal of Revenue on facts and in circumstances of case. 6. appellant craves leave to add, amend, alter or delete any of above grounds of appeal during course of appellate proceedings. 4. Before us, at outset, ld. DR submitted that though Revenue has raised various grounds but solitary issue which is to be decided is with respect to income of Joint Venture (JV). 4.1 During course of assessment proceedings, Assessing Officer noticed that assessee had received gross contract receipt of Rs.15,55,39,153 - on account of construction of dam and entire contract was given to M s Shraddha Energy & Infraprojects Pvt. Ltd. for execution of work. Before Assessing Officer, it was submitted that assessee did not execute any contract but it was conduit for obtaining work, receiving payments against work done by individual constituents and distribution of amounts in their individual shares as per agreed ratio and that entire contract was given to its members. Assessing Officer noticed that assessee had given contract work to AOP without deduction of tax in terms of provisions of section 194C of Act. He was of view that since assessee has not deducted tax, amount which has been paid by assessee was liable for disallowance under section 40(a)(ia) of Act. Assessing Officer was further of view that execution of contract was responsibility of assessee and this sub-contracting of work to one of members of AOP cannot be considered as revenue sharing arrangement. According to him, arrangement between assessee and its members was sub-contract and in view of provisions of section 40(a)(ia), payment made by AOP to sub- contractors without deduction of tax was liable to be taxed in hands of assessee by disallowing payment under section 40(a)(ia) of Act. He 4 ITA Nos.2200 & 2201 PN 2014 accordingly made addition of Rs.15,55,39,150 -. Aggrieved by order of Assessing Officer, assesses carried matter before ld. CIT(A), who deleted addition by holding as under :- 3.4 I have considered submission of appellant and perused material available on record. appellant has relied on order in case of Swapnali RDS Joint Venture decided by my predecessor, for proposition that facts of appellant's case and various judgements cited were identical. It has been pointed out that this case is covered in favour of appellant wherein vide paras 3.4 to 3.14 CIT (Appeals)-II, has decided similar issue in favour of above assessee. issue at hand has been elaborately discussed by my predecessor and finding given in appellate order No. PN CIT(A)-II ITO Wd 3(1 ).Pn 247 2010-11 dated 17.03.2011 in above case i.e. Swapnali RDS JV is reproduced below which was also followed by undersigned while adjudicating similar issue in appellant's case for A.Y. 2009-10 vide appellate order No PN CIT(A)-II ITO Wd-3(1),Pn 240 2011-12 dated 31.12.2012. 3.4 I have considered submissions of appellant and material available on record. It has been explained by appellant that Joint Venture as such does not execute any contract work but was merely formed for obtaining contract work and receive payment, which was immediately distributed in ratio of share of work done for particular year. actual share in Joint Venture of total work allocated was 50% for Swapnali Construction and 50% for RDS Construction Co. It was, therefore, clarified that contract account and Balance sheet of Joint Venture showed nothing but apportionment of contract receipts, assets and liabilities between members. There was no expenditure booked in contract account nor any Profit and Loss Account prepared for purpose since there did not arise any profit or loss to appellant per se. Therefore, Joint Venture transferred not only gross revenue but also corresponding TDS to its members in ratio of their work done by individual members, for which apportionment certificate was duly issued every year by Assessing Officer. It is explained that it was done to pass on credit of TDS to members who have accounted for corresponding contract revenue in their respective returns. It is thus averred that in view of facts and circumstances of case, there was no relationship of contractor and subcontractor between Joint Venture and its three members. Therefore, there was no question of applicability of TDS provisions u s. 194C of Act. It is also stated that section 40(a)(ia) could be applied only when any expenditure is incurred by assessee; whereas here there was no expenditure incurred by appellant AOP. profit and loss infact occurred to individual members, who have accounted for same in their respective books of account. 3.5 .. 3.6 .. 3.7 .. 3.8 .. 5 ITA Nos.2200 & 2201 PN 2014 3.9 appellant AOP has also got similar features. Here also Joint Venture has been formed only for purpose of obtaining contract and it is merely conduit for receiving payment for carried out contract. Immediately, entire revenue is transferred to two members forming Joint Venture without deducting anything from same, in accordance with work carried out. There is no profit or loss accruing to appellant Joint Venture, nor there was any expenditure booked in contract account as such. Joint Venture also does not retain any profit with itself There does not exist any subcontract agreement between Joint Venture and two members. In above judgment given by Himachal Pradesh High Court, it was observed by Hon'ble Court that heading and wordings of section 194C and section 194C(2) clearly indicate that payment should be made to resident who was sub-contractor, and concept of "sub-contract" was intrinsically linked with section 194C(2). Hon'ble High Court held that if there was no sub-contract then person was not liable to deduct tax at source from payment made to resident. perusal of wordings of section 194C(2) shows that TDS was to be made when contractor was responsible for paying any sum to sub-contractor in pursuance of contract with sub-contractor for carrying out of any work or for supply of labour for carrying out whole or any part of work undertaken by contractor etc. But here, no such existence of such contract between Joint Venture and its members has been found which would be termed as sub-contract agreement. Under facts and circumstances of appellant's case, therefore, it becomes apparent that in absence of any sub-contract, there cannot be case of applicability of section 194C(2) when entire contract receipts of Joint Venture was directly being apportioned between two members of Joint Venture. 