TDS not required on external development charges paid to HUDA as payment lacks statutory contractual liability

ITAT Delhi ruled in favor of the assessee regarding non-deduction of TDS on external development charges (EDC) paid to HUDA. The tribunal held that EDC payments are not for specific work done by HUDA for the assessee, but rather charges levied by Haryana Government for external development with HUDA merely executing the work. Since the payment did not arise from statutory or contractual liability towards HUDA, no TDS deduction was required under sections 201(1)/201(1A). The addition was deleted.

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Issues:
The judgment involves the following Issues:
1. Whether External Development Charges (EDC) payments are subject to TDS u/s 194C.
2. Whether the cost of acquisition of land by HUDA should be subjected to TDS.
3. Applicability of judgments relied upon by the CIT(A) regarding penalty u/s 271C.
4. Contravention of CBDT's office Memorandum regarding TDS on EDC payable to HUDA.

Issue 1:
The main issue is whether the assessee is liable for interest u/s 201(1A) for non-deduction of TDS on EDC payments to Haryana Urban Development Authority (HUDA). The AO raised a demand for failure to deduct TDS on EDC payments, leading to interest liability.

Details for Issue 1:
The AO contended that the appellant failed to deduct TDS on EDC payments to HUDA, considering it a default u/s 194C. The appellant argued that there was no privity of contract between HUDA and the appellant, as the agreement was only between the Haryana Government and the appellant.

Issue 2:
The second issue involves the deduction of TDS on interest payments to HUDA for late payment of EDC. The AO held the appellant liable for TDS on interest payments, which the appellant contested.

Details for Issue 2:
It was established that payments to HUDA were essentially payments to the Haryana Government, and HUDA acted as the designated authority to collect on behalf of the government. As per section 196 of the Act, interest payments to the government do not attract TDS, leading to the conclusion that the appellant was not required to deduct TDS on interest payments u/s 194A.

Judgment Summary:
The ITAT Delhi dismissed the revenue's appeal, upholding the CIT(A)'s decision. The tribunal concurred with the earlier judgments that EDC payments to HUDA were not liable for TDS u/s 194C. Consequently, the assessee was not considered an 'assessee in default' u/s 201(1) and was not liable to pay interest u/s 201(1A). The tribunal also ruled in favor of the appellant regarding the deduction of TDS on interest payments to HUDA, stating that such payments to the government did not require TDS deduction.

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

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