TaxTMI 
TaxTMI 
2019 (9) TMI 39
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....and finding given therein will apply mutatis mutandis in all the appeals. 2. The facts in brief are that, the assessee is a company engaged in the business of Real Estate. It was required to obtain license for developing group housing colony from Director, Town & Country Planning (DTCP), Government of Haryana. One of the conditions while granting such license by DTCP is payment of external development charges (EDC). Accordingly, in terms of the condition for granting license, the assessee company paid EDC to Haryana Urban Development Authority (HUDA) as per the direction of the DTCP. Consequent to the survey carried out on HUDA, it came to the notice that the assessee company has made following payments of EDC to HUDA without deducting tax at source: F.Y. A.Y. Amount 2013-14 2014-15 Rs. 23,89,85,700/- 2014-15 2015-16 Rs. 21,10,38,000/- 2015-16 2016-17 Rs. 2,75,00,000/- The AO, accordingly, issued show-cause notice for levy of penalty under section 271C, as the assessee has failed to deduct tax on the payment of EDC made to HUDA. Not being satisfied with the reply of the assessee, the AO levied following penalty for each of the year at the rate of 2% of the EDC....
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.... in the office of Governor of Haryana, acting through Director, Town and Country Planning, Haryana. 9. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in holding that the payment has been made by assessee to HUDA, ignoring the that the license for development was granted by the Governor of Haryana and payment has been made on account of EDC/IDC to the Governor of Haryana in compliance with the Bilateral Agreement entered between the assessee and the Governor of Haryana and 10. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in confirming penalty u/s 271C despite the fact that the assessee has not been treated as an 'assessee in default' as per the provisions of section 201 of the Act. 11. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the penalty rejecting the contention of the assessee that payments of EDC/ IDC Charges made by the assessee are not in the nature of payments as specified under section 194C of the Act. 12. On the facts and circumstances of the case, the learned CIT(A) has erred, both....
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....why penalty u/s 271C amounting Rs. 47,79,714/- (2% of Rs. 23,89,85,700/-) should not be levied for non-deduction of tax under section 194C/1941 of the Act. In response to which the assessee vide reply dated 11.09.2017 submitted that the assessee company has made payment to HUDA on directions of DTCP. It was explained that DTCP is the levying Authority and HUDA is merely the collecting/ executing authority on behalf of DTCP. Thus, vis-a-vis the assessee company, the amount was being paid to the DTCP only. Further, it was explained that since DTCP is Government Department not an authority, thus, there was no requirement to deduct TDS in view of the provision of section 196 of the Act, whereby it is specifically provided that no tax is to be deducted on payment to the Government. It was submitted by the Ld. Counsel that the assessee company also filed documents explaining that the EDC payment was made to Government of Haryana acting through DTCP, which included letter dated 26.05.2006 issued to assessee by DTCP in response to the application made for grant of license,(the copy of which has been placed in the PB at Pages 65-67); Copy of Bank Guarantee dated 13.06.2006 entered into betw....
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....ourt in the case of CIT vs. M/s Manjunatha Cotton and Ginning Factory & Others, ITA No. 2564.2565/2005, ITA No. 5020, 5022, 5023/2009 & ITA No. 5025,5026/2010, order dated 13.12.2012. It was submitted that the above principle laid down by the Karnataka High Court has been further affirmed by the Apex Court in the case of CIT & Anr, Vs. M/s SSA's Emerald Meadows in CC No. 11485/2016 dated 05.08.2016 and also applied in the following judgments: i. ITAT Delhi in M/s Moving Pictures Company India Ltd. v. DCIT ITA No. 2896/Del/2015 dated 29.03.2019 ii. ITAT Delhi in the case of M/s ACB India Ltd. ACIT v. ACIT in ITA No. 1409/Del/2015 dated 26.04.2018 iii. ITAT Delhi in the case of M/s ABR Auto Pvt. Ltd. v. ACIT in ITA No. 6236/Del/2015 dated 04.12.2017 iv. ITAT Delhi in the case of Duli Chand Sharma vs. ITO in ITA No. 4624/Del/2016 dated. 21.3.2017 v. ITAT Delhi in the case of Sunstar Exposition P Ltd Vs ITO in ITA No. 4869/Del/2012 dated. 12.4.2017 6.1 On the basis of the above judgments, the Ld. Counsel contended that the AO has failed to specify in the notice issued under section 274 read with 271C of the Act, as to whether assessee has failed to deduct tax a....