3.10 In another judgment of Himachal Pradesh High Court in case of ITO Vs. Ramanand & Co. and others, 163 ITR 702 (HP) High Court had stated that 'contractor' for purposes of section 194C(2) would be any person who enters into contract with Central or State Government or any local authority, corporation etc.; whereas 'sub-contractor' would mean any person who enters into contract with contractor for carrying out such work or supply of labour for carrying out whole or part of such work undertaken by contractor under this contract. This feature for sub- contractor is not found to be in existence here, since as in earlier cited judgment of Himachal Pradesh High Court, Joint Venture was nothing but collective name for its members itself who had come together for obtaining contract for benefit of constituent members. In written submission dated 9-3-2011 appellant has cited another decision, given by Authority for Advance Ruling (AAR) in case of Hyundai Rotem Co., IN RE (2010) 323 ITR 277 (AAR). In that case, it was issue of status; i.e., whether consortium formed by four companies to bid for and execute contract for Delhi Metro Rail Corporation (DMRC), for purpose of design, training, manufacture, supply testing, commissioning, etc. was to be treated as AOP for purposes of Income-tax assessment. It was held that merely coming together and acting in cooperation with each other for purpose of obtaining work and executing contract, while each member carries out its own work independently, does not lead to conclusion that AOP for purposes of assessment was formed. Further, that consortium cannot be treated as AOP for income tax purpose and members were liable to be taxed on basis that they were separate taxable entities. In this judgment it was noticed that consortium members do not act as agent of one another and members were jointly and severally liable towards employer (DMRC), profit and loss were apportioned by individual members themselves, 6 ITA Nos.2200 & 2201 PN 2014 and common expenditure were not being incurred by them. Similar was case with appellant. Therefore, ratio of this decision given by AAR was applicable here also, though here appellant had itself filed its returns in status of AOP. However, as discussed above, this was for specific purpose. Effectively, since revenue as well as TDS credits were apportioned between two members of joint venture, and two member companies were including these receipts in their turnover and also claiming TDS credits thereon; appellant AOP was not booking any revenue or expenditure which is in line with this decision of AAR. 3.11 In case of Van OORD ACZ. BV, IN RE (2001) 248 ITR 399 (AAR) it was case when assessee, foreign company undertook construction contract in joint Venture with HCC, Indian company. Both these JV partners agreed to bear respective losses and retain respective losses and retain respective profits separately, with each of partners agreeing to execute specific part of jobs assigned to them. This formation of joint venture was for obtaining contract and coordinating and executing contract. In such case, it was held that joint venture between assessee and HCC could not be assessed as AOP, but both were liable to be assessed as separate and independent entities. ratio of this decision was similar to decision of Hyundai Rotem Co. cited above, and leads to similar conclusion. In such situation this was additional argument that there was no case of applicability of TDS provisions between Joint Venture formed for purpose of obtaining contract and coordinating execution; and its two member companies forming it, who were independently responsible for execution, and were booking corresponding income expenditure in their own cases. This was additional argument in addition to primary reason that there was no contract agreement between AOP and its two constituent companies i.e. swapnali Construction and RDS Construction for sub-contracting work to them. There was no contractor-sub-contractor relationship existing between joint Venture and its partners and therefore, there was no applicability of section 194C(2) of Act. 3.12 appellant has primarily placed reliance on ruling of AAR in case of Hyundai Rotem Co., in RE (2010) 323 ITR 277 (AAR) and Van OORD ACZ.BV, in RE (2001) 248 ITR 399 (AAR) In support of its contention. There was another AAR Ruling in case of Geoconsult ZT GmbH IN RE (2008) 304 ITR 283, for which appellant has explained that same was distinguishable on facts. appellant has compared facts and ratio of this AAR ruling with other two rulings of AAR in cases of Hyundai Rotem Co. and Van OORD ACZBV, mentioned above. It has been clarified that reliance has been correctly placed on case of Hyundai Rotem Co IN RE (2010) 323 ITR 277, which is most recent order from AAR, which has, in turn, relied upon on earlier AAR ruling in case of Van OORD ACZ.BV (supra). appellant has also stated that facts of case of Geoconsultant ZT GmbH (supra) are also distinguishable with reference to appellant's case. appellant has explained following, which is being repeated here for sake of clarity : 'As regards Id AO's contention that decision in case of Geoconsult ZT GMBH has not been considered by appellate authorities including ITAT we would like to bring to your kind attention following - i) In Geoconsult ZT GMBH [(2008) 304 ITR 283], decision in case of Van Oord ACZ. BV [(2001) 248 ITR 399 (AAR) has been distinguished; whereas 7 ITA Nos.2200 & 2201 PN 2014 ii) In Hyundai Rotem Co. [(2010) 323 ITR 277] decision in case of Geoconsult ZT GMBK has been distinguished and decision in case of Van Oord ACZ BV [(2001) 248 ITR 399 (AAR) has been followed; and iii) decision in case of Hyundai Rotem Co. is more recent than that in case of Geoconsult ZT GMBH." It is further clarified that in case of Geoconsult ZT GMBH, nature of work was providing project consultancy services, which was homogenous and there was interchangeability between partners; whereas, in case of Hyundai Rotem Co., Van Oord ACZ BV, Rajdeep Infrastructure and also appellant i.e. Progressive Ramu Developers R.D.S. Construction JV, nature of work was construction, which was not interchangeable but divisible physically between members. appellant has compared facts and distinguishable features by comparative chart of these five cases including that of appellant in its submission dated 10.03.2011, reproduced in para 3.3 above. 