MI PKS (JV) Vs ITO (ITAT Ahmedabad)
No Work Before Birth: JV Not Born Yet, But MOU Signed? -Pre-Existence MOU Falls Flat: ITAT Disallows Entire Transport Claim of JV- ITAT Confirms Both Transport & Sublet Disallowances
Assessee, a Joint Venture AOP formed on 17.04.2017, received ₹13.02 crore from Western Railways for earthwork & sub-contracted the entire job to PKS Technobuild Pvt Ltd vide agreement dated 18.04.2017. Assessee passed on ₹12.36 crore to the sub-contractor but also claimed separate transportation expense of ₹41,48,000 & sublet expense of ₹5,19,692. AO disallowed both, holding that (i) the alleged MOU dated 10.04.2017—under which Assessee claimed to have incurred transportation expenses for initial 0.5 km—was impossible because Assessee itself did not exist before 17.04.2017, & (ii) the sub-contract agreement contained no reference to any such prior work or reimbursement. AO further held that sublet expense represented cess & charges deductible as per clause-11 of the sub-contract & should have been borne by the sub-contractor. CIT(A)/NFAC upheld the disallowance.
Tribunal noted that no work could have been executed before the JV came into existence & the so-called 10.04.2017 MOU was inconsistent with this fact, supporting Revenue’s contention that it was an afterthought. Tribunal held that transportation expense was rightly disallowed. On the sublet expense of ₹5,19,692, Tribunal referred to clause-11 which clearly stated that all statutory levies were to be borne by the sub-contractor. Hence, Assessee was not entitled to claim deduction. Tribunal dismissed the appeal in full.
