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Facts
The assessee paid External Development Charges (EDC) to HUDA, a Development Authority. The Assessing Officer held that the assessee failed to deduct TDS on these payments, treating HUDA as a contractor under Section 194C of the Income Tax Act. The assessee contended that HUDA was a state government authority and no contract existed.
Held
The Tribunal, relying on the jurisdictional High Court's decision in Puri Constructions, held that EDC payments to HUDA were covered under Section 194C. The mere fact that HSVP (an entity similar to HUDA) was constituted under a statutory enactment did not make it a government entity for the purpose of TDS exemption.
Key Issues
Whether payments of External Development Charges (EDC) to HUDA attract TDS provisions under Section 194C, and if HUDA, as a Development Authority, should be considered a government entity exempt from TDS.
Sections Cited
250, 201(1), 201(1A), 194C, 196, 271C
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Income Tax Appellate Tribunal, DELHI BENCH “B”NEW DELHI
Before: SHRIMAHAVIR SINGH, HON’BLE & SHRISANJAY AWASTHI
सुनवाईक�तारीख/ Date of hearing: 09.12.2025 09.12.2025 उ�ोषणाक�तारीख/Pronouncement on आदेश /O R D E R PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
This is a batch of two appeals arising from Ld. Addl./JCIT (Appeals)-1, Noida orders dated 23/05/2025, passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).In both these cases the single point of contention is that the assessee filed its TDS returns on which the Ld. AO held that the assessee had failed to deduct TDS on the payment of External Developmental Charges (hereinafter referred to as “EDC”) paid to Haryana Urban Development Authority (hereinafter referred to as “HUDA”). The assessee had submitted before the Ld. AO that such EDC charges were being paid to HUDA, being a Development Authority of a State Government and hence there could be no TDS liability since there was effectively no contract between HUDA and the developer. However, the Ld. AO held that there was a liability to deduct tax at source and thereafter he passed an assessment order u/s 201(1) r.w.s. 201(1A) of the Act.
1.1 The aggrieved assessee approached the Addl./JCIT (Appeals), where also he could not succeed on the basis of the case of Puri Constructions (Pvt. Limited) reported in 159 taxmann.com 444 (Del.).
1.2Further aggrieved, the assessee has approached the ITAT, challenging this action of Ld. AO through various grounds of appeal.
Before us the ld. AR fairly mentioned that the case of Puri Constructions (supra) was against the assessee and since it was a binding decision of the Hon’ble Jurisdictional High Court. Hence, the ITAT was requested to take an appropriate decision in the matter.
2.1 The Ld. DR relied on the orders of the authorities below.
We have carefully considered the submissions of Ld. AR/DR and have gone through the records before us. We have also carefully perused the case of Puri Constructions (supra) and we find that this matter has to be decided against the assessee on the basis of the binding decision of the Hon’ble Delhi High Court. For the sake of reference the head notes from this case are extracted as under:
“Section 194C, read with sections 196 and 271C of the Income- tax Act, 1961 - Deduction of tax at source - Contactors/subcontractors, payments to (Scope of provision) - Assessee was granted license to carry out a development project under Haryana Development and Regulation of Urban Areas Act, 1975 - Assessee paid External Development Charges (EDC) to Haryana Shahari Vikas Pradhikaran (HSVP) on directions of Department of Town and Country Planning (DTCP) - Assessing Officer opined that EDC would fall within ambit of section 194C - He, thus, held that assessee was in default for non-deduction of TDS and penalty was to be levied under section 271C - Assessees contended that payments made to HSVP were pursuant to directives of DTCP and in aid of external development work being carried out, those payments should be viewed as sums which were payable to Government of Haryana - It was noted from communication of DTCP that an arrangement was in existence as per which DTCP was used to collect EDC and sent to HSVP - Communication further asserted that HSVP was executing agency working for and on behalf of state government for carrying out external development works for which funds were provided to HSVP through DTCP - Whether since assessees effected a payment in favour of HSVP in connection with external development work which was to be executed by it pursuant to arrangement that existed between said entity and State Government, provisions of section 194C would stand attracted - Held, yes - Whether mere fact that HSVP was constituted under a statutory enactment and was discharging functions akin to or similar to governmental obligations or performing activities closely connected with State functions, same would not result in recognizing HSVP as Government - Held, yes - Whether thus, EDC payments would be covered under section 194C - Held, yes [Paras 63, 69 and 88] [In favour of revenue]”
Considering the discussion above, both the appeals of the assessee are hereby dismissed.
Order pronounced in the open court on 09.12.2025