MAPSKO BUILDERS PRIVATE LIMITED,GURUGRAM V. JCIT (OSD), CIRCLE-75(1), NEW DELHI

ITA 3340/DEL/2024

AI Insights

The case involves Mapsko Builders Pvt. Ltd., which appealed against the order of the CIT(A)-3, Gurgaon, concerning the non-deduction of TDS on payments made to HUDA for External Development Charges (EDC). The appellant argued that these payments were not subject to TDS as they were made to a government entity. However, the Tribunal, referencing a CBDT memorandum and a Delhi High Court decision, concluded that TDS was applicable on such payments as HUDA is a taxable entity under the Income Tax Act. The Tribunal dismissed the appeal, affirming the penalties imposed for non-compliance with TDS provisions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471601 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2014-2015
• Other Referred Cases: Associated Cement Co. Ltd. vs CIT [1993] 2001 ITR 435, M/s Santhur Infrastructure Pvt. Ltd. vs. ACIT, ITA No. 6844/Del/2019, M/s Shiv Sai Infrastructure (Pvt.) Ltd. vs. ACIT, ITA No. 5713/Del/2019, M/s R.P.S. Infrastructure (Pvt.) Ltd. vs. ACIT, ITA No. 5805-5806 & 5349/Del/2019, BPTP Ltd vs Principle Commissioner of Income Tax,(Central-III), M/s Spaze Tower Pvt. Ltd. ITA No.5842/Del/2019, M/s Perfect Constech Pvt. Ltd., ITA No.6907/Del/2019, M/s Sukham Infrastructure/638, 249 & 250/CHD/2015, Puri Construction [2024] 159 taxmann.com 444(Delhi)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARVIND KUMAR TRIVEDI
• Assessee Lawyers: SUBHASH K. BANSAL
• Keywords: TDS
• Section: 201(1); 194C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’, NEW DELHI Before Sh. Satbeer Singh Godara, Judicial Member & Sh. S. Rifaur Rahman, Accountant Member ITA No. 3340/Del/2024 : Asstt. Year: 2014-15 Mapsko Builders Pvt. Ltd., 6th Floor, Baani the Address, No. 1, Golf Course Road, Sector-56, Gurugram-122011 Vs JCIT(OSD), Circle-75(1), New Delhi (APPELLANT) (RESPONDENT) PAN No. AADCM5296L Assessee by : Sh. Subhash K. Bansal, CA Revenue by : Sh. Arvind Kumar Trivedi, Sr. DR Date of Hearing: 30.01.2025 Date of Pronouncement: 30.01.2025 ORDER This assessee’s appeal for Assessment Year 2014-15, arises against the CIT(A)-3, Gurgaon’s order dated 17.05.2024 in case No. 10593/2013-14, in proceedings u/s 201(1)(1A) of the Income Tax Act, 1961 (in short “the Act”). 2. Heard both the parties at length. Case file perused. 3. Coming to the assessee’s sole substantive grievance raised in the instant appeal that both the learned lower authorities have erred in law and on facts in holding it as the ”assessee in default” in section 201(1) r.w.s. 201A proceedings, we note that ITA No. 3340/Del/2024 Mapsko Builders Pvt. Ltd. 2 the learned CIT(A)’s lower appellate discussion to this effect reads as under: “4. Ground no.2-7 These grounds of appeal have been taken up by the appellant against raising demands of Rs.28,56,639/- by the AO on account of failure on the part of the appellant to deduct TDS u/s201(l) of the Act and failing to deposit the TDS in Govt. account within prescribed time limit and Rs.25,76,240/- on account of interest u/s 2O1(1A) of the Act respectively. A survey/inspection u/sl33A of the Act was carried out at the office of the Haryana Urban Development Authority(HUDA) by the TDS wing of the department, Panchkula on 09.02.2017. During the course of survey, it was noted that EDC(External Development Charges) were received by the HUDA from private developers/colonizers without deducting TDS. The proceedings u/s 201(1)/201(1A) of the Act were initiated in the case of the appellant by issuing notice on 21.03.2017 on the ground that HUDA is a taxable entity and EDC has income character thereby EDC payments were liable for TDS deduction. During the proceedings u/s 201(1)/201(1A) of the Act, it was observed by the AO that the HUDA is a taxable entity carrying out business activities to acquire, develop and dispose off land for residential, commercial and institutional purpose in urban estates developed in State of Haryana and its income including EDC (charged from the colonizers for External Development Work like water supply, sewerage, drains, sewage management, college hospital etc.) is taxable under Income Tax Act. Thus, a private developer is liable to deduct TDS @ 2% on EDC payments to the HUDA u/s 194C of the Act since EDC payments made by the developers to the HUDA is covered under service contracts. While holding so, the AO relied upon the decision of Hon'ble Supreme Court, the Hon'ble Patna