TaxTMI 
TaxTMI 
2019 (9) TMI 631
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....under the facts and circumstances the levy of penalty of Rs. 39,40,000/- u/s.271C is illegal, without jurisdiction, contrary to law and unsustainable. 1.1 That under the facts and circumstances, there is no such default for which penalty u/s.271 C can be initiated and levied. 1.2 That under the facts and circumstances, the provisions of chapter- XVIIB of the Act are not applicable on the payment of Rs. 19,70,00,000/- paid for external development charges (EDC) to Govt. by issuing payment in the name of Haryana Urban Development Authority (HUDA) for and on behalf of and on instructions of Govt., as on payment to Govt., TDS provisions are not applicable. 1.3 That under the facts and circumstances, on merits, the ini....
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.... as EDC charges on which no TDS was deducted. According to the AO, TDS @ 2% should have been deducted and accordingly, he levied a penalty of Rs. 39,40,000/- u/s 271C. 4. Before us Ld. Counsel has made various submissions. Sums and substance of which can be summarised as under:- - No TDS is required for the payment to the Govt. u/s.196 of the I.T. Act. - It is a case where payments have been made to DTCP, Govt. of Haryana and the A.O. is wrong in assuming that EDC payment has been made to HUDA. - The assessee entered into agreement with Haryana Govt. through Haryana Governor through Director Town & Country Planning (DTCP) on 25.01.2008. - Clause-I(a) of the said agreement provided for payment of EDC....
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....bench order in RPS Infrastructure Ltd. also refers to this clarification Dtd.23.12.17 as CBDT circular. - It is not a CBDT circular but only an office memorandum wherein CBDT has given its opinion to "National Real Estate Development Council" which sought it clarification from CBDT on this issue. - At the outset, it is not a CBDT circular, it is also not a direction of CBDT u/s.119, it is only an opinion of CBDT, which cannot take the character of the interpretation of the law to be applied compulsorily. - Also, in said letter CBDT says "it appears that ..." which also shows that the CBDT is not very clear that whether this payment is to be taken as paid to Govt. or to HUDA. - It is apparent that the said....
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....ayment 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 betwe....
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....itself has demanded not to deduct TDS. In case even if tax was required to be deducted on such payment but not deducted under a bonafide belief then no penalty shall be leviable under section 271C of the Act as there was no contumacious conduct by the assessee. Our view is fully supported from the judgment of the Hon'ble Supreme Court in the case of Commissioner of income tax vs bank of Nova Scotia, 380 ITR 550, wherein the Hon'ble Court has held as under: "2. The matter was pursued by the Revenue before the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal vide order dated 31.03.2006 entered the following findings: "11. We have carefully considered the rival submissions. In the instant case we are not deali....
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....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 271C has been deleted by recording the following findings: "31. We have carefully considered the rival contentions and perused the orders of the lower authorities. On looking to the facts of the case as discussed by us in appeal of the assessee and revenue in 201(1) and 201(1A) proceedings above, we find that the belief of the assessee is bonafide and failure to deduct tax at source u/s 194C of the Act is for a reasonable cause. The ld Assessing Officer could not show any contemptuous conduct on part of the assessee for non-deduction of tax at source. There could also not be....