TaxTMI 
TaxTMI 
2022 (8) TMI 191
X X X X Extracts X X X X
X X X X Extracts X X X X
....g taken on record. 2. The facts in brief are the Assessee company is a private limited company incorporated on 01.07.2006 and is engaged in the business of Development of housing and commercial projects. Appellant company paid External Development Charges, hereinafter referred to as EDC, to Haryana Urban Development Authority, hereinafter referred to as HUDA, during F.Y. 2013-14 Rs. 3,63,70,000/-. The appellant Company has claimed that it has been paying the said EDC to HUDA, being a state Government Organisation, without deducting of tax treating it as an exempt entity as per section 196 of the Income Tax Act. The Assessing Officer passed the order u/s 271(C) of the income tax act imposing a penalty of Rs. 7,27,400/- for non deduction of TDS under section 194C on the basis of Office Memorandum issued by CBDT dated 23rd December, 2017 vide F. No. 370133/37/2017-TPL wherein the payment to HUDA has been treated as a payment to development authority of state government of Haryana and not to Government of Haryana. Thereby the provision of TDS was made applicable on EDC payments by the developers to HUDA. 2.1 The background to the issue are that a survey u/s 133A was carried out a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntry Planning, Government of Haryana. In view of the above mentioned facts, the Ld. AO was of the view that HUDA is taxable entity who was rendering services for External Development Work and receiving the consideration for such services. Accordingly, in view of Circular No. 681 of CBDT dated 08/03/1994, the TDS was applicable on EDC charges. Thereafter, the LD.AO has reproduced various circulars dated 15.01.2002, 08.07.2002, 25.09.2009 and 14.08.1996 issued by Accounts Officer, for Chief Controller of Finance, HUDA, Panchkula vide which EDC charges were fixed. Finally, the Ld. AO was of the view the assessee has paid EDC for the works carried out by HUDA and hence the same was liable for TDS u/s 194C Ld. AO also noticed that certain tax deductor sought clarification regarding applicability of TDS provisions on EDC charges paid to HUDA and the CBDT vide OI in F.No. 370133/37/2017-TFL dated 23/12/2017 has clarified that when EDC is paid to Government of Haryana, the same would be exempt from TDS provisions. It was further clarified by the CBDT that in the instant case, it appears that the developer has made the payment in the nature of EDC not to the Government but to the HUDA which....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d High Court in the case of 'CIT (TDS) Vs. Canara Bank' 386 ITR 504 (All.) has elaborately discussed the distinction between a corporation established under an Act and body incorporated under an Act. The Hon'ble High Court while relying upon the decision of the Hon'ble Supreme Court in the case of Dalco Engineering (P.) Ltd. v. Satish Prabhakar Padhye [2010] 4 SC C378 has observed that a company incorporated under the Companies Act is not created by the Company Act but comes into existence in accordance with the provisions of the said Act and that there was a well-marked distinction between body created by a statute and a body which after coming into existence is governed in accordance with the provisions of a statute. h) There is sufficient detail & case laws to say that TDS on HUDA on EDC which is a capital payment then penalty is not leviable. No penalty on technical or venial ground. i) There being no escapement of tax, as HUDA has fulfilled all its tax obligations, No penalty can be levied. Hon'ble Supreme Court in the case of M/s Hindustan Steel Ltd. vs State of Orissa (1972) 83 ITR 26(SC) and decision of Hon'ble High Court of Delhi i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as himself noted that the demand draft of the EDC amounts are drawn in favour of the Chief Administrator, HUDA though routed through the Director General, Town and Country Planning, Sector-18, Chandigarh. He has also referred to the notes to accounts to the financial statements of HUDA wherein it has been stated that "other liabilities also include external development charges received through DGTCP, Department of Haryana for execution of various EDC works. The expenditure against which have been booked in Development Work in Progress, Enhancement compensation and Land cost." Undisputedly, the payment of EDC was issued in the name of Chief Administrator, HUDA. It is also not in dispute that HUDA has shown EDC as current liability in the balance sheet, but in the 'Notes' to the Accounts Forming part of the Balance Sheet, it has been shown that EDC has been received for execution of various external development works and as and when the development works are carried out, the EDC's liabilities are reduced accordingly. It is also not in dispute that HUDA is engaged in acquiring land, developing it and finally handing it over for a price. It is also not in dispute that EDC is fixed by H....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erefore, 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 is evident that the payments have been made by the assessee to HUDA which is an authority of Haryana Government created by enactment of Legislature for carrying out developmental activities in the state of Haryana. Such Authorities admittedly are not in the category of local authority or Government. These payments were made during the year 2013-2016 and during this period, that is, prior to issue of CBDT Circular dated 23.12.2017, there was no cla....