3.13 I have carefully perused this explanation and I am of considered opinion that facts of appellant's case are distinguishable from that of case of Geoconsult ZT GMBH (supra), in which nature of work was project consultancy services which was homogenous and there was interchangeability. In para 12 of order of AAR in case of Hyundai Rotem Co. (supra), it has clearly distinguished its facts from case of Geoconsult ZT GMBH (supra). This has been emphasised by explanation that scope of work for each member in case of Hyundai Rotem Co. was specifically defined, and it is mutually exclusive to each other, and there was no interchangeability or overlapping of work to any substantial extent. On other hand, in case of Geoconsult ZT GMBH, it being in nature of project consultancy services comprising of project preparation management and design responsibility each of three members had same skill to do these services and work was also interchangeable between members. Thus, it is held that facts of appellant's case were identical to case of AAR ruling in case of Hyundai Rotem Co. in winch reliance was also placed on ruling of Van Oord ACZ BV; and was distinguishable from facts in case of Geoconsult ZT GMBH. It is also noticed from ITAT Pune Bench decision in case of Rajdeep & PMCC Infrastructure in ITA No. 1280 PN 2006 order dated 25.05.2009 that it was admitted position that no work was conducted by AOP, and It had only acted as conduit between Maharashtra State Road Transport Corpn. (MSRDC) and two members of AOP, so far as their separate and neatly identified work areas were concerned. In such circumstances, it was held that it will not lead to taxability In hands of AOP. Tribunal also placed reliance on Advance Ruling in case of Van Oord ACZ BV in Re (supra) and reproduced extensively from this decision. Therefore, this decision of Pune Bench of ITAT lends support to appellant s case here. 3.14 In view of above discussion made from para 3.3 to 3.13, including two judgments of Himachal Pradesh High Court cited supra; along with two decisions of AAR; as also chart distinguishing between decisions of AAR in case of Geoconsult ZT GMBH, Hyundai Rotem Co. and Van OORD ACZ BV vis-a-vis case of Rajdeep & PMCC Infrastructure and appellant's own case; filed along with appellant's submission dt. 10-3-2011, it is held that in absence of any contract for sub-contracting work by Joint Venture to its two member companies, provisions of section 194C(2) were not applicable for 8 ITA Nos.2200 & 2201 PN 2014 purposes of TDS. two entities forming Joint Venture were already being assessed since A. Y.2001-02 onwards on their respective shares, and TDS apportionment certificates were also issued by Assessing Officer every year for these years, to enable them to claim same in their own cases. Moreover, there was no Profit and Loss Account in appellant's case, and there was no claim of any expenditure. Therefore, there was no question of any disallowance under provisions of section 40(a)(ia) of Act. disallowance u s. 40(a)(ia) made by Assessing Officer, therefore, cannot be sustained. In effect, method adopted by Assessing Officer has also resulted in double taxation of same contract revenue; which is in violation of Karnataka High Court decision reported in 197 ITR 321 (Kar). Ground of appeal no. 1 is, accordingly, liable to be allowed." 3.4 above findings of CIT (Appeals) in case of Swapnali RDS Joint Venture, were contested before ITAT by Department. Hon ble ITAT, Pune vide order ITA No.771 PN 2011 dated 26.09.2012 has declined to interfere with finding given by CIT (Appeals) and has held as under : 2. At outset of hearing, Ld. Authorised Representative pointed out that this case is covered in favour of assessee by ITAT, Pune Bench, in ITA.No.65 PN 2011 for A.Y. 2006-07 in case of ITO Vs. Gammon Progressive-JV, wherein vide paras 5 to 9 Tribunal deciding similar issue in favour of assessee by dismissing appeal of Revenue, has held as under: 5. After going through above submissions and material on record, we find that first issue is regarding status of assessee. Assessing Officer has mentioned status as firm. However, in explanation given, assessee has made it clear that status in which returns was filed was that of AOP. It was explained that in returns of income since beginning till A.Y. 2006-07, status was mentioned as AOP only, i.e., when returns were filed manually. However, from A.Y. 2007-08, when electronic filing had to be done, due to computer error status appeared as firm on ITR acknowledgement, whereas in computation of total income, it was correctly mentioned as AOP. It was explained that I.T.Return Form No.5 was actually applicable for firms, AOPs and BOIs. Therefore, this error might have occurred. assessee has also filed computation of total income alongwith acknowledgements from A.Y. 2002-03 to A.Y. 2006-07 in which status was regularly shown as AOP and even in application form for allotment of PAN it was shown as AOP. CIT(A) noticed from record that status was shown as AOP. However, it was not very much relevant for purpose of applicability of provisions of section 194C since TDS provisions are applicable to all entities except individuals and HUF having gross receipts or turnover from business or profession below prescribed limit. 