Hon’ble ITAT in case of M/s Ramky ECI JV Vs ITO (ITAT Kolkata) Appeal Number : ITA No. 159 & 160/GTY/2020 Date of Order: 31/08/2023 held that TDS is not deductible on payment by Joint Venture to its constituents as the payment is not in the nature of commission and section 194H does not get attracted.
The relevant part of case law is as under:
8. Considering the facts and circumstances of the case fulfilment of the attributes of not treating a JV as an AOP prescribed under CBDT Circular supra and the judicial precedents referred above, we are of the considered view that assessee JV does not fall in the category of AOP under the Act. Further, there does not exist a relationship of a contractor and sub-contractor within the meaning of section 194C, therefore, question of deduction of tax at source does not arise. Once there is no liability to deduct tax at source, holding assessee JV as assessee in default is also not tenable.
8.1. Ld. AO has applied the provisions of section 194H for the compensation paid to RAMKY, out of the gross bills received from NHDICL, by treating it as commission. Definition of commission as contained in section 194H does not befit the payment of 2.25% made to RAMKY to subject it to tax deduction at source. The definition of commission contained in Explanation to section 194H is as under:
“Commission or brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities.”
8.2. From the above definition, in the present case, compensation paid by assessee JV is not for acting on behalf of JV for any service. Further, there are no services taken by the JV in the course of buying or selling of goods nor there is any transaction relating to any asset, valuable articles or thing. Accordingly, the payment is not in the nature of commission and section 194H does not get attracted. Hence, assessee JV is not to be treated as assessee in default.
