Tribunal rules in favor of assessee on TDS for EDC payments, citing exemption for payments to govt bodies.

The Tribunal allowed the appeal, ruling that the demand and interest on the assessee for failure to deduct TDS on External Development Charges (EDC) payments were unjustified. The decision was based on the finding that the assessee did not breach Chapter XVII B of the Act by making payments to the Government department through HUDA without TDS deduction. The judgment highlighted the exemption from TDS obligations for payments to State Government departments and statutory bodies, aligning with legal precedents.

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Issues involved:
The appeal challenges the order of the Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre concerning the treatment of the assessee as 'assessee in default' for failure to deduct tax on payments made as External Development Charges (EDC) to the Directorate of Town and Country Planning, Haryana (Haryana Government) concerning AY 2014-15.

Details of the Judgment:

Issue 1: Treatment as 'assessee in default' for failure to deduct tax on EDC payments:
The assessee contested the action of the Assessing Officer for treating them as 'assessee in default' for not deducting TDS on payments made to Haryana Urban Development Authority (HUDA) as External Development Charges (EDC). The assessee argued that since EDC is a charge levied by the Government for external development work, and the payment was made to the Town and Country Planning Department of the Government of Haryana through HUDA, there was no statutory or contractual liability towards HUDA specifically. The assessee relied on a clarification from the Directorate of Town and Country Planning, Haryana, stating that payments for EDC made to the State Government department do not require TDS deduction. The Co-ordinate Bench's order in a similar case supported this view, emphasizing that payments to agencies like HUDA on behalf of the State Government are exempt from TDS obligations under Section 196 of the Act.

Issue 2: Applicability of TDS provisions on payments to development authorities:
The judgment referenced a Supreme Court case where it was held that TDS provisions do not apply to payments made to statutory bodies like development authorities. Drawing from this precedent, the Tribunal concluded that the principles applied in that case are relevant in the present situation, further supporting the assessee's argument that TDS was not required on payments made for EDC to the Government department through HUDA.

Conclusion:
The Tribunal allowed the appeal, holding that the demand and interest imposed on the assessee for not deducting TDS on EDC payments were not justified. The decision was based on the finding that the assessee did not violate the provisions of Chapter XVII B of the Act by making payments to the Government department through HUDA without TDS deduction. The judgment emphasized the exemption from TDS obligations for payments to State Government departments and statutory bodies, in line with relevant legal precedents.

Separate Judgement:
No separate judgment was delivered by the judges in this case.

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