6. It was further explained on behalf of assessee that joint venture as such does not execute any contract work but were merely formed for obtaining contract work and for receiving payment, which was immediately distributed in ratio of share of work done. actual share in joint venture of total work allocated was 60% for M s.Gammon India Ltd. and 40% for M s.Progressive Contraction Ltd. In this background it was explained that contract account and Balance Sheet of joint venture reveals nothing but apportionment of contract receipts, assets and liabilities between members. There was no expenditure booked in contract account nor any Profit and Loss Account 9 ITA Nos.2200 & 2201 PN 2014 prepared for purpose since there did not arise any profit or loss to assessee per se. Joint venture transferred not only gross revenue but also corresponding TDS to its members in ratio of their work done by individual members for which appointment certificate was duly issued every year by Assessing Officer. In this background it was submitted that there was no relationship of contractor and sub-contractor between joint venture and its two members. Therefore, there was no question of applicability of TDS provisions u s.194C of Act. assessee also explained why returns were filed by joint venture as AOP. It was explained that it was done to pass on credit of TDS to members on basis of tax apportionment certificates who have accounted for corresponding contract revenue in their respective returns. It was also submitted that Nil income arising in hands of AOP is confirmed by action of Assessing Officer in not assessing any profit income arising from contract apart from this disallowance u s. 40(a)(ia) of Act. assessee vide its submissions dated 26.03.2010 and 06.09.2010, explained difference between revenue sharing arrangement entered into by joint venture vis-a-vis sub-contract. It was explained on behalf of assessee that in case of sub-contract, there was relationship of principal and agent whereas in situation of revenue sharing, it was on principal to principal basis. Further, in sub-contracting, contractor retains his share of profit alongwith TDS and only balance is passed on to sub-contractor. But in joint venture, assessees did not retain any share in revenue with it and has passed entire gross revenue alongwith TDS apportioned for them. It was submitted that Department has also issued tax apportionment certificates every year during past eight years to enable two members to claim TDS credits in their respective cases. Even in current assessment year, it was noticed that tax apportionment certificate was issued by Department vide letter No.Pn Wd.3(4) TC 07-08 dated 26.11.2008 of Assessing Officer in which Assessing Officer has allowed apportionment of entire TDS of Rs.9,26,588 - during year to M s.Gammon India Ltd., since entire work during year was carried out by it. Similarly, there has been apportionment to either of two companies or to both companies in earlier years also by Assessing Officer for enabling them to claim TDS in respective cases. assessee, vide its submission dated 22.04.2010, furnished details which revealed that gross revenue from this contract receipts by joint venture was accounted for in case of either or both of two companies who were members of joint venture in all assessment years 2001-02 to 2008-09. It was further explained by assessee that revenue sharing was not exactly 60:40 in each year since it depends on relative work done in particular year. Having explained difference between cases of contract sub-contract, in background of clauses of agreement, assessee relied on decision of Hon'ble Himachal Pradesh High Court in case of CIT vs. Ambuja Darla Kashlog Mangu Transport Cooperative Society (2009) 227 CTR 299 (HP). 7. In background of tax apportionment certificates issued by Assessing Officer, it was stated on behalf of assessee that Assessing Officer has marked copy of this certificate to members of joint venture as well as to their respective Assessing Officers, which shows that Assessing Officer has applied his mind and consciously accepted fact that joint venture AOP was for distribution of receipts amongst its constituents in proportion of their work sharing. Therefore, there was no applicability of provisions of TDS u s.40(a)(ia) of Act. 8. Further, assessee, vide its submission dated 06.09.2010, made comparison of tax rates applicable to domestic companies, being joint 10 ITA Nos.2200 & 2201 PN 2014 venture partner in their individual capacity and tax rates applicable to AOP. However, in submission dated 21.10.2010, it was explained that tax rates in case of domestic company and AOP would be same in this case. This was due to applicability of section 167B of Act. assessee also filed details of returns of income of two corporate entities being joint venture members, alongwith acknowledgements of their I.T. returns, which revealed that both of them had huge positive returned incomes every year. For this payment stand of assessee was that method of apportionment of revenue to members was not to take any undue benefit of losses incurred by them. Therefore, it was stated that there was no loss to revenue as result of this method adopted by assessee of sharing gross revenue by its members, which was taxed in their hands. However, this explanation of assessee did not find favour from Assessing Officer. assessee has also raised issue of consistency stating that same method was being accepted by Department in past 8 to 10 years including A.Y. 2007-08 in which tax apportionment certificate was also being issued. It was contended that this aspect has not been considered in assessment order u s.143(3) for A.Y. 2007-08. On principle of consistency, Ld. Authorised Representative relied on decision of Hon'ble Bombay High Court in case of Gopal Purohit (2010) 228 CTR 582 (Bom.) and assessee also relied on decision of Hon'ble Supreme Court in case of Radhasoami Satsang vs. CIT (1992) 193 ITR 321 (SC) wherein it was observed that strictly speaking principle of res judicata does not apply to income