Jammu and Kashmir HC
reverses ITAT order and rules in favour of assessee (a JV company) for AY
2005-06, railway contract receipts of over Rs. 12 cr. not income of assessee,
but diversion of income by overriding title; Assessee (a joint
venture between two companies) was formed for construction of railway tunnels,
HC notes that assessee was formed only for the purposes of submission of tender
and that the contract was not executed by assessee, but by JV members, and
contract was merely allotted in assessee’s name; Further, noting
that the contract receipts of over Rs. 12 cr. were allocated to the JV partners
(in the ratio of 97:3), HC holds no income accrued to assessee as there
was diversion of income by overriding title, extensively relies on SC ruling in
Sitaldas Tirathdas; Remarks that “neither amount would have been
received by the assessee from the northern railways for no work performed by it
nor it could be stated that the assessee has performed any activity but still
the income has accrued.”; Separately, HC rules that the amount allocated /
distributed to JV partners could not be disallowed u/s. 40(a)(ia), holds
Finance Act, 2012 amendment inserting proviso to Sec. 40(a)(ia) [stating that
once tax is paid by payee, deductor cannot be treated as assessee-in-default]
is retrospective in nature, also cites CBDT circular on allocation of revenues
in consortium arrangements:HC
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