ITO,Ward-77(2), New Delhi V. Shree Vardhman Township Private Ltd., New Delhi

ITA 2804/DEL/2022

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The case involves the Income Tax Officer (ITO) appealing against the decision of the Commissioner of Income Tax (Appeals) which had relieved M/s. Shree Vardhman Township Ltd. from the liability of deducting TDS on payments made as External Development Charges (EDC) to the Haryana Urban Development Authority (HUDA). The revenue contended that EDC payments were in the nature of a contract under section 194C and thus should be subjected to TDS. The Tribunal examined whether the assessee could be treated as in default under section 201(1) of the Act for non-deduction of TDS on these payments. The Tribunal referenced several precedents where it was held that such payments to HUDA did not require TDS deduction, leading to the dismissal of the revenue's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302424 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 18-10-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 27-11-2022
• Other Referred Cases: M/s RPS Infrastructure Limited vs. Addi. CIT, Range-78, New Delhi, Santur Infrastructure Pvt. Ltd. vs. ACIT, Sarv Estate Pvt. Ltd. Vs. JCIT, Shiv Sai Infrastructure (Pvt.) Ltd. VS. ACIT, Perfect Constech Pvt. Ltd. vs. Addl. CIT, Range-76, Delhi
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Non-deduction of tax; TDS; Set aside
• Section: 194C; 201(1); 194A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘G‘ BENCH DELHI BEFORE: SHRI KUL BHARAT, JUDICIAL MEMBER & SHRI M.BALAGANESH, ACCOUNTANT MEMBER ITA No.2804/Del/2022 (Assessment Year: 2015-16) ITO, Ward-77(2), Delhi Vs. M/s. Shree Vardhman Township Ltd., 301, 3 rd Floor, Indraprakash Building, 21- Barakhamba Road, New Delhi 110001 PAN/GIR No. AACCV 2952 P (Appellant) .. (Respondent) Assessee by Ms. Gunjan Jain, CA Revenue by Shri Subhra Jyoti Chakraborty, CIT-DR Date of Hearing 19/10/2023 Date of Pronouncement 30/10/2023 O R D E R PER M. BALAGANESH (A.M): This appeal in ITA No.2804/Del/2022 for A.Y. 2015-16 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-23, Delhi in appeal No.23/10882/2014-15 dated 06.09.2022 (hereinafter referred to as ld. CIT(A) in short) against the order of assessment passed u/s.201(1)/201(1A) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 24.03.2022 by the ld. Income Tax Officer, Ward-77(2), Delhi (hereinafter referred to as ld. AO). ITA No.2804/Del/2022 2 2. The revenue has raised the following grounds of appeal before us:- 1. 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 definition of contract provided u/s 194C is wide enough to cover EDC payments. EDC payments are in nature of contract u/s. 194C 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 acquisition of land in paid by HUDA which transfers and gives possession of land to private builders. HUDA developers urban infrastructure on land by undertaking EDCs. HUDA transfer land to private builders who has to pay user fee for the developed urban infrastructures which is named as EDC under the license to set up commercial set ups. Therefore, EDC would partake the nature of section 194C that'... any other agreement to arrangement for the use of (either separately or together) any -(a); or ... Accordingly, EDC ought to be subjected to TDS under section 194C of the Income Tax Act @2%. 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 judgement 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 Tribunal was penalty 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 judgement 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 applicable on EDC payable to HUDA. 3. We have heard the rival submissions and perused the materials available on record. We find that the only effective issue involved herein is whether assessee could be treated as assessee in default u/s 201(1) of the Act and consequentially liable for interest u/s 201(1A) of the Act in respect of non deduction of tax at source on payment of external development charges (EDC) to Haryana Urban Development Authority (HUDA). The entire facts of the issue, observations of the ld AO, the submissions of the assessee and the observations of the ld CIT(A) are captured hereunder:- 4. I have considered the material on record including written submissions of the AR of the appellant filed in course of appellate proceedings. I have ITA No.2804/Del/2022 3 perused the order u/s 201(1) and 201(1A) of the Act. In the present appeal the appellant has raised eleven grounds of appeal. 5. All the grounds are related to raising of demand u/s 201(1) and 201(1) of Rs. 1,22,16,209/- on the appellant for its failure to deduct TDS of Rs.32,00,000/- u/s 194C on payment of Rs.16,00,00,000/-, Rs.32,65,331/- u/s 194A on payment of Rs.3,26,53,310/-made to the HUDA and charging interest of Rs.57,50,878/- on the above TDS liability of Rs.64,65,331/-. 6. According to the Assessing Officer, the appellant was required to deduct tax at source (TDS) on the payments of External Development Charges (here- in-after referred as "EDC" to Haryana Urban Development Authority (here-in- after referred as "HUDA". According to the AO, by failing to deduct tax at source on the payments made to HUDA, the appellant has committed a default within the meaning of section 194C of the Income Tax Act, 1961. 7 In the case of the appellant, it has been stated that the appellant has paid external development charges for taking license for development of residential, commercial colony in Haryana in the F.Y. 2014-15. Detail of external development charges including interest paid in the financial year 2014-15 is as under: Date of Payment Amount paid/ Credited TDS deducted TDS deductible @2% u/s 194C TDS deductible @10% u/s 194A 23.06.2014 16,00,00,000/- NIL 32,00,000/- 31.03.2015 3,26,53,310/- NIL 32,645,331/- 32,00,000/- Rs. 32,65,331/- 8. The AO further levied the interest for late payment/non-payment of TDS chargeable u/s.201(1) 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 don which such tax is actually paid, the interest has been charged and payable by the appellant u/s.201(1A) as follows: Amount of Payment (Rs.) Date of Payment TDS applicable u/s 194C and 194A (Rs.) TDS deducted Month of Default Interest Default u/s 201(1A) @ 1% p.m on the amount of TDS deductible (Rs.) 16,00,00,000/- 23.06.2014 32,00,000/- NIL 94 30,08,000/- ITA No.2804/Del/2022 4 3,26,53,310/- 31.03.2015 32,65,331/- NIL 84 27,42,878/- Total 57,50,878/- 9. Thus, the A.O. has raised demand u/s. 201(1)/(1A) of the Act amounting to Rs. 1,22,16,209/-. 10. The AO has held that HUDA is a taxable entity and its business income is taxable. The AO has contended that EDC is arising out of an agreement which is in the nature of service contract wherein colonizers pay EDC to HUDA for creation, development and maintenance of urban infrastructure named as EDWs. HUDA is rendering a service to colonizers for which EDC is paid. Therefore, EDC ought to be subject to TDS u/s 194A & 194C of the Act @ 10% and 2% respectively. 11. It is a matter of fact that EDC is paid to HUDA to commercially exploit the land owned by it. It has been submitted during the appellate proceedings that there is no privity of contract between HUDA authority and appellant company, there is agreement between Haryana Government and appellant company only. 12. In connected case, it was held that the appellant was not assessee in default for not deducting TDS on the payments of EDC made to HUDA. The Hon'ble ITAT, Delhi has held in the case of M/s RPS Infrastructure Limited vs. Addi. CIT, Range-78, New Delhi reported as {2019 (9) TMI 39-ITAT Delhi}, date of order: 23.07.2019 as under: 5.0 We have heard the rival submissions and have also 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 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 the financial statements of 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 ITA No.2804/Del/2022 5 matter remains that payment has been made to HUDA through DTC 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 DCP 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 Co-ordinate 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 ITA No.5337 & 5338/Del/2019 vide order dated 13.09.2019 and Shiv Sai Infrastructure (Pvt.) Ltd. VS. ACIT in ITA No.5713/Del/2019 vide order dated 11.09.2019. A similar view was also taken by the Co- ordinate Bench of ITAT Delhi in case of R.P.S 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 hold that the impugned penalty u/s 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. 6.0 In the final result, the appeal of the assessee stands allowed." 13. Thus, it was held that the payment of EDC is not for carrying out any specific work to be done by HUDA for and on behalf of the appellant but rather Haryana Government which levies these charges for carrying out external development and engages the services of HUDA for execution of the work. Therefore, in view of the above judgement, the appellant 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 addition is not sustained. 14. A similar view has been taken by the Hon'ble 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 ITA No.5337 & 5338/Del/2019 vide order dated 13.09.2019 and Shiv Sai Infrastructure (Pvt.) Ltd. vs. ACIT in ITA No.5713/Del/2019 vide order dated 11.09.2019. 15. The facts of the case are identical to the case of Perfect Constech Pvt. Ltd. vs. Addl. CIT, Range-76, Delhi (I.T.A No.6907/Del/2019), as quoted above. Respectfully following the orders of the Hon'ble ITAT Delhi as aforesaid, it is held that the appellant was not liable to deduct TDS on payment of EDC made to the HUDA. Therefore, the impugned demand of Rs.1,22,16,209/- is not sustainable and is deleted. Accordingly, this ground of the appellant is hereby allowed. ITA No.2804/Del/2022 6 16. The next issue involved is deduction of TDS on payment of interest to the HUDA for late payment of EDC. In the forgoing paragraphs it has been held that the payment to HUDA is actually the payment made to the Haryana Government and HUDA is the designated authority to collect the payment on behalf of the Government. The payment of interest to the Government 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 on interest u/s 194A. Hence, the action of the Assessing Officer in holding that the appellant was liable to deduct TDS on payment of interest made to HUDA is liable to be deleted. 17. In the result, the appeal of appellant is hereby allowed. 4. We find that the ld. CIT(A) had granted relief by placing reliance on the decisions of the co-ordinate bench of this tribunal stated supra, wherein it was held that the EDC paid to HUDA would not be liable for deduction of tax at source and accordingly the assessee cannot be treated as ‘assessee in default’ in terms of section 201(1) of the Act and no tax could be recovered from it for non-deduction of tax at source. Consequentially the assessee could not be made liable to pay interest u/s 201(1A) of the Act. Accordingly, the grounds raised by the revenue are dismissed. 5. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 30/10/2023. Sd/- (KUL BHARAT) Sd/- (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Delhi; Dated 30/10/2023 NV Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A), Delhi. 4. CIT 5. DR, ITAT, Delhi 6. Guard file. ITA No.2804/Del/2022 7 BY ORDER, (Asstt. Registrar) ITAT,Delhi //True Copy//