tax proceedings since each assessment year was separate unit in itself and what is decided in one year may not apply in following year. It was further contended that where fundamental aspect permeating through different assessment years has been found as fact one way or other and parties have allowed that position to be sustained by not challenging order, it would not be at all appropriate to allow position to be changed in subsequent year. It was also contended that Hon'ble Kerala High Court in case of Manjunath Motor Service and Canara Public Conveyances, 197 ITR 321 (Kar.) observed that method adopted by Assessing Officer would result in double taxation of same income since gross receipts distributed amongst two joint venture partners was included as receipts in their respective cases and joint venture partners had also utilised TDS credits on basis of apportionment certificate issued by Assessing Officer. In view of above discussion, CIT(A) was justified in holding that in absence of any contract or sub-contract work by joint venture to its member companies, provisions of section 194C were not applicable for purpose of TDS. two corporate entities forming joint venture were already being assessed since A.Y. 2000-01 onwards on their respective shares and TDS apportionment certificates were also issued by Assessing Officer every year for these eight years including current assessment year to enable them to claim same in their own cases. Moreover, there was no Profit and Loss Account in assessee s case and there was no claim of any expenditure. Therefore, there was no question of any disallowance under provisions of section 40(a)(ia) of Act. Moreover, disallowance u s. 40(a)(ia) made by Assessing Officer cannot be sustained. In effect, method adopted by Assessing Officer will also result in double taxation of same contract revenue which is in violation of Karnataka High Court decision reported in 197 ITR 321 (Kar.). This view is fortified by decision of ITAT Pune Bench in ITO vs. Rajdeep & PMCC Infrastructure, wherein Tribunal has observed as under: 6. We have noted that it is admitted position that no work is carried out by AOP, it has acted as conduit between 11 ITA Nos.2200 & 2201 PN 2014 MSRDC and two persons constituting this AOP so far as their separate, and neatly identified, work areas are concerned. mere existence of AOP cannot lead to taxability in hands of AOP unless AOP receives monies in its own right. We have noted that Hon'ble Authority of Advance Rulings was in seisin of materially identical situation in case of Van Oord ACZ BV In Re(248 ITR 399) in which two contractors joined hands for carrying out neatly identified separate work which was part of composite contract awarded to AOP, but taxability of income from such contract was held to be taxable in hands of respective contractors. While holding so Hon'ble Authority for Advance Ruling observed as follows: "7. So far as question Nos. 1 and 2 are concerned parties have specifically ruled out constitution of any partnership between them. There is no sharing of profits or loss. They have specifically provided in agreement that each party will bear its own loss and retain its profits as and when such profits or loss arise. Having regard to agreement we are of view that applicant cannot be treated as partnership which can only be created by agreement. Nor can it be treated as AOP. In order to constitute AOP there will have to be common purpose or common action and object of association must be to produce income jointly. It is not enough that persons receive income jointly. In instant case, each of two parties has agreed to bear its own loss or retain its own profit separately. Both have agreed to execute job together for better co-operation in their relationship with Chennai Port Trust. intention was not to carry out any business in common, only part of job will be done by VOACZ according to its technical skill and capability. other part of contract will be executed by HCC. total value of contract was Rs. 2,62,01,03,120. applicant's share of work was valued at Rs. 44,52,78,920 (17 per cent of total value). association with HCC was not with object of earning this income but for co ordination in executing contract so that HCC could also make its own profit. HHC's work and income arising therefrom was quite separate and independent of applicant's work and income. If cost incurred by HCC or applicant was more than their income, each party will have to bear its loss without any adjustment from other party. association of petitioner company with HCC was undoubtedly for mutual benefit but such association will not make them single assessable unit and liable to tax as AOP. For example, building contractor may associate with plumber and electrician to execute building project. All these persons are driven by profit-making motive. But that by itself will not make three persons liable to be taxed as AOP if each one has designed and independent role to play in building project. In instant case, applicant has stated that applicant has made its own arrangement for execution of work independent from that of HCC. There is no control or connection between work done by applicant and HCC." 8. On facts hereinabove, applicant and HCC cannot be treated as AOOP for purpose of levy of income-tax. applicant will be liable to be taxed as separate and independent entity. question No.1 is answered accordingly." 12 ITA Nos.2200 & 2201 PN 2014 7. We are in considered agreement with views so expressed by Hon'ble Authority for Advance Ruling. We adopt reasoning of Hon'ble AAR and, respectfully following same, approve conclusion arrived at by CIT(A) and decline to interfere in matter. In view of above discussion, we are not inclined to interfere in finding of CIT(A) who has directed Assessing Officer to delete addition. same is upheld. 9. In result, appeal filed by Revenue is dismissed. 3. Nothing contrary was brought to our knowledge on behalf of Revenue. 