The Commissioner of Income Tax-II vs SMC Rohit J.V.

This Appeal under Section 260-A of the Income Tax Act, 1961 (the Act), challenges the order dated 13th March, 2013 passed by the Income Tax Appellate Tribunal (the Tribunal) for the Assessment Year 2008-09.

The Revenue has proposed the following questions of law for our consideration:-

"Whether, on the facts and in the circumstances of the case, and in law, the Tribunal is correct in holding that no contract has existed between assessee AOP and its members and there was no liability on the part of the assessee to deduct tax at source on payment to it members ignoring the fact that the AOP is a separate person from the member of the AOP as per provisions of sec. 2(31), therefore, it is liable to deduct t ax on payment made to the members of AOP?"

The Respondent-Assessee is an Association of Persons (AOP). For the subject assessment year, the Respondent had filed return of income, declaring ''Nil'' income. During assessment proceedings, the Assessing Officer noted that the Respondent and AOP had failed to deduct tax at source on the payment made by it to its members. This on the ground that the said payment was made to the sub-contractors. The Assessing Officer while arriving at the above decision, placed reliance upon the decision of the CIT(A) in the case of SMC Ambika (JV) which was an identical facts.

In appeal, the CIT(A) held that the members of AOP who received the amount from the AOP were not its sub-contractor. Consequently, no occasion to deduct tax under Section 40 (a)(ia) of the Act, would arise. In the meantime, Tribunal reversed the decision of CIT(A) in the matter of SMC Ambika (supra) and held in favour of the assessee therein. Thus, the CIT(A) placed reliance on the above decision of the Tribunal to hold in favour of the Respondent.

On further appeal by the Revenue, the impugned order of the Tribunal upheld the order of the CIT(A). It also records that the payment made by AOP to its members was not a payment to sub-contractors. Therefore, the provisions of Section 40(a)(ia) are inapplicable. Thus, the Revenue''s appeal was dismissed.

Mr. Suresh Kumar, learned Counsel appearing for the Appellant very fairly brings to our notice that the Revenue had filed in this Court an Appeal against the order of the Tribunal in SMC Ambika (supra) i.e. Income Tax Appeal No. 252 of 2012. On 11th June, 2014, this Court refused to entertain the Appeal by the Revenue. We notice that this Court in its order dated 11th June, 2014 has, inter alia, observed as under:-

"The Tribunal found that the assessee is an Association of Persons (AOP). The association comprises of M/s. SMC Infrastructure Pvt. Ltd. which is a company incorporated under the Indian Companies Act, 1956 and M/s. Ambika Enterprises which is a proprietary firm. The association was for the purposes of bidding for contract of the Thane Municipal Corporation. It is the association which placed its bid and was eventually awarded the contract by the Thane Municipal Corporation on 16th November, 2004. The Tribunal noted this admitted fact in para-9 of the order under challenge and found that the contract received from Thane Municipal Corporation was made over to the two entities noted above. The work was carried out and the same was handed over to the members to enable them to execute the contract. The association has neither kept any commission of its own nor any profit. The association comprising of these two members/ partners joined together for the purposes of executing the project. It is in such circumstances, that no interference of any sub-contractorship can be drawn. It is not correct to say that the Tribunal insisted on any written contract evidencing such relationship. The Tribunal noted the admitted facts and found that there is no sub-contract or relationship of a sub-contractor emerging from this undisputed factual position. It is in these circumstances, that it held that section 194C(2) of the Income Tax Act has no application to the facts of the assessee''s case."

The aforesaid facts are identical to this case and the above decision of this Court would equally apply to the present facts. Moreover, the Revenue has not shown any distinguishing feature in the present case which would warrant a different view in this case.

Accordingly, no substantial question of law arises for our consideration. Appeal dismissed. No order as to costs.