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.... conditions of EDC at all. It is only DTCP that can legally take action against the assesse for non-payment of such charges. It was contended that the levy of EDC was made by the Government acting through DTCP and it was only the Government who was entitled to collect it. The mere fact that the payment was made to HUDA on the direction of DTCP to carry out the execution work does not change the fact that the recipient in the eyes of law is Government acting through DTCP. The Ld. Counsel further pointed out that even HUDA has not considered the receipt of such amount as its income. It has considered the said amount as its current liability. The said fact is undisputed and acknowledged by the ld. AO at para 3, page 2 of the penalty order. The Ld. AO has considered at page 2 to 5 as to why the said receipts constitutes income in the hands of the HUDA and not current liability. However, the fact remains that HUDA has accounted such amount as its liability and not its income which substantiates the fact that the said payments are made to HUDA on behalf of DTCP. He submitted that there is no liability to deduct TDS in respect of payments made to Government as per section 196 of Income Ta....
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....S on the payment of EDC. As regard the Office Memorandum issued by the CBDT placed at PB page 150 as relied upon by the Id. AO and Id. CIT (A), he submitted that this was issued at a much later date, i.e., 23.12.2017 and assessee did not have the benefit of the same at the time of making the said payments which was in the year 2013-2016. Thus, reliance placed on the said memorandum issued at a later date to hold the assessee a defaulter is injudicious. Further, even after the issue of this memorandum, DTCP has issued a clarification dated 29.06.2018 placed at PB page 148-149 to the effect that no TDS was/is required to be deducted in respect of payments of EDC. He also pointed out that even in this clarification issued by DTCP, it has covered both past and future as the words used are was/is. On the basis of this, it was submitted that the issue is a debatable one and not free from controversy. He invited our attention to section 273B, whereby notwithstanding anything contained in section 271C, no penalty is to be on the person or the assessee for failure to deduct tax at source if such person or the assessee proves that there was a reasonable cause for the said failure. In the pre....
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....ous judgments and materials relied upon by both the sides. On going through the facts, we note that dispute is with regard to non-deduction of tax in respect of payment of EDC charges made by the assessee to HUDA. As per the AO, HUDA is neither a local authority nor Government, thus, the payments made to it by the. assessee on account of EDC charges were liable for TDS under section 194C of the Act. Since, assessee has failed to deduct the TDS; therefore, it is liable for penalty under section 271C of the Act. On the other hand, the case of the assessee is that obligation to pay EDC charges is arising out of the license granted by DTCP and these payments are to be made for obtaining the license and as per the direction of the DTCP, the same have been paid to HUDA. Further, these payments are not in the nature of payment or in pursuance of works contract. There is no privity of contract between the assessee and the HUDA. On the contrary, the agreement is between Assessee Company and the DTCP which admittedly is a Government Department as agreement has been signed by DTCP on behalf of Governor of Haryana. We are of the view that we need not go in all these issues. From the facts, it ....
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..../s. Itochu Corporation, reported in 268 ITR 172 (Del) and in the case of CIT Vs. Mitsui & Company Ltd. reported in 272 ITR 545. Respectfully following the aforesaid judgments of Hon'ble Delhi High Court and the decision of the ITAT, Delhi in the case of Television Eighteen India Ltd., we allow the assessee's appeal and cancel the penalty as levied u/s 271-C." 3. Being aggrieved, the Revenue took up the matter before the High Court of Delhi against the order of the Income Tax Appellate Tribunal. The High Court rejected the appeal only on the ground that no substantial question of law arises in the matter. 4. On facts, we are convinced that there is no substantial question of law, the facts and law having properly and correctly been assessed and approached by the Commissioner of Income Tax (Appeals) as well as by the Income Tax Appellate Tribunal. Thus, we see no merits in the appeal and it is accordingly dismissed." 12. The above judgment has been followed by the Coordinate Bench of the ITAT DELHI in the case of DCIT TDS), ACIT, TDS AND JCIT, TDS, Dehradun Versus The Joint Secretary Organizing Committee For Winter Games whereby the penalty levied under section 271 C ....