4. Facts being similar, so following same reasoning we are not inclined to interfere with finding of CIT(A) who has rightly held that there is no question of disallowance made u s. 40(a)(ia) of Act. Same is upheld. 3.5 Since factual matrix and legal position of issue involved is pari materia same as in case of Swapnali RDS Joint Venture also relied upon by appellant and followed in appellant's case for A. Y. 2009-10, following decision taken by my predecessor and decision of Hon ble ITAT, Pune, disallowance u s 40(a)(ia) made by AO, is held to be not sustainable. Grounds no. 1 to 6 of appeal raised by appellant are liable to be allowed for both years under consideration. 5. Before us, at outset, ld. AR submitted that issue in present appeal is covered in assessee s favour by decision of Co-ordinate Bench of Tribunal in assessee s own case for assessment year 2009-10. He placed on record copy of order of Tribunal in ITA Nos.942 to 944 PN 2013 order dated 28.11.2014 and pointed to relevant findings of Tribunal. He therefore submitted that following decision of Co-ordinate Bench of Tribunal in assessee s own case appeal of Revenue needs to be dismissed. ld. DR, on other hand, supported order of Assessing Officer. 6. We have heard rival submissions and perused material on record. We find ld. CIT(A) while deleting addition had noted that facts of present case are identical to that of Swapnali RDS Joint Venture and he had followed decision of predecessor in assessee s own case for assessment year 2009-10. We find that Co-ordinate Bench of Tribunal in assessee s own 13 ITA Nos.2200 & 2201 PN 2014 case for assessment year 2009-10 has decided issue in favour of assessee by holding as under :- 10. We have heard rival and perused records. In facts of present case, issue arising before us is in relation to application of provisions of section 40a(ia) of Act. assessee AOP had received contracts from third party which, in turn, was executed by two members of AOP. plea of assessee AOP was that it was constituted for obtaining work and receiving payments against said work done by constituents of AOP and said payment was to be distributed in agreed ratio between two members of AOP for carrying out work. Such assignments of work to members as per Memorandum of Understanding agreed upon is not equivalent to sub- contract and as such assessee AOP was not liable to deduct tax at source out of amount distributed amongst members of AOP in agreed ratio of share. Assessing Officer, while deciding issue in hands of assessee, had given office note to effect that in case of M s. Swapnali RDS Joint Venture (supra), similar addition under section 40(a)(ia) of Act has been made for assessment year 2008-09 which has been deleted by CIT(A)-II, Pune. Department has filed appeal against this order to ITAT and matter is pending before ITAT. To keep issue alive in other cases also, similar addition is being made in this case also. facts and circumstances arising in present appeal are identical to facts and circumstances of case before Tribunal in M s. Swapnali RDS Joint Venture (supra), wherein it was held as under:- 2. At outset of hearing, Ld. Authorised Representative pointed out that this case is covered in favour of assessee by ITAT, Pune Bench, in ITA.No.65 PN 2011 for A.Y. 2006-07 in case of ITO Vs. Gammon Progressive-JV, wherein vide paras 5 to 9 Tribunal deciding similar issue in favour of assessee by dismissing appeal of Revenue, has held as under: 5. After going through above submissions and material on record, we find that first issue is regarding status of assessee. Assessing Officer has mentioned status as firm. However, in explanation given, assessee has made it clear that status in which returns was filed was that of AOP. It was explained that in returns of income since beginning till A.Y. 2006-07, status was mentioned as AOP only, i.e., when returns were filed manually. However, from A.Y. 2007-08, when electronic filing had to be done, due to computer error status appeared as firm on ITR acknowledgement, whereas in computation of total income, it was correctly mentioned as AOP. It was explained that I.T.Return Form No.5 was actually applicable for firms, AOPs and BOIs. Therefore, this error might have occurred. assessee has also filed computation of total income alongwith acknowledgements from A.Y. 2002-03 to A.Y. 2006-07 in which status was regularly shown as AOP and even in application form for allotment of PAN it was shown as AOP. CIT(A) noticed from record that status was shown as AOP. However, it was not very much relevant for purpose of applicability of provisions of section 194C since TDS provisions are applicable to all entities except individuals and 14 ITA Nos.2200 & 2201 PN 2014 HUF having gross receipts or turnover from business or profession below prescribed limit. 6. It was further explained on behalf of assessee that joint venture as such does not execute any contract work but were merely formed for obtaining contract work and for receiving payment, which was immediately distributed in ratio of share of work done. actual share in joint venture of total work allocated was 60% for M s.Gammon India Ltd. and 40% for M s.Progressive Contraction Ltd. In this background it was explained that contract account and Balance Sheet of joint venture reveals nothing but apportionment of contract receipts, assets and liabilities between members. There was no expenditure booked in contract account nor any Profit and Loss Account prepared for purpose since there did not arise any profit or loss to assessee per se. Joint venture transferred not only gross revenue but also corresponding TDS to its members in ratio of their work done by individual members for which appointment certificate was duly issued every year by Assessing Officer. In this background it was submitted that there was no relationship of contractor and sub-contractor between joint venture and its two members. Therefore, there was no question of applicability of TDS provisions u s.194C of Act. assessee also explained why returns were filed by joint venture as AOP. It was explained that it was done to pass on credit of TDS to members on basis of tax apportionment certificates who have accounted for corresponding contract revenue in their respective returns. It was also submitted that Nil income arising in hands of AOP is confirmed by action of Assessing Officer in not assessing any profit income arising from contract apart from this disallowance u s. 40(a)(ia) of Act. assessee vide its submissions dated 26.03.2010 and 06.09.2010, explained difference between revenue sharing arrangement entered into by joint venture vis-a-vis sub-contract. It was explained on behalf of assessee that in case of sub-contract, there was relationship of principal and agent whereas in situation of revenue sharing, it was on principal to principal basis. Further, in sub-contracting, contractor retains his share of profit alongwith TDS and only balance is passed on to sub- contractor. But in joint venture, assessees did not retain any share in revenue with it and has passed entire gross revenue alongwith TDS apportioned for them. It was submitted that Department has also issued tax apportionment certificates every year during past eight years to enable two members to claim TDS credits in their respective cases. Even in current assessment year, it was noticed that tax apportionment certificate was issued by Department vide letter No.Pn Wd.3(4) TC 07-08 dated 26.11.2008 of Assessing Officer in which Assessing Officer has allowed apportionment of entire TDS of Rs.9,26,588 - during year to M s.Gammon India Ltd., since entire work during year was carried out by it. Similarly, there has been apportionment to either of two companies or to both companies in earlier years also 15 ITA Nos.2200 & 2201 PN 2014 by Assessing Officer for enabling them to claim TDS in respective cases. assessee, vide its submission dated 22.04.2010, furnished details which revealed that gross revenue from this contract receipts by joint venture was accounted for in case of either or both of two companies who were members of joint venture in all assessment years 2001-02 to 2008-09. It was further explained by assessee that revenue sharing was not exactly 60:40 in each year since it depends on relative work done in particular year. Having explained difference between cases of contract sub-contract, in background of clauses of agreement, assessee relied on decision of Hon'ble Himachal Pradesh High Court in case of CIT vs. Ambuja Darla Kashlog Mangu Transport Cooperative Society (2009) 227 CTR 299 (HP). 7. In background of tax apportionment certificates issued by Assessing Officer, it was stated on behalf of assessee that Assessing Officer has marked copy of this certificate to members of joint venture as well as to their respective Assessing Officers, which shows that Assessing Officer has applied his mind and consciously accepted fact that joint venture AOP was for distribution of receipts amongst its constituents in proportion of their work sharing. Therefore, there was no applicability of provisions of TDS u s.40(a)(ia) of Act. 8. Further, assessee, vide its submission dated 06.09.2010, made comparison of tax rates applicable to domestic companies, being joint venture partner in their individual capacity and tax rates applicable to AOP. However, in submission dated 21.10.2010, it was explained that tax rates in case of domestic company and AOP would be same in this case. This was due to applicability of section 167B of Act. assessee also filed details of returns of income of two corporate entities being joint venture members, alongwith acknowledgements of their I.T. returns, which revealed that both of them had huge positive returned incomes every year. For this payment stand of assessee was that method of apportionment of revenue to members was not to take any undue benefit of losses incurred by them. Therefore, it was stated that there was no loss to revenue as result of this method adopted by assessee of sharing gross revenue by its members, which was taxed in their hands. However, this explanation of assessee did not find favour from Assessing Officer. assessee has also raised issue of consistency stating that same method was being accepted by Department in past 8 to 10 years including A.Y. 2007-08 in which tax apportionment certificate was also being issued. It was contended that this aspect has not been considered in assessment order u s.143(3) for A.Y. 2007-08. On principle of consistency, Ld. Authorised Representative relied on decision of Hon'ble Bombay High Court in case of Gopal Purohit (2010) 228 CTR 582 (Bom.) and assessee also relied on decision of Hon'ble Supreme Court in case of Radhasoami Satsang vs. CIT (1992) 193 ITR 321 (SC) wherein it was 16 ITA Nos.2200 & 2201 PN 2014 observed that strictly speaking principle of res judicata does not apply to income tax proceedings since each assessment year was separate unit in itself and what is decided in one year may not apply in following year. It was further contended that where fundamental aspect permeating through different assessment years has been found as fact one way or other and parties have allowed that position to be sustained by not challenging order, it would not be at all appropriate to allow position to be changed in subsequent year. It was also contended that Hon'ble Kerala High Court in case of Manjunath Motor Service and Canara Public Conveyances, 197 ITR 321 (Kar.) observed that method adopted by Assessing Officer would result in double taxation of same income since gross receipts distributed amongst two joint venture partners was included as receipts in their respective cases and joint venture partners had also utilised TDS credits on basis of apportionment certificate issued by Assessing Officer. In view of above discussion, CIT(A) was justified in holding that in absence of any contract or sub- contract work by joint venture to its member companies, provisions of section 194C were not applicable for purpose of TDS. two corporate entities forming joint venture were already being assessed since A.Y. 2000-01 onwards on their respective shares and