Society wins TDS dispute over External Development Charges paid to GMADA under section 194C

ITAT Chandigarh ruled in favor of the assessee society regarding TDS provisions under section 194C on External Development Charges paid to GMADA. The tribunal held that TDS provisions do not apply to EDC payments made to GMADA as the authority was not functioning as a contractor on behalf of the assessee. Following precedent from H.P. Singh case with identical facts, the tribunal set aside the demand raised under sections 201(1) and 201(1A), concluding that section 194C provisions are not attracted to such payments.

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Issues Involved:
1. Liability to deduct tax at source on payments made to GAMADA by way of external development charges.
2. Computation of tax liability and interest u/s 201(1A).
3. Denial of opportunity to the appellant by virtual mode.

Summary:

1. Liability to Deduct Tax at Source:
The primary issue was whether the appellant was liable to deduct tax at source on payments made to Greater Mohali Area Development Authority (GAMADA) for External Development Charges (EDC). The Assessing Officer (AO) held that these payments were advance payments for civil work, thus falling under the purview of Section 194C of the Income Tax Act, 1961, necessitating TDS deduction. The appellant contended that EDC payments were statutory levies, not contractual payments, and hence not subject to TDS under Section 194C. The Tribunal referenced the decision in the case of "M/s Sukham Infrastructure (P) Ltd." where it was held that payments to GAMADA were not contractual but statutory, thus not attracting Section 194C. Consequently, the Tribunal ruled that the provisions of Section 194C were not applicable to the payments made by the appellant to GAMADA.

2. Computation of Tax Liability and Interest u/s 201(1A):
The AO computed a tax liability of Rs. 47,79,260/- and interest u/s 201(1A) amounting to Rs. 45,88,089/- due to the appellant's failure to deduct TDS. The Tribunal, following its decision on the non-applicability of Section 194C, set aside the demand raised u/s 201(1) read with Section 201(1A).

3. Denial of Opportunity by Virtual Mode:
The appellant argued that the order passed u/s 250 by the CIT(A) was bad in law as they were not afforded an opportunity by virtual mode despite a specific request. However, the Tribunal's decision did not specifically address this procedural issue, focusing instead on the substantive grounds of appeal.

Conclusion:
The Tribunal allowed the appeal, ruling that the provisions of Section 194C were not applicable to the payments made to GAMADA, thereby setting aside the demand raised u/s 201(1) read with Section 201(1A). The decision was pronounced in the open court on 03/11/2023.

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