M/s Preet Land Promoters and Developers Pvt. Ltd., Mohali V. ITO, Chandigarh

ITA 829/CHANDI/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7002 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2014-2015
• Appeal Filed On: 17-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Keywords: Additional evidence
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.829/CHD/2017 ASSESSMENT YEAR: 2014-15 PREET LAND PROMOTERS AND VS. THE ITO DEVELOPERS PVT. LTD. TDS-1 SITE OFFICE SECTOR 86, PREET CITY CHANDIGARH MOHALI PAN NO. AADCP8893L (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. VINEET KRISHAN REVENUE BY : SH. RAVI SARANGAL DATE OF HEARING : 12/07/2017 DATE OF PRONOUNCEMENT : 08/08/2017 ORDER PER B.R.R. KUMAR A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE LD. CIT (A)-2, CHANDIGARH DT. 15/03/2017. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ORDER PASSED UNDER SECTION 250(6) OF TH E INCOME TAX ACT, 1961 BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2 CHAN DIGARH IN APPEAL NO. 181/2/15-16 DATED 15.03.2017 IS CONTRARY TO LAW AND FACTS OF THE CASE. 2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) GRAVELLY ERRED IN UPHOLDING TH E ORDER OF INCOME TAX OFFICER (TDS-I), CHANDIGARH IN TREATING THE 'ASSESSEE IN DE FAULT' UNDER THE PROVISIONS OF SECTION 201(1) & 201(1A) OF THE INCOME TAX ACT, 196 1. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. COMMISSIONER OF INCOME TAX (APPEALS) GRAVELLY ERRED IN UPHOLDING TH E ACTION OF THE LD. ASSESSING OFFICER THAT APPELLANT WAS REQUIRED TO DEDUCT TDS O F RS. 16,18,240/- UNDER SECTION 194C ON AN AMOUNT OF RS. 8,09,12,000/- PAID AS EXTE RNAL DEVELOPMENT CHARGES TO GMADA. 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. COMMISSIONER OF INCOME TAX (APPEALS) GRAVELLY ERRED IN UPHOLDING TH E ACTION OF THE LD. ASSESSING OFFICER THAT ASSESSEE WAS REQUIRED TO DEDUCT TAX OF RS. 16,18,240/- UNDER SECTION 194C IN RESPECT OF EDC CHARGES PAID TO GMADA AND CH ARGING OF INTEREST UNDER SECTION 201(1A) OF RS. 3,68,386/- . THE PROVISIONS OF SECTION 194C OF THE INCOME TAX ACT, 1961 ARE NOT APPLICABLE TO PAYMENT OF EDC CHAR GES PAID BY ASSESSEE TO GMADA. 2 3. THE APPELLANT HAS RAISED VARIOUS GROUNDS. THE ON LY EFFECTIVE GROUND IS AGAINST THE DEMAND RAISED OF RS .19,95,305/- U/S 20 1(1)/201(1A) OF THE ACT BY TREATING THE ASSESSEE AS 'ASSESSEE IN DEFAULT' FOR NON - DEDUCTION OF TAX U/S 194C ON PAYMENTS OF EDC MADE TO GMADA OF RS. 8,09,12,000 /-. 4. BRIEFLY, THE FACTS ON THE ISSUE ARE THAT THE APP ELLANT COMPANY HAS PAID EXTERNAL DEVELOPMENT CHARGES (EDC) OF RS 8,09,12,00 0/- TO GMADA AND HAS NOT DEDUCTED TAX AS PER THE PROVISIONS OF SECTION 194C OF THE ACT. ASSESSING OFFICER NOTED THAT EDC IS AN ADVANCE PAYMENT RECEIVED BY GM ADA FROM PRIVATE BUILDERS FOR DOING CIVIL WORK. THE EDC RECEIVED BY GAMADA HAS BEEN SPENT ON REPAIR / MAINTENANCE/ CREATING INFRASTRUCTURE FOR P VT. COLONIZERS. ON PERUSAL OF THE NOTIFICATION GMADA THE ASSESSING OFFICER HELD T HAT EDC IS ACTUALLY CHARGED BY GMADA FROM PVT. BUILDERS AND INCUR THESE PAYMENT S FOR DEVELOPMENT OF INFRASTRUCTURE AND OTHER AMENITIES FOR THE BUILDERS . THUS EXTERNAL DEVELOPMENT CHARGES MADE BY THE APPELLANT TO GMADA IS COVERED U NDER SERVICE CONTRACT WHERE THE DEDUCTOR HAS MADE PAYMENT OF EDC TO GMADA FOR THE SERVICES RENDERED BY IT AND THEREFORE, ASSESSEE WAS LIABLE T O DEDUCT TAX AT SOURCE ON SUCH PAYMENTS AS PER THE PROVISIONS OF SECTION 194C OF THE INCOME TAX ACT, 1961. 5. BEFORE THE LD.CIT(A), THE APPELLANT FILED COPY OF NOTIFICATION DATED 22.06.2010 THAT GMADA IS A STATUTORY BODY OF PUNJAB GOVERNMENT AND COLLECTS THE EDC ON BEHALF OF THE GOVERNMENT AND A COPY OF R TI REPLY FROM GMADA STATING THAT THE EDC COLLECTED BY GMADA IS ACCOUNTE D UNDER THE HEAD LIABILITIES OF THE GOVERNMENT IN THE BALANCE SHEET BY GMADA. THESE DOCUMENTS WERE FILED AS ADDITIONAL EVIDENCE AND REQUESTED THA T THESE ARE RELEVANT IN DECIDING THE APPEAL AND BE ADMITTED AS ADDITIONAL E VIDENCE UNDER RULE 46A OF THE INCOME TAX RULES, 1962. THE ADDITIONAL EVIDE NCES WERE FORWARDED TO AO FOR REMAND REPORT. THE ASSESSING OFFICER HELD THAT THE PAYMENT OF EXTERNAL DEVELOPMENT CHARGES TO GMADA ARE IN THE NATURE OF C ONTRACTUAL PAYMENT WHICH IS THE INCOME IN THE HANDS OF GMADA AND THERE FORE, ASSESSEE WAS UNDER OBLIGATION TO DEDUCT TAX ON THIS PAYMENT AS PER THE PROVISIONS OF SECTION 194C. THE ASSESSING OFFICER CONCLUDED THAT NONE OF THE DO CUMENTS CAN BE REGARDED AS ADDITIONAL EVIDENCE, AS THEY DO NOT IN ANY WAY A LTER THE FACTS OF THE CASE. 7. LD. CIT(A) HELD THAT THE PAYMENTS ON EDC CHARGES TO GMADA WHICH IN THE NATURE OF THE CONTRACTUAL PAYMENT WHICH IS THE INCOME IN THE HANDS OF GMADA AND THEREFORE THE ASSESSEE WAS UNDER OBLIGATI ON TO DEDUCT TAX ON THIS PAYMENT AS PER THE PROVISION OF SECTION 194C. 3 8. BEFORE US THE LD .AR ARGUED THAT THERE IS NO CON TRACT BETWEEN GMADA AND THE ASSESSEE HENCE THE PAYMENT DID NOT FALL UND ER THE CATEGORY OF CONTRACTUAL PAYMENT. THE LD. AR STRONGLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 9. WE HAVE GONE THROUGH THE FACTUAL MATERIAL AVAILA BLE ON RECORD AND FOUND THAT SUCH PAYMENTS ARE OUT OF LEGAL OBLIGATIO NS RATHER THAN CONTRACTUAL ARRANGEMENTS, AND IT IS ONLY WHEN PAYMENTS ARE MADE 'IN PURSUANCE OF A CONTRACT' THAT THE PROVISIONS OF SECTION 194C COME INTO PLAY. THE CONTRACT MAY BE ORAL OR WRITTEN, EXPRESS OR IMPLIED BUT THERE MU ST BE A CONTRACT NEVERTHELESS. IN THE PRESENT CASE, HOWEVER, THE PAYMENT IS ON ACC OUNT OF LEGAL OBLIGATION. 10. WE HAVE FURTHER GONE THROUGH THE ORDER OF THE L D. CIT (A) FOR THE AY 2013-14 IN THE CASE OF THE ASSESSEE WHERE IN IT WAS HELD THE THE ASSESSEE IS NOT LIABLE TO DEDUCT TDS ON THE EDC PAYMENTS. THE R ELEVANT PARA READS AS UNDER : AS PER THE PROVISIONS OF SECTION 194C OF INCOME TAX AC T THE TAX IS DEDUCTIBLE ONLY IF THE CONTRACT OF WORK HAS BEEN GIVEN TO THE OTHER PARTY. THE RELATION BETWEEN THE PARTIES SHOULD BE AT LEAST THAT OF PRIN CIPAL AND SERVICE PROVIDER. THE SCOPE OF WORK IN SUCH CONTRACTS OF WORK IS DETERMIN ED BY THE PERSON AWARDING THE CONTRACT AND IT IS EXECUTED BY THE OTHER PARTY IN ACCORDANCE WITH THE DESIRES OF THE PARTY AWARDING THE WORK. HOWEVER, IN THE PRE SENT CASE, THE RELATIONSHIP BETWEEN THE APPELLANT AND GMADA DOES NOT CONFORM TO BEING PRINCIPAL AND SERVICE PROVIDER IN STRICT SENSE BECAUSE EVEN THOUG H EDC IS CHARGED FOR DEVELOPMENT OF THE AREA BUT YET GMADA DOES NOT CARR Y OUT THE WORK OF DEVELOPMENT AT THE INSTRUCTIONS OF THE PERSON PAYIN G EDC. THE DECISIONS FOR CARRYING OUT DEVELOPMENTAL ACTIVITY IN THE AREA ARE EXCLUSIVELY TAKEN BY GMADA WITHOUT CONSULTING THE PERSONS PAYING EDC. IN OTHER SENSE, THE PAYMENT OF EDC IS MORE OF A LEVY CHARGED BY GMADA BUT FOR A SPECIFIC PURPOSE OF DEVELOPMENT OF THE AREA. UNDER THE CIRCUMSTANCES, THE CHARGES OF E DC ARE NOT PAYMENTS MADE TO GMADA IN VIEW OF SPECIFIC WORK CONTRACT; THEREFO RE THESE ARE OUTSIDE THE PURVIEW OF 194C OF INCOME TAX ACT. THE GROUND OF AP PEAL IS ALLOWED. 11. ON THE FACTUAL MATRIX OF THE ASSESSEE THESE PAY MENTS DO NOT FALL UNDER THE CATEGORY OF CONTRACTUAL PAYMENT AND HENCE ASSES SEE IS NOT LIABLE TO TDS UNDER SECTION 194C. 12. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (B.R.R.KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 08/08/2017 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR