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Facts
The revenue filed appeals against the CIT(A)'s order for A.Y. 2017-18 and 2018-19. The Assessing Officer had raised a demand on the assessee for failing to deduct TDS under Section 194I on ground rent payments made to the Delhi Development Authority (DDA), treating the DDA as not a 'local authority'. The CIT(A) deleted the demand, holding that DDA is a local authority and payments to it are exempt from TDS under Section 196.
Held
The Income Tax Appellate Tribunal upheld the CIT(A)'s decision, confirming that the DDA is indeed a 'local authority'. Consequently, payments of ground rent made to the DDA are exempt from TDS deduction under Section 196 of the Income Tax Act, 1961. The Tribunal relied on the Supreme Court's decision in *Union of India vs R.C. Jain* and CBDT Circular No. 699.
Key Issues
Whether the Delhi Development Authority (DDA) constitutes a 'local authority' for the purpose of exemption from TDS deduction under Section 194I of the Income Tax Act, 1961, on ground rent payments.
Sections Cited
194I, 201(1), 201(1A), 196, 10(20), 22(1) of Delhi Development Act, 1957, 22(4) of Delhi Development Act, 1957
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH, ‘A’: NEW DELHI
Before: SHRI C.N. PRASAD & SHRI M. BALANGANESH
Assessee by None Revenue by Sh. Ajay Kumar Arora, SR. DR Date of Hearing 12.11.2025 Date of Pronouncement 31.12.2025 ORDER PER C.N. PRASAD, JM, These two appeals are filed by the revenue against the order of the Ld. CIT(A) -23, Delhi dated 12.02.2025 for the A.Y. 2017-18 and 2018-19.
Inspite of issue of notices none appeared nor any adjournment application was moved by the Assessee.
Therefore, these appeals are disposed of on hearing the ld. DR on merits.
The revenue has raised following grounds of appeal for the A.Y. 2017-18 :-
1. That on the fact and circumstances of the case and in law, the Ld CITIA)-2), Delhi in its miler dated 12.02.2025 in appeal no. CIT(A), Delhi- 23/100444/2016-17 has erred in relying on the antes of the decision of Hon'ble Supreme Court in case of Union of India vs R C Jain AIR 1961 which DDA was held "Local Authority" in respect of provisions of Bonus Act and not as per Income Tax Act, 1961.
2. That on the facts and circumstance of the case and in law, Ld. CIT(A)-23, Delhi has erred in t considering the facts that DDA was not established under any Central Act, and it's mans in de not exempt from income tax, which are prerequisite to fall in the ambit of section 196 of the Act.
3. That on the facts and circumstance of the case and in law, Ld. CIT(A)-23, Delhi has erred in law in considering the DDA as local authority merely on the ground that it is under administrative control of Ministry of Urban Development, Government of India.
4. That the order of Ld. CIT(A) is being bad in law and erroneous in nature.
That the appellant craves leave to add or amend any one or more of the grounds of appeal stated above as and when need for doing so may arise.
4. Heard the Ld. DR and perused the orders of the authorities below. The only issue for adjudication in these two appeals is as to whether the DDA is a local authority or not for deduction of TDS Section 194I of the Act r.w. 201(1)/201(1A) of the Income Tax Act on ground rent charges paid by Assessee. The AO held that ground rent payment made by the assessee to DDA are covered u/s.194I of the Act and since the assessee failed to deduct TDS @ 10% on such payment as per the provisions of Section 194I of the Act, the AO raised demand u/s.201(1) and 201(1A) on the assessee. The Ld. CIT(A) considering the submissions of the assessee that the payment of ground rent to DDA which is an authority working under the control and super intendance of the Ministry of Urban Development, Government of India and also considering circular of CBDT where payment is made to local authority no TDS is required to be deducted, held that the DDA is a local authority and assessee is not require to deduct TDS on payment of ground rent to DDA and deleted the demand raised by the AO and Section 201(1) or 201(1A) observed as under :-
“34. In Ground No 7 to 9, appellant had contested against the demand raised by Assessing Officer of Rs. 1,05,01,124/- (Rs.57,38,319/- u/s 201(1) and Rs.47,62,805/- Interest u/s 201(1A)) on account of fallure to deduct TDS u/s 1941 on payments made of Rs. 5,73,83,196/- to regulatory authority.
