EMINENCE TOWNSHIPS (INDIA) PRIVATE LIMITED,NEW DELHI vs. CIT(TDS), DELHI-1, NEW DELHI

PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.2296/Del/2024 for AY 2015-16, arises out of the order of the Commissioner of Income Tax (TDS)-1, New Delhi [hereinafter referred to as „ld. CIT(TDS)‟, in short] in Appeal No. CIT (TDS)- 1/263/2023-24/4212 dated 20.03.2024 against the order of assessment passed u/s 201(1)/ (1A) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 29.03.2022 by the Assessing Officer, DCIT, Circle- 74(1), New Delhi (hereinafter referred to as „ld. AO‟). 2. The assessee has raised the following grounds of appeal before us:- “1. That having regard to the facts and circumstances of the case and in law, the order under section 263 of the Income Tax Act, 1961 ("the Act") dated 20.03.2024 passed by the Ld. Commissioner of Income Tax Eminence Township (India) Pvt. Ltd (TDS), Delhi-1, New Delhi ["CIT(TDS)"], setting aside the order u/s 201(1)/201(1A) of the Act dated 29.03.2022 for F.Y. 2014-15 passed by the Ld. DCIT, Circle-74(1), Delhi ["the Assessing Officer"] as erroneous and prejudicial to the interest of the revenue, is without juri iction, bad in law and void-ab-initio. 2. That having regard to the facts and circumstances of the case and in law, the Ld. CIT(TDS) erred in assuming juri iction u/s 263 of the Act, so much so that, the order passed by the Assessing officer do not satisfy the statutory twin conditions prescribed under section 263 of the Act, viz., (i) that the assessment order is erroneous; and (ii) that the assessment order is prejudicial to the interest of Revenue, which are to be cumulatively satisfied. 3. That having regard to the facts and circumstances of the case and in law, the CIT(TDS) erred in exercising the revisionary juri iction under section 263 of the Act by not appreciating that External Development Charges (EDC) were paid consequent to license granted by DTCP, Government of Haryana and there was no contractual obligation between the assessee and HUDA and thus, the assessee was not liable to deduct TDS on such payments. 4. That having regard to the facts and circumstances of the case and in law, the CIT(TDS) erred in exercising the revisionary juri iction under section 263 of the Act ignoring the provisions of clause (c) of Explanation 1 to Section 263 of the Act as the issue regarding liability to deduct TDS on EDC payments to HUDA is subject matter of the appeal filed by the assessee against the order of Ld. Assessing Officer passed u/s 201(1)/201(1A) of the Act and is under consideration before the Ld. Commissioner of Income Tax (Appeals). 5. That having regard to the facts and circumstances of the case and in law, the Ld. CIT(TDS) erred in exercising juri iction under section 263 of the Act, because the Ld. Assessing Officer passed order u/s 201(1)/201(1A) of the Act computing a higher amount of TDS @ 10% of EDC Payments u/s 1941 of the Act whereas as per Ld. CIT(TDS), the liability to deduct TDS on EDC Payments should be computed @ 2% u/s 194C of the Act and hence, the said order u/s 201(1)/201(1A) cannot be termed as prejudicial to the interest of revenue. 6. That having regard to the facts and circumstances of the case and in law, the Ld. CIT(TDS) erred in exercising juri iction under section 263 Eminence Township (India) Pvt. Ltd of the Act in respect of the issue of liability of the assessee to deduct TDS on EDC Payments to HUDA as per directions of DTCP, at best, could be said to be debatable issue ousting the juri iction under section 263 of the Act.” 3. We have heard the rival submissions and perused the materials available on record. The Assessee herein is a builder. On the basis of information received from DCIT, TDS circle, Panchkula, vide letter dated 9- 3-2017, which revealed that there was a TDS survey action conducted under section 133A of the Act at the business premises of Haryana Urban Development Authority( HUDA) now Haryana Shahari Vikas Pradhikaran (HSVP) on 9-2-2017, wherein it was found that External Development Charges (EDC) were received by HUDA from private builders without deducting tax at source on it. EDC was received for use of urban development infrastructure known as External Development Work done by HUDA on its own land. Since EDC has the character of income, the same should have been subjected to deduction of tax at source by the private builders. 