TaxTMI 
TaxTMI 
2023 (4) TMI 399
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.... & 100. Mr. Yuvraj Singh & Mr. Chetan Kumar Shukla, Advs. in item nos.104, 108,111 & 112. Mr. Salil Kapoor, Ms. Ananya Kapoor, Mr. Utkarsh Kumar Gupta, Mr. Sumit Lalchandani& Mr. Sanat Kapoor, Advs. in item no.107. For the Respondents: Mr. Sunil Agarwal, Mr. Shivansh B. Pandya & Mr. Utkarsh Tiwari, Advs. in item nos.84,85,98,99 & 100. Mr. Shailendera Singh, Ms. Dacchita Shahi & Mr. Akash Saxena, Advs. in item no.84. Mr. Abhishek Khanna & Mr. N.K. Aggarwal, Advs. in item no.104. Ms. Aakanksha Kaul, Adv. for UOI in item no.112. Mr. Puneet Rai, Mr. Ashvini Kumar & Ms. Madhavi Shukla, Advs. in item no.107. Mr. Zoheb Hossain & Mr. Sanjeev Menon, Advs. in item nos.108, 111&112. Mr. Niraj Kumar, Adv. in item nos.108 & 111. VIBHU BAKHRU, J. (Oral) 1. The petitioners in these petitions impugn orders passed under Section 201(1)/201(1A) of the Income Tax Act, 1961 (hereafter 'the Act'), whereby demands of Tax Deducted at Source (hereafter 'TDS') were raised by the Assessing Officer (hereafter 'the AO') against the respective petitioners (assessees) on the premise that they were liable to withhold tax (TDS) on External Development Charges (also referred to as 'EDC' in short) paid to H....
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....tionate development charges as and when required and as determined by the Director General Town and Country Planning. 8. The respondents issued four show cause notices dated 20.02.2021, 22.03.2021, 24.03.2021 and 25.03.2021 calling upon the petitioner to show cause, inter alia, as to why the petitioner may not be treated as an 'assessee in default' in respect of TDS deductible in terms of Sections 194C^2/194J of the Act on the amount of EDC paid to HUDA. 9. The petitioner responded to the said show cause notices, inter alia, contending that the EDC were paid pursuant to the statutory obligations under the HDRUA Act and the Rules made thereunder. Payment of EDC is one of the conditions for obtaining license from Director General, Town & Country Planning for developing land. The petitioner claimed that the said payments were, in fact, payments of charges to the State Government of Haryana and therefore, the petitioner had no obligation to deduct TDS. 10. The petitioner also referred to various other provisions of the Act relating to withholding of TDS and submitted that none of the Sections (that is, Section 192 to 194LB) of the Act were applicable. The petitioner specifical....
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....ent for award for land to LAO. (e) LAO transfers the ownership and possession of land to HUDA. As narrated above that the cost of land is paid by HUDA. HUDA develops urban infrastructure on land by undertaking EDWs. HUDA transfers land to private builders who has to pay user fee for this developed urban infrastructure which is name as EDC under the license to set up commercial set ups. EDC would be called Rent '... any other agreement or arrangement for the use of (either separately or together) any, - (a) land; or ...'Therefore, EDC ought to be subjected to TDS undersection 1941 of the Act@10%." 13. The learned counsel appearing for the respondents readily admitted that Section 194-I of the Act is not applicable and the payment of EDC cannot be construed as rent attracting the obligation to deduct TDS at the rate of 10% on the said payment. However, they earnestly contended that since the AO has the jurisdiction to determine whether TDS is payable or not, the impugned order be set aside and the matter be remanded to the AO. According to them, the AO has erroneously mentioned that TDS was required to be deducted under Section 194-I of the Act instead of Section....
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.... be unsustainable. 20. It is relevant to note that in BPTP Ltd's case 2019 SCC OnLIne Del 12358, the Revenue sought to sustain the initiation of reassessment proceedings by contending that TDS on EDC was required to be withheld under Section 194 of the Act, which related to TDS on dividends. However, during the course of the proceedings, it was also contended by the Revenue that EDC was in the nature of rent. This Court found the said contentions unmerited. 21. The relevant extract from the decision in BPTP Ltd's case 2019 SCC OnLIne Del 12358 is set out below: "26. The AO in paragraph 2 of the recorded reasons quotes that "EDC is covered by the provisions of section 194 of the Income-tax Act, 1961. The Assessee has failed to deduct TDS on the payments made to the HUDA". There is no explanation or rationale for the aforesaid observation made by the AO. We, therefore, cannot understand as to how the payment of EDC-being in the nature of statutory fees, could be subject to withholding tax under section 194 of the Act, a provision that is applicable to dividends. The nature of dividend payment is intrinsically different from EDC and, therefore, the apparent reason for r....
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....g of section 194-I, we do not find any infirmity in the aforesaid conclusion of the High Court. The High Court has rightly held that TDS shall be deducted on the payment of the lease rent to the Greater Noida as per section 194-I. Reliance on circular dated 30-1-1995 has been placed by the Noida/Greater Noida Authority. A perusal of the Circular dated 30-1-1995 indicate that the query which has been answered in the above circular is "Whether requirement of deduction of income tax at source under section 194-I applies in case of payment by way of rent to the Government, statutory authorities referred to in section 10(20-A) and local authorities whose income under the head "Income from house property" or "Income from other sources" is exempt from income-tax" 29. We are unable to see as to how the above provision and decision is of any assistance to the Revenue. It can be seen from the quoted portion of the said judgment that in the said case, the payment of annual rent was considered to be falling within the ambit of section 194-I, a conclusion drawn by the Court on a reading of the relevant clauses of the lease deed. In the present case, the EDC charges, on the aforesaid ra....
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.... it has for an inexplicable reason, concluded that assessees ought to deduct TDS from EDC and now seeks to find provisions of law to sustain the said conclusion. In BPTP's case (supra), the AO had initiated reassessment proceedings on the ground that assessee was required to deduct TDS under Section 194^4 of the Act; apparently, on the premise that EDC is dividend. However, before the court, it was argued on behalf of the Revenue that EDC is rent and therefore TDS was required to be deducted from payment of EDC. In the present case, the AO has proceeded on the basis that EDC is rent but the Revenue contends that it is a payment to contractor attracting the provisions of TDS under Section 194C of the Act. 25. It is apparent from the above, that the approach of the Revenue is flawed. We reject the contention that the findings of the AO regarding the nature of EDC charges as well at the provisions referred by him for determining the petitioner's liability are not material. 26. Accordingly, for the reasons stated above, the order impugned in W.P.(C) No.4351/2021 is set aside and the said petition is allowed. 27. As already observed at the outset; it is common ground that the d....
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....ontractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to- (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein. (2) Where any sum referred to in sub-section (1) is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. (3) Where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of clause (iv) of the Explanation, tax shall be deducted at source- (i) on the invoice value excluding the value of material, if such value is mentioned separ....
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....income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed one hundred and eighty thousand rupees: Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such income by way of rent is credited or paid, shall be liable to deduct income-tax under this section. 4. Section 194. Dividends.- The principal officer of an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India, shall, before making any payment in cash or before issuing any cheque or warrant in respect of any dividend or before making any distribution or payment to a shareholder, who is resident in India, of any dividend within the meaning of sub-clause (a) or sub-clause (....