TDS apportionment certificates were also issued by Assessing Officer every year for these eight years including current assessment year to enable them to claim same in their own cases. Moreover, there was no Profit and Loss Account in assessee s case and there was no claim of any expenditure. Therefore, there was no question of any disallowance under provisions of section 40(a)(ia) of Act. Moreover, disallowance u s. 40(a)(ia) made by Assessing Officer cannot be sustained. In effect, method adopted by Assessing Officer will also result in double taxation of same contract revenue which is in violation of Karnataka High Court decision reported in 197 ITR 321 (Kar.). This view is fortified by decision of ITAT Pune Bench in ITO vs. Rajdeep & PMCC Infrastructure, wherein Tribunal has observed as under: 6. We have noted that it is admitted position that no work is carried out by AOP, it has acted as conduit between MSRDC and two persons constituting this AOP so far as their separate, and neatly identified, work areas are concerned. mere existence of AOP cannot lead to taxability in hands of AOP unless AOP receives monies in its own right. We have noted that Hon'ble Authority of Advance Rulings was in seisin of materially identical situation in case of Van Oord ACZ BV In Re(248 ITR 399) in which two contractors joined hands for carrying out neatly identified separate work which was part of composite contract awarded to AOP, but taxability of income from such contract was held to be taxable in hands of respective contractors. While holding so Hon'ble Authority for Advance Ruling observed as follows: 17 ITA Nos.2200 & 2201 PN 2014 "7. So far as question Nos. 1 and 2 are concerned parties have specifically ruled out constitution of any partnership between them. There is no sharing of profits or loss. They have specifically provided in agreement that each party will bear its own loss and retain its profits as and when such profits or loss arise. Having regard to agreement we are of view that applicant cannot be treated as partnership which can only be created by agreement. Nor can it be treated as AOP. In order to constitute AOP there will have to be common purpose or common action and object of association must be to produce income jointly. It is not enough that persons receive income jointly. In instant case, each of two parties has agreed to bear its own loss or retain its own profit separately. Both have agreed to execute job together for better co-operation in their relationship with Chennai Port Trust. intention was not to carry out any business in common, only part of job will be done by VOACZ according to its technical skill and capability. other part of contract will be executed by HCC. total value of contract was Rs. 2,62,01,03,120. applicant's share of work was valued at Rs. 44,52,78,920 (17 per cent of total value). association with HCC was not with object of earning this income but for co ordination in executing contract so that HCC could also make its own profit. HHC's work and income arising therefrom was quite separate and independent of applicant's work and income. If cost incurred by HCC or applicant was more than their income, each party will have to bear its loss without any adjustment from other party. association of petitioner company with HCC was undoubtedly for mutual benefit but such association will not make them single assessable unit and liable to tax as AOP. For example, building contractor may associate with plumber and electrician to execute building project. All these persons are driven by profit-making motive. But that by itself will not make three persons liable to be taxed as AOP if each one has designed and independent role to play in building project. In instant case, applicant has stated that applicant has made its own arrangement for execution of work independent from that of HCC. There is no control or connection between work done by applicant and HCC." 8. On facts hereinabove, applicant and HCC cannot be treated as AOOP for purpose of levy of income-tax. applicant will be liable to be taxed as separate and independent entity. question No.1 is answered accordingly." 7. We are in considered agreement with views so expressed by Hon'ble Authority for Advance Ruling. We adopt reasoning of Hon'ble AAR and, respectfully following same, approve conclusion arrived at by CIT(A) and decline to interfere in matter. 18 ITA Nos.2200 & 2201 PN 2014 In view of above discussion, we are not inclined to interfere in finding of CIT(A) who has directed Assessing Officer to delete addition. same is upheld. 9. In result, appeal filed by Revenue is dismissed. 3. Nothing contrary was brought to our knowledge on behalf of Revenue. 4. Facts being similar, so following same reasoning we are not inclined to interfere with finding of CIT(A) who has rightly held that there is no question of disallowance made u s. 40(a)(ia) of Act. Same is upheld. 7. Before us, Revenue has not pointed out any distinguishable features in facts of present case and that of assessment year 2009-10 nor has controverted findings of ld. CIT(A). In view of these facts, we find no reason to interfere with order of ld. CIT(A) and thus this ground of Revenue is dismissed. ITA No.2201 PN 2014 (For A.Y. 2011-12) : 8. Since both parties have admitted that facts of present case in year under appeal are identical to assessment year 2010-11, we therefore following same reasoning given while deciding appeal for assessment year 2010-11 hereinabove and for similar reasons dismiss ground of Revenue. 9. In result, both appeals of Revenue are dismissed. Order pronounced on this 7th day of October, 2016. Sd - Sd - (SUSHMA CHOWLA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Pune; Dated : 7th October, 2016. 19 ITA Nos.2200 & 2201 PN 2014 Copy of order is forwarded to : 1) Assessee; 2) Department; 3) CIT(A)-II, Pune; 4) CIT-II, Pune; 5) DR B Bench, I.T.A.T., Pune; 6) Guard File. BY ORDER, True Copy Sr. Private Secretary , ITAT, Pune Income-tax Officer, Ward 3(1), Pune v. M/s Shraddha & IHP Joint Venture