High Court in the case of Associated Cement Co. Ltd. vs CIT [1993] 2001 ITR 435 and CBDT circular no. 681 dated 08.03.1994 wherein it was held that provisions of section 194C would apply to all types of contracts including transport contracts, labour contracts, service contracts etc. The appellant was confronted by the AO vide show cause dated 25.03.2021 as to why TDS deduction on EDC payments were not made. In response, the appellant submitted that EDC is determined and levied by the DTCP (the Directorate of Town and Country Planning), a Department of Govt. of Haryana, therefore, TDS provisions are not applicable as per the provisions of section 196 of the Act as the payment was made to the Govt. Further, the appellant submitted before the AO that there was no agreement between it and the HUDA. The reply of the appellant was considered by the AO but not found tenable. It was held by the AO that land is owned by HUDA which ITA No. 3340/Del/2024 Mapsko Builders Pvt. Ltd. 3 received EDC as income by doing External Development Works and Demand Drafts of EDC were also drawn in favour of the Chief Administrator, HUDA. Further, it was held by the AO that the appellant has paid total amount of Rs.14,29,21,961/- as EDC without deducting TDS during the year under consideration. Therefore, demands of Rs.28,56,639/- on account of failure on the part of the appellant to deduct TDS u/s 201(1) of the Act and failing to deposit the TDS in Govt. account within prescribed time limit and Rs.25,76,240/- on account of interest u/s 2O1(1A) of the Act respectively were raised. 5. The appellant submitted during the appellate proceedings that it was engaged in the business of Real Estate Development, and related activities and paid amount of Rs.14,29,21,961/- to the HUDA as EDC without deduction of tax since provisions of section 194C of the Act are not applicable on any such payment made by it to the HUDA. The appellant submitted that as per the Haryana Estate Government Policies for the development/implementation of any residential/commercial projects, it had to take necessary license from the Department of Town Planning and Country Planning(DTPC)(Govt. of Haryana)by making payment of License fee and EDC (External Development charges for the infrastructure) to the Govt. The payment of EDC was made to the HUDA as per Govt. guidelines (the DTCP) and not in pursuance of any contract entered by the appellant with the HUDA. Further, it was contended that section 194C of the Act applies where there is contract between two parties i.e. contractor and contractee whereas in this case there is no contract between the appellant and HUDA for the infrastructure development. The appellant entered into contract with Department of Town Planning and Country Planning(DTPC) to develop colony and the payment to HUDA was made on the direction of the DTPC. It was further submitted that the DTCP has clarified vide letter dated 19.06.2018 that collection of EDC was made by the DTCP through Haryana Shehri Vikas Pradhikaran (erstwhile HUDA) in order to execute external development works.The appellant relied upon various judgments as under: i) Hon'ble ITAT Delhi in the case of M/s Santhur Infrastructure Pvt. Ltd., vs. ACIT, ITA No. 6844/Del/2019, dated 18.12.2019 ii) Hon'ble ITAT Delhi in the case of M/s Shiv Sai Infrastructure (Pvt.) Ltd. vs. ACIT, ITA No. 5713/Del/2019, dated 11.09.2019 iii) Hon'ble ITAT Delhi in the case of M/s R.P.S. Infrastructure (Pvt.) Ltd. vs. ACIT, ITA No. 5805-5806 & 5349/Del/2019, dated 23.7.2019 iv) Hon'ble High Court of Delhi in the case of BPTP Ltd vs Principle Commissioner of Income Tax,(Central-III) ITA No. 3340/Del/2024 Mapsko Builders Pvt. Ltd. 4 v) Hon'ble ITAT Delhi in the case of M/s Spaze Tower Pvt. Ltd. ITA No.5842/Del/2019 vi) Hon'ble ITAT Delhi in the case of M/s Perfect Constech Pvt. Ltd., ITA No.6907/Del/2019 vii) Hon'ble ITAT Chandigarh in the case of M/s Sukham Infrastructure/638, 249 & 250/CHD/2015 6.1 Upon consideration of facts of the case and perusal of material available on record, it is observed that the appellant was engaged in the business of real estate development during the year under consideration. For this purpose, the appellant had obtained necessary license from the DTCP (Department of Town Planning and Country Planning, Govt. of Haryana) after paying requisite license Fee. In addition to the license fee, as terms of license, it had to pay External Development Charges for the infrastructural development to the Govt. of Haryana. 