4. Proceedings under Section 201(1) and 201(1A) of the Act stood initiated on the assessee vide issuance of notice dated 21-03-2017. In response to the said notice and various other notices issued by the Learned AO from time to time, the assessee filed the complete submissions which are placed on record. The Learned AO observed that assessee company has made payment of Rs. 70 lakhs towards EDC to HUDA on 29-12- 2014, relevant to assessment year 2015-16. The Learned AO showcaused the assessee vide letter dated 23-02-2022 as to why the assessee should not be treated as assessee in default under section 201(1) of the Act and consequential levy of interest under section 201(1A) of the Act for non- deduction of TDS on EDC payments made to HUDA by applying the provisions of Section 194I of the Act. The Learned AO also relied on the Eminence Township (India) Pvt. Ltd CBDT Office Memorandum (OM) dated 23-12-2017 in this regard. The Learned AO passed an order under Section 201(1) and 201(1A) of the Act on 29-03-2022, treating the assessee as an „assessee in default‟ for non- deduction of tax at source in respect of EDC charges paid to HUDA to the extent of Rs 7 lakhs and interest under Section 201(1A) of the Act was levied to the extent of Rs 6,16,000/- by applying the provisions of Section 194I of the Act. 5. The very same issue was subject matter of litigation before the Hon‟ble Juri ictional High Court in the case of Puri Construction Pvt Ltd vs Additional Commissioner of Income Tax & Ors in WP (C ) 9483 /2019 and CM Appl 39041/2019 reported in 159 taxmann.com 444 (Delhi) and the Hon‟ble Delhi High Court rejected the contentions of the revenue with regard to payment of EDC charges for application of provisions of section 194I of the Act and held that the same would fall within the ambit of provisions of Section 194C of the Act. The Court held that EDC Payments carried out is civil in nature for providing amenities and hence EDC payments made by the Builders to HUDA would be covered under service contract, thereby liable to TDS as per provisions of section 194C of the Act @ 2%. 6. Based on the said order of Hon‟ble Juri ictional High Court, the Learned CIT, TDS -1, New Delhi sough to revise the order framed under section 201(1) and 201(1A) of the Act dated 29-3-2022 treating the same as erroneous and prejudicial to the interest of the revenue for wrong application of provisions of section 194I of the Act. Accordingly, a revision order stood passed under section 263 of the Act by the Learned CIT on 20- 03-2024 setting aside the order passed by the Learned AO with a direction Eminence Township (India) Pvt. Ltd to frame a fresh order in the light of decision of Hon‟ble Juri ictional High Court referred supra. Aggrieved, the assessee is in appeal before us. 7. At the outset, it is pertinent to note that the tax to be deducted at source under section 194I of the Act is 10%, whereas the tax to be deducted at source under section 194C of the Act is 2%. The Learned PCIT says the Learned AO ought to have applied the provisions of section 194C of the Act as per the decision of the Hon‟ble Juri ictional High Court referred supra. We find that the Learned AO had erred on the revenue side by charging 10% TDS rate as per section 194I of the Act in the instant case and hence there cannot be any prejudice that could be caused to the interest of the revenue in the instant case. The order passed by the Learned AO is prejudicial to the interest of the assessee and the revision order passed by the Learned CIT is prejudicial to the interest of the revenue. Hence the mandatory twin conditions for initiation of revision proceedings under section 263 of the Act does not get satisfied in the instant case and respectfully following the decisions of Hon‟ble Supreme Court in the case of Malabar Industrial Co. reported in 243 ITR 83 (SC) and Max India Ltd reported in 295 ITR 282 (SC), we have no hesitation to quash the revision order passed by the Learned CIT under section 263 of the Act. Accordingly, the grounds raised by the assessee are allowed. 8. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 10/02/2025. - - (SUDHIR KUMAR) ACCOUNTANT MEMBER

Dated: 10/02/2025
A K Keot
Eminence Township (India) Pvt. Ltd