Tax deduction on External Development Charges to HUDA applies under section 194C, with default and interest for non-deduction.

Payment of External Development Charges to HUDA by a real estate developer was treated as falling within the tax deduction requirements under section 194C of the Income-tax Act, 1961. On that basis, non-deduction of tax at source justified treating the payer as an assessee in default under section 201(1), with consequential liability to interest under section 201(1A). The binding jurisdictional High Court ruling on this payment category was followed, and the payer's challenge failed.

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Issues: Whether the assessee was liable to be treated as an assessee in default under section 201(1) of the Income-tax Act, 1961, and liable for interest under section 201(1A) for non-deduction of tax at source under section 194C on payment of External Development Charges to HUDA.

Analysis: The payment of External Development Charges to HUDA was held to attract the provisions governing deduction of tax at source. The order under challenge had followed the binding jurisdictional High Court decision holding that such payments by real estate developers to HUDA fall within section 194C of the Income-tax Act, 1961. On that basis, failure to deduct tax at source justified treating the assessee as an assessee in default and levy of consequential interest.

Conclusion: The issue was decided against the assessee and in favour of the Revenue; the assessee was rightly treated as an assessee in default and was liable to interest under section 201(1A).

Ratio Decidendi: Payment of External Development Charges to HUDA by a real estate developer attracts deduction of tax at source under section 194C of the Income-tax Act, 1961, and non-deduction renders the payer an assessee in default under section 201(1), with consequential liability to interest under section 201(1A).

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