6.2 As per section 3(3) of the Haryana Development and Regulation of Urban Areas Act, 1975, the amount of EDC is charged from developers on account of proportionate cost of infrastructure development such as water supply, sewerage/drainage, electricity supply etc carried out by State Govt./local authority. The amount, period for the payment and manner of depositing EDC charges are regulated by the terms and condition laid in the license granted by the DTCP. Accordingly, the appellant had made payments of Rs.14,29,21,961/- on account of External Development Charges (EDC) to the HUDA ,now known as HSVP(Haryana Shehri Vikas Pradhikaran) upon which TDS was not deducted as per the terms of license granted by the DTCP. 6.3 During the assessment proceedings, it was observed by the AO that the appellant had not deducted TDS on the payment of the EDC made to HUDA under section 194C of the Act. Thus, the AO held the appellant the 'assessee in default' within the meaning of sections 201(1)/201(1A) of the Act and raised demands accordingly. Therefore, in order to decide the grounds of appeal raised by the appellant, it is imperative to examine whether payments on account of EDC made by the appellant to HUDA are subjected to the provisions of section 194C of the Act or not. 6.4 In order to decide the same, reference is hereby drawn from CBDT memorandum F.No 370133/37/2017-TPL dated 23.12.2017 wherein it was clarified that TDS is deductible u/s 194 of the Act on payment of EDC to HSVP (earstwhile HUDA). The same is reproduced as under: \"2. In this regard it is submitted that provisions of non- deduction of tax under section 196 of the Income Tax Act, 1961, is applicable to the government and to the other authorities as mentioned under the section. Accordingly, ITA No. 3340/Del/2024 Mapsko Builders Pvt. Ltd. 5 external Development Charges (EDC) if paid to the Government of Haryana would be exempt from TDS provisions. However, in the instant case, it appears that the developer has made the payment in the nature of External Development Charges (EDC) not to the Government but to HUDA (Haryana Urban Development Authority) which is a development authority of State Government of Haryana and is a taxable entity under the Income Tax Act, 1961. Hence, TDS provisions would be applicable on EDC payable by the developer to HUDA.\" Further, reliance is hereby placed on the decision of Hon'ble Delhi High Court dated 13.02.2024 in the case of Puri Construction [2024] 159 taxmann.com 444(Delhi) wherein it was held that section 194C of the Act is applicable to EDC paid by Real Estate Developers to HUDA. The Hon'ble High Court also turned but the challenge to the clarification issued by CBDT dated 23.12.2017 which is reproduced as above. Thus, it is noted that the judicial pronouncements relied upon the appellant have been superseded by the aforementioned latest judgment of Hon’ble Delhi High Court, moreover, it is also pertinent to mention that in such judicial pronouncements, CBDT memorandum has not been challenged or been discussed by the respective judicial forums. 6.5 Keeping in view the above facts, discussion and respectfully following the ratio of decision pronounced Hon'ble High Court and CBDT memorandum, it is held that TDS u/s 194C of the Act was to be deducted on EDC payments to HUDA. Therefore, keeping in view the provisions of section 194C of the Act, the appellant was liable to deduct TDS on EDC payments u/sl94C of the Act. Thus, it is held that there is no merit in the grounds of appeal taken by the appellant. Accordingly, demands of Rs.28,56,639/- and Rs.25,76,240/- raised by the AO u/s 201(1) and u/s 201(1A) of the Act are hereby confirmed and accordingly, the grounds of appeal no. 2-7 are dismissed.” 4. Suffice to say, it has come on record that hon’ble jurisdictional high court in Puri Construction (P.) Ltd. vs. Addl. CIT (2024) 159 taxmann.com 444 (Delhi) (supra) has already settled the issue in department’s favour and against the assessee that such External Development Charges (“EDC”) indeed attract TDS deduction and therefore, we find no merit in ITA No. 3340/Del/2024 Mapsko Builders Pvt. Ltd. 6 the assessee’s instant sole substantive grievance which stand rejected accordingly. 5. This assessee’s appeal is dismissed. Order Pronounced in the Open Court on 30/01/2025. Sd/- Sd/- (S. Rifaur Rahman) (Satbeer Singh Godara) Accountant Member Judicial Member Dated: 30/01/2025 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR "