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Income Tax Appellate Tribunal, DELHI BENCH “E”: NEW DELHI
Before: SHRI SHAMIM YAHYA & SHRI KUL BHARAT
O R D E R PER KUL BHARAT, JM:
This appeal, preferred by the Revenue, is directed against the order of the learned Commissioner of Income-tax (Appeals)-26, New Delhi, dated 27.02.2023, pertaining to the assessment year 2014-15. The Revenue has raised following grounds of appeal:
“1. Whether on the facts and in the circumstances of the case and in Rs.2 law, the CIT(A) was justified in not appreciating the fact that the definition 1941 is wide enough to cover EDC payments. EDC payments are in the nature of rent u/s 1941 and therefore are required to be subjected to TDS accordingly.
2. Whether on the facts and in the circumstances of the case and in law, the CIT(A) was justified in not appreciating the fact that the cost of land is paid to HUDA which transfers and gives possession of land to private builders. Huda develops urban infrastructure on land by undertaking EDWs. HUDA transfers land to private builders who has to pay user fee for the developed urban infrastructure which is named as EDC under the license to set up commercial set ups. EDC would be called rent ...any other agreement or arrangement for the use of (either separately or together) any,-(a) land; or Therefore EDC ought to be subjected to TDS under section 1941@10%.
3. Whether on the facts and in the circumstances of the case and in law, the CIT(A) was justified in not appreciating the fact that judgments relied upon by the Ld.CIT(A) are of no avail in the present case as subject matter of appeal in those cases before the Hon'ble Tibunal was penalty order u/s. 271C of the I.T. Act.
4. Whether on the facts and in the circumstances of the case and in law, the CIT(A) was justified in not appreciating the fact that decision of Hon'ble ITAT in the judgments relied upon that the assesse was not liable to deduct tax at source on External Development Charges (EDC) is in contravention to CBDT's Office Memorandum vide F.No. 370133/37/2017-TPL dated 23.12.2017, wherein it has been clearly mentioned that the TDS provisions would be applicable on EDC payable to HUDA.
5. That the order of the CIT(A) being erroneous in law and on facts and needs to be vacated.
6. That the appellant craves leave to add or amend any one or more of the grounds of the appeal as stated above as and when need for doing so may arise.”
Facts giving rise to the present appeal are that the AO carried out a survey/inspection u/s 133A of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), at the premises of Haryana Urban Development Authority (HUDA) and Sky High Land Con Pvt. Ltd. by the TDS Wing . It was noticed during the survey that External Development charges (EDC) were received by HUDA from private builders/persons without TDS. It was noticed that the assessee company also had made payments of EDC charges to HUDA in different years and no tax was deducted. Therefore, notice was issued to the assessee. After considering the submissions of the assessee the AO treated the assessee in default u/s 201(1) of the Act and made addition in respect of default u/s 201(1) at Rs. 1,17,76,900/- and interest u/s 201(1A) of Rs. 1,05,66,527/-. Thus, raised a demand of Rs. 2,23,43,427/-. Aggrieved against this, the assessee preferred appeal before the learned CIT(A), who allowed the appeal by deleting the demand in question.
Aggrieved against this now the Revenue is in appeal before this Tribunal.
3. Learned DR argued that the learned CIT(A) was not justified in deleting the disallowance in question made by the Assessing Authority.
4. On the other hand, learned counsel for the assessee submitted that the issue is no more res-integra and has been decided in favour of the assessee by the Coordinate Bench of this Tribunal. He placed reliance on the decisions of the Coordinate Benches in M/s Perfect Constech Pvt Ltd. Vs. ACIT (order dated 29.12.2020); ITA No. 1957/Del/2020 – Shree Vardhman
Developers Pvt. Ltd. Vs. JCIT (order dated 07.11.2022); and ITA no.
9282/Del/2019 – DCIT Vs. M/s Omaxe Limited (order date d 30.01.2023).
We have heard rival submissions and perused the material available on record. We find that the Coordinate Bench of the Tribunal under identical facts in in the case of DCIT Vs. M/s Omaxe Limited vide order dated 30.01.2023, inter alia, has held as under:
“5.1 Further, the Hon’ble coordinate Bench in the case of Shree Vardhman Developers Pvt. Ltd. Vs. JCIT, Range-77, New Delhi [ITA no. 1957/Del/2020 dated 7.11.2022 (2022) (11) TMI 1053 – ITAT Delhi] while deciding the identical issue, has also taken into consideration the judgments passed by the coordinate benches in the case of Tulip Infratech Pvt. Ltd. vs. ACIT [ITA nos. 6734, 6735 & 6736/Del/2019]; and in the case of M/s RPS Infrastructure Ltd. vs. ACIT (supra), which also dealt with the identical issue as involved in the instant case. For ready reference, we are reproducing the concluding part of the order passed by the coordinate Bench in Shree Vardhman Developers Pvt. Ltd. Vs. JCIT (supra): “7. The Co-ordinate Benches in M/s. Perfect Constech P. Ltd. case and 5806, 5349/Del/2019 title of the case RPS Infrastructure Ltd. vs. ACIT have held that assessee was not required to deduct tax at source at the time of payment of EDC. 7.1 As for convenience the relevant findings at para no. 5 in M/s. Perfect Constech Pvt. Ltd (supra) is reproduced; “5. We have heard the rival submissions and have also 13 ITA no. 9282/Del/2019 perused the material on record. It is seen that in Para 4.3.2, subparagraph (iv) of the order passed u/s 271C of the Act, the LD.AO has himself noted that the demand draft of the EDC amounts are drawn in favour of the Chief Administrator, HUDA though routed through the Director General, Town and Country Planning, Sector-18, Chandigarh. He has also referred to the notes to accounts to HUDA wherein it has been stated that “other liabilities also include external development charges received through DGTCP, Department of Haryana for execution of various EDC works. The expenditure against which have been booked in Development Work in Progress, Enhancement compensation and Land cost.” Undisputedly, the payment of EDC was issued in the name of Chief Administrator, HUDA. It is also not in dispute that HUDA has shown EDC as current liability in the balance sheet, but in the “Notes" to the Accounts Forming part of the Balance Sheet, it has been shown that EDC has been received for execution of various external development works and as and when the development works are carried out, the EDC"s liabilities are reduced accordingly. It is also not in dispute that HUDA is engaged in acquiring land, developing it and finally handing it over for a price. It is also not in dispute that EDC is fixed by HUDA from time to time. However, the fact of the matter remains that payment has been made to HUDA through DTCP which is a Government Department and the same is not in pursuance to any contract between the assessee and HUDA. Thus, the payment of EDC is not for carrying out any specific work to be done by HUDA for and on behalf of the assessee but rather DTCP which is a Government Department which levies these charges for carrying out external development and engages the services of HUDA for execution of the work. Therefore, it is our considered view that the assessee was not required to deduct tax at source at the time of payment of EDC as the same was not out of any statutory or contractual liability towards HUDA and, therefore, the impugned penalty was not leviable. We note that similar view has been taken by the Coordinate Benches of ITAT Delhi in the cases of Santur Infrastructure Pvt. Ltd. vs. ACIT in ITA 6844/Del/2019 vide order dated 18.12.2019, Sarv Estate Pvt. Ltd. vs. JCIT in & 5338/Del/2019 14 ITA no. 9282/Del/2019 vide order dated 13.09.2019 and Shiv Sai Infrastructure (Pvt.) Ltd. vs. ACIT in ITA No.5713/Dei/2019 vide order dated 11.09.2019. A similar view was also taken by the Coordinate Bench of ITAT Delhi in case of R.PS Infrastructure Ltd. vs. ACIT in 5805, 5806 & 5349/Del/2019 vide order dated 23.07.2019. Therefore, on an identical facts and respectfully following the orders of the Co-ordinate Benches as aforesaid, we
271C of the Act is not sustainable. The order of the Ld. CIT (A) is set aside and the penalty is directed to be deleted." 7.2 Similarly para no. 11 in the case RPS Infrastructure Ltd ( Supra) is also reproduced below; “11. We have heard the rival submissions, perused the relevant findings given in the orders passed by the authorities below and the various judgments and materials relied upon by both the sides. On going through the facts, we note that dispute is with regard to non-deduction of tax in respect of payment of EDC charges made by the assessee to HUDA. /As per the LD.AO, HUDA is neither a local authority nor Government, thus, the payments made to it by the assessee on account of EDC charges were liable for TDS under section 194C of the Act. Since, assessee has failed to deduct the TDS; therefore, it is liable for penalty under section 271C of the Act. On the other hand, the case of the assessee is that obligation to pay EDC charges is arising out of the license granted by DTCP and these payments are to be made for obtaining the license and as per the direction of the DTCP, the same have been paid to HUDA. Further, these payments are not in the nature of payment or in pursuance of works contract. There is no privity of contract between the assessee and the HUDA. On the contrary, the agreement is between Assessee Company and the DTCP which admittedly is a Government Department as agreement has been signed by DTCP on behalf of Governor of Haryana We are of the view that we need not go in all these issues. From the facts, it is evident that the payments have been made by the assessee to HUDA which is an authority of Haryana Government created by enactment of Legislature for carrying out developmental activities in the state of Haryana. Such Authorities admittedly are not in the category of local 15 authority or Government. These payments were made during the year 2013- 2016 and during this period, that is, prior to issue of CBDT Circular dated 23.12.2017, there was no clarity as regard the deduction of tax on these payments. We are of the view that the assesse was under a bonafide belief
DTCP, who is Governmental authority and licence was granted by the Government and EDC charges was directed to be paid to HUDA, therefore, this could led to reasonable cause that TDS was not required to be deducted; Secondly, DTCP had issued a clarification dated 29.06.2018 to the effect that no TDS was/is required to be deducted in respect of payments of EDC and this clarification issued by DTCP, covers both past and future as the words used are was/is. This shows that Governmental authority itself has demanded not to deduct TDS. In case even if tax was required to be deducted on such payment but not deducted under a bonafide belief then no penalty shall be leviable under section 271C of the Act as there was no contumacious conduct by the assessee. Our view is fully supported from the judgment of the Hon'hle Supreme Court in the case of Commissioner of income tax vs. Bank of Nova Scotia, 380 ITR 550, wherein the Hon'hle Court has held as under: “2. The matter was pursued by the Revenue before the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal vide order dated 31.03.2006 entered the following findings: "11. We have carefully considered the rival submissions. In the instant case we are not dealing with collection of tax u/s 201(1) or compensatory interest u/s 201(1 A). The case of the assessee is that these amounts have already been paid so as to end dispute with Revenue. In the present appeals we are concerned with levy of penalty u/s 271-C for which it is necessary to establish that there was contumacious conduct on the part of the assessee. We find that on similar facts Hon'ble 16 Delhi High Court have deleted levy of penalty u/s 271-C in the case of Itochu Corporation 268 ITR 172 (Del) and in the case of CIT v. Mitsui & Company Ltd. 272 ITR 545.”
Respectfully following the aforesaid judgments of Hon'ble Delhi High Court and the decision of the ITAT, Delhi in the case of Television Eighteen India Ltd., we allow the assessee's appeal and cancel the penalty as levied u/s 271-C."
Being aggrieved, the Revenue took up the matter before the High Court of Delhi against the order of the Income Tax Appellate Tribunal. The High Court rejected the appeal only on the ground that no Substantial question of law arises in the matter.
On facts, we are convinced that there is no substantial question of law. the facts and law having properly and correctly been assessed and approached by the Commissioner of Income Tax (Appeals) as well as by the Income Tax Appellate Tribunal. Thus, we see no merits in the appeal and it is accordingly dismissed.”
In the light of aforesaid, ground no. 4 to 8 are decided in favour of the assessee and the appeal of assessee is allowed. Impugned penalty order is set aside.” 5.1 Considering the peculiar facts and circumstances, since the coordinate Benches of the Tribunal in the cases referred to above have specifically dealt with the identical issue in hand and held clearly that on payment of “EDC” to the HUDA, no TDS is liable to be deducted, hence we are inclined not to interfere with the decision of the learned Commissioner, in deleting the penalty on this count. 17 5.2 As we have decided not to interfere in the deletion of penalty on merits, hence, not dwelling into the point of limitation as raised by the Revenue/Department and other grounds of appeal
as the same would prove futile exercise.
6. In the result, appeal filed by the Revenue/Department stands dismissed.”
Therefore, taking the consistent view and respectfully following the decision of the Coordinate Bench in – DCIT Vs. M/s Omaxe
Limited (supra), we do not find any infirmity in the order of the learned CIT(A) and the same is hereby affirmed. Grounds raised by the Revenue are rejected.
Revenue’s appeal stands dismissed. pronounced in open court on 22nd November, 2023.