As per P&L account, the appellant had made payment of Rs.5,73,83,196/- towards the Ground Rent to the regulatory authorities without deducting TDS @ 10% u/s 1941 of the Act. The Assessing Officer had held that Ground Rent payment made by appellant to DDA are covered under section 1941 of the Act and therefore, the appellant was liable to deduct TDS @10% on such payment as per section 1941 of the Act. The AO further levied the interest for late payment/ non- payment of TDS chargeable u/s. 201(1A) of the Act @1% for every month on the amount of TDS in default from the date on which such tax was deducted to the date of order passed, the demand raised and payable by the appellant u/s. 201(1) and interest u/s. 201(1A) of the Act, which as follows: Page | 3
Appellant had submitted in its reply that the amount of Rs.67,42,500/- was paid as ground rent out of total outstanding amount of Rs. 5,73,83,196/- during the F.Y. 2016-17. Appellant had further submitted that the payment was made to regulatory authority DDA (Delhi Development Authority) which is a local authority and constituted by the Delhi (Control of Building Operation) Ordinance, 1955 which was later on replaced by the Delhi Development Act, 1957. The primary object was to promote and secure the development of Delhi in accordance with the Master Plan as also the Zonal Development Plans to be prepared by the "DDA" and approved by the Central Government. DDA is working under the control and superintendence of the Ministry of Urban Development, Government of India. Appellant had relied on decision of Supreme Court in the case of Union of India Vs R C Jain AIR 1981 SC 951, wherein DDA has been held to be a local authority. The same fact is also clarified by CBDT vide circular no 699, dated 30.01.1995 that under the provisions of section 196 of the Income-tax Act, no tax is required to be deducted at source from any sum payable to the Government, local authority of statutory authority.
Appellant had also submitted that the payment of ground rent to DDA is an authority working under the control and superintendence of the Ministry of Urban Development, Government of India, and clarified by DDA vide Circular No. 03/2017 dated 24.01.2017 that even after placement of Nazul lands at the disposal of Delhi Development Authority, the title continues to vest with the Central Government and the Authority merely acts as Agency of the Central Government to deal with such land, and the appellant has acquired the land under rule 43 of the DDA (Disposal of Developed Nazul Land) Rules, 1981, and thus the appellant was under Page | 4
bonafide belief that TDS was not required to be deducted on payment of ground rent to DDA. Scanned copy of DDA circular No. 03/2017 dated 24.01.2017 is reproduced as under:-
The appellant further stated that it is evident from above circular as per para 4 of DDA circular No. 03/2017 dated 24.01.2017 the Authority collecting damages and other charges on the Nazul-ll Land on behalf of the Government, these are not the income of the Delhi Development Authority and hence are not included in the income and expenditure of DDA' 39. The appellant also stated that identical issue had been previously decided in favour of the appellant by the CIT(A) in the F.Y.2015-16. 40. Contention of the appellant is found correct as the similar issue was decided by the predecessor vide order dated 23.09.2023 in appeal no. CIT(A)- 23/10907/2015-16 with the following observations: “39. It is evident from above circular that as per para 4 of DDA circular No. 03/2017 dated 24.01.2017 the Authority is collecting damages and other on the Nazul-Il Land on behalf of the Government, these are not the income of the Delhi Development Authority and hence are not included in the income and expenditure of DDA 40. On perusal of assessment order and submission filed by appellant, it is evident that as per Circular No.699 dated 30/01/1995 of CBDT, No TDS is required to be deducted on the rent or lease payment to Government/Local Authority / Statutory Authority as referred in section 10(20) of the Act. Further DDA is held to be a local authority by the Apex Court in the case of Union of India Vs RC Jain (AIR 1981 SC 951).
The payment of ground rent to the local authority does not attract TDS as per the provisions of section 196 of the Act. Therefore, the appellant was not liable to deduct TDS on payment of ground rent to DDA u/s.194I of the Act.” 42 Since, the payments made to DDA does not attract provisions of TDS, action of Assessing Officer in holding that the appellant was liable to deduct TDS on payment of ground rent made to DDA and raising demand u/s 201(1)/201(1A) of the Act of Rs 87,74,653/- is not sustainable and deleted. Accordingly, ground raised
by the appellant is hereby 'allowed"."
41. As the facts under consideration are the same as of F.Y. 2015-16 (Α.Υ. 2016-17) therefore, following the principle of consistency, the demand of Rs. 1,05,01,124/(Rs.57,38,319/- u/s 201(1) and Rs.47,62,805/- interest u/s 201(1A)) is hereby deleted. Thus, grounds of appeal Nos. 7 to 9 are allowed.”
5. On careful perusal of the order of the CIT(A) we do not see any reason to interfere with the findings of the CIT(A) and, therefore, the same is sustained. The grounds raised by the revenue are rejected.
The facts in the appeal for the A.Y.2017-18 are identical to the facts for the A.Y.2018-19 the decision taken therein shall apply mutatis mutandis for appeal for the A.Y.2018-19. We order accordingly.
In the result, both the appeals of revenue are dismissed. Order pronounced in the open court on 31.12.2025.