2023 (7) TMI 1198 - AT - Income Tax

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

Gopal Global Developers Private Ltd. Versus ITO (TDS) Ward-74 (3) New Delhi

The Tribunal allowed the appeal, ruling that the demand and interest on the assessee for failure to deduct TDS on External Development Charges (EDC) ... TDS u/s 194C - Default u/s 201(1) and 201(1A) - Non deduction of tds on payment towards EDC charges to DGTCP Haryana through HUDA without deduction of TDS - HELD THAT:- There is no TDS liability on statutory payments made to Government of Haryana, Town and Country Planning Department is part of Government of Haryana. HUDA is only authorized to accept payment on behalf of Town and Country Planning Department. Furthermore, EDC is a charge levied by Government for carrying out External Development Work to be executed in the periphery of or outside colony/area for the benefit of colony/area. EDC charge is deposited in the receipt head of ‘TCP Department’ being Government. The assessee is not liable to deduct TDS at the time of payment of EDC as the same was not out of any statutory or contractual liability towards HUDA per se. 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. [2022 (5) TMI 1344 - ITAT DELHI] Thus we hold that imposition of demand computed u/s 201(1) and consequential interest u/s 201(1A) 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. Also decided in UNION BANK OF INDIA VERSUS ADDITIONAL COMMISSIONER OF INCOME TAX (TDS) KANPUR [2022 (3) TMI 623 - SC ORDER] TDS provisions for payments made to such Authority are not applicable. Appeal of assessee allowed. 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.