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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’ NEW DELHI
Before: SHRI SAKTIJIT DEY, VICE- & SHRI M. BALAGANESH
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘G’ NEW DELHI
BEFORE SHRI SAKTIJIT DEY, VICE-PRESIDENT AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER
ITA No.1973/Del/2023 Assessment Year: 2016-17
Income Tax Officer, Vs. Santur Builders P. Ltd., Ward-77(1), E-6, Greater Kailash, New Delhi Part-1, New Delhi PAN :AAICS4666F (Appellant) (Respondent)
Assessee by Sh. Sarthak Jain, Advocate Department by Sh. Anuj Garg, Sr. DR Date of hearing 29.11.2023 Date of pronouncement 07.12.2023
ORDER PER SAKTIJIT DEY, VICE-PRESIDENT
Captioned appeal by the Revenue arises out of order dated
10.05.2023 of learned Commissioner of Income Tax (Appeals) -23,
New Delhi, for the assessment year 2016-17.
Grounds raised by the Revenue are as under:
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 assessee was not liable to deduct tax at source on External Development Charges (EDC) is in contravention to CBDT's Office
ITA No.1973/Del/2023 AY: 2016-17
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. 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 judgments relied upon by him are of no avail in the present case as subject matter of appeal in those cases before the Hon'ble Tribunal was penalty order u/s. 271C of the LT Act, 1961 while in this case subject matter of appeal is order u/s. 201(1)/201(1A) of IT Act passed by AO. 3. That the order of the CIT(A) being erroneous in law and on facts and needs to be vacated. 4. 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.
As could be seen from the grounds raised, the issue in
dispute is whether the assessee was required to deduct tax at
source on the payment of External Development Charges (EDC) to
Haryana Urban Development Authority (HUDA).
Briefly the facts are, the assessee is a resident corporate
entity engaged in the business of real estate. In the assessment
year under dispute, the assessee had developed a housing project
at Sohna, Gurgram. Consequent upon a survey operation
conducted in the premises of HUDA, it was found that EDC was
received from various entities, including the assessee. Based on
such information, the Assessing Officer initiated proceedings
under section 201 of the Act in case of the assessee to verify 2 | P a g e
ITA No.1973/Del/2023 AY: 2016-17
whether the assessee has deducted tax at source on payment of
EDC to HUDA. Since, the assessee had not deducted tax at
source on such payment, the Assessing Officer treated the
assessee as an assessee in default under section 201(1) of the Act
and passed an order raising demands under section
201(1)/201(1A) of the Act. Against the order so passed, the
assessee preferred an appeal before learned first appellate
authority.
Learned Commissioner (Appeals) referred to a decision of
ITAT Delhi Bench, wherein it was held that payment of EDC is not
for carrying out any specific work on behalf of the payer, but
rather the Government of Haryana, which levies such charges for
carrying out external development and engages the service of
HUDA for execution of the work, there was no requirement of
deduction of tax at source, while making such payment. Relying
upon the said decision learned first appellate authority deleted
the demand.
We have considered rival submissions and perused the
materials on record. There are plethora of decisions, wherein it
has been held that there is no requirement for deduction of tax at
source on payment of EDC to HUDA. In fact, in assessee’s own 3 | P a g e
ITA No.1973/Del/2023 AY: 2016-17
case in assessment year 2015-16, the Coordinate Bench, while
deciding Revenue’s appeal in ITA No.217/Del/2023, dated
18.07.2023 has held as under:
“3. The issue is no longer res integra. The identical issue has came up for adjudication before the Co-ordinate Bench of Tribunal in the case of Spaze Tower Pvt. Ltd. vs. JCIT, New Delhi in ITA No.5842/Del/2019, order dated 26.05.2022. The relevant operative paragraphs of the order of the Co-ordinate Bench squarely covered the issue reads as under: “6. We have carefully considered the rival submissions. The Assessing Officer/JCIT levied penalty of Rs.6,14,460/- under Section 271C for short deduction/non deduction of tax at source alleging default committed by the assessee under Section 194C on payment of External Development Charges (EDC) to Haryana Urban Development Authority (HUDA). With the assistance of the ld. counsel, we find that the Directorate of Town and Country Planning, Haryana (Haryana Government) has issued clarification on TDS deduction on EDC payments vide letter dated 19.06.2018 which is self explanatory and thus reproduced herein for ready reference: “To The Chief Administrator, Haryana Shahari Vikas Pradhikaran, Panchkula, Memo No.DTCP/ACCTTS/Assessing Officer(HQ)/CAO/2894/2018 Date: 19.6.2018 Subject: Clarification on TDS Deductions on EDC Payments. Please refer to the matter cited as subject above. 1. Section 2(g) of the Haryana Development and Regulation of Urban Areas Act, 1975 defines that external development works (hereinafter referred as EDW) shall includes any or all infrastructure development works like water supply, sewerage, drains, provisions of treatment and disposal of sewage, sullage and storm water, roads, electrical works, solid waste management and disposal, slaughter houses, colleges, hospitals, stadium/sports complex, fire stations, grid sub-stations etc. and/or any other work which the Director may specify to be executed in the periphery of or outside colony/area for the benefit of the colony/area. 2- As per Section 3(3)(ii), license holder has to pay proportionate development charges if the external development works as defined in clause (g) of section 2 are to be carried out by the Government or any other local authority. The proportion in which and the time within which, such payment is to be made, shall be determined by the Director. 3. Presently, external development works in the periphery of or outside 4 | P a g e
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colony/area for the benefit of the colony/area are being executed by Haryana Shahari Vikas Pradhikaran thereafter HSVP) which is the Development Authority or state Govt. Earlier upto 31.03.2017, Department of Town 8t Country Planning used to collect the external development charges from the colonizer to whom licences have been granted under Act No. 8 of 1975 and the persons to whom permission for change of land use have been granted under Act No. 41 of 1963, in the shape of bank draft drawn in favour of CA, HSVP and send the same to CA, HSVP. 4. As the receipt on account of EDC was not sufficient to carry out the all development works under EDC for the urban estate as per approved development plans, therefore to meet out the shortfall, a new scheme Swaran Jayanti Haryana Urban Infrastructure Development Scheme (renamed as Mangal Nagar Vikas Yojana was approved by the State Govt. and appropriate budget provision for execution of development works has been made in the said scheme. From Financial Year 2017-18, the receipts on account of EDC is being deposited in the consolidated fund of the State under Major Receipt Head-0217 receipts and all license/CLU holders have also been directed vide order dated 12.05,2017 that payment of EDC in respect of license/CLU granted by TCP Deptt. may be made online through e- payment gateway or in shape of demand drafts favouring Director, Town 6 Country Planning, Haryana. Required funds for execution of development works are released to HSVP after granting the sanction from the Finance Department. It is, therefore, clarified that HSVP is only an executing agency for and on behalf of State Govt. for carrying out EDW for which funds are given to HSVP by the Govt. through TCP Deptt. Since, payment for EDC has been made to TCP Deptt. of State Govt., no TDS was/is to be deducted out of payment made to Govt. for EDW. Accounts officer (HO) For: Director Town & Country Planning Haryana, Chandigarh
On the basis of the aforesaid clarification, the assessee contends that the payment to HUDA is, in effect, payment to State Government and therefore such payment is exempt from obligations to deduct TDS in view of Section 196 of the Act. 8. We also notice that identical issue has been examined by the Co-ordinate Bench in the case of Perfect Constech Pvt. Ltd. vs. Additional Commissioner of Income Tax in ITA No.6907/Del/2019 order dated 29.12.2020 wherein Co- ordinate Bench found that the provisions of Section 194C are not applicable on payments to agencies like HUDA on behalf of the State Government. The imposition of penalty under Section 271C was consequently found to be unsustainable in the absence of default of Section 194C of the Act. 9. The facts and issue being identical, in the light of the clarification noted above coupled with view taken by the Co-ordinate Bench in the identical facts situation, we see no reason to depart therefrom. Consequently, we find merit in the plea raised on behalf of the assessee for cancellation of penalty imposed under Section 271C of the Act.” 5 | P a g e
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In consonance with view taken by the Co-ordinate Bench, we hold that imposition of demand of Rs.46,51,786/- computed under Section 201 of the Act and consequential interest of Rs.40,00,536/- under Section 201(1A) of the Act aggregating to Rs.86,52,322/- for the Assessment Year 2015-16 is not justified in view of the finding of the Co-ordinate Bench that the assessee has not committed any violation of provision of Chapter XVII B of the Act by making payment towards EDC charges to DGTCP Haryana through HUDA without deduction of TDS. 5. It is further noticed that Hon’ble Supreme Court in the case of Union of India vs. Additional Commissioner of Income Tax (TDS), Kanpur, 136 taxmann.com 155 (SC) in the context of Agra Development Authority observed that such authority was statutory body constituted under UP Urban Planning and Development Act, 1973 and covered by notification issued. After considering the terms of notification, it was held that TDS provisions for payments made to such Authority are not applicable. Same principles would apply mutatis mutandis in the instant case.” 7. The aforesaid decision of the Coordinate Bench squarely
applies to the facts of the present appeal as well. Accordingly, we
do not find any reason to interfere with the decision of learned
first appellate authority. Grounds are dismissed.
In the result, the appeal is dismissed.
Order pronounced in the open court on 7th December, 2023
Sd/- Sd/- (M. BALAGANESH) (SAKTIJIT DEY) ACCOUNTANT MEMBER VICE-PRESIDENT Dated: 7th December, 2023. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi 6 | P a g e