TaxTMI 
TaxTMI 
2022 (11) TMI 1439
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....oner of Income Tax (Appeals) has grossly erred both in law and on facts in sustaining the order passed by Assessing Officer u/s 201(1) & 201(1 A) for not deducting tax at source of Rs. 5,82,660/- on payment made as External Development Charges to Greater Mohali Development Authority (GMADA) and charging Interest u/s 201(1 A) of Rs. 5,59,353/- thereon. 2. That the learned Commissioner of Income Tax (Appeals) has erred in both law and on facts in sustaining the action of the Assessing Officer and ignored the fact that the EDC charges were collected by GMADA on behalf of the State Govt, and that the assessee was not liable to deduct tax at source. 3. That the learned Commissioner of Income-tax (Appeals) erred on both law and facts in sustaining the order of Assessing Officer that EDC paid to Greater Mohali Development Authority (GMADA) was a taxable entity and payment made without deduction of tax was in violation with the provisions of 194C. 3.1 That the learned Commissioner of Income-tax (Appeals) ought to have considered the fact that GMADA only collected EDC on behalf of the State Govt, and EDC collected was to be utilized as per the directions....
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....irmed the findings of the AO and against the said order and the findings of the Ld. CIT(A), NFAC, the assessee is in appeal before us. 6. During the course of hearing, the Ld. AR submitted that the sole issue in dispute is whether the assessee was liable to deduct tax u/s 194 C of the Act on the payment of EDC charges to GMADA. Referring to the impugned order, it was submitted that the CIT(A) has held that the EDC charges were received by the GMADA from the assessee in pursuance of the work contract executed between the assessee and GMADA and for the purposes, the Ld. CIT(A) has relied on the notification No. 17.17.2001 dated 22.6.2010, and the policy framed by the State of Punjab for utilization of EDC, Section 29 of the Punjab Regional and Town Planning and Development Act and the copy of the CBDT office Memorandum No. 23.12.2017. Thereafter, the Ld. CIT(A) has concluded his findings at para 5.1 and 6.2 and the contents thereof reads as under:- "5.1 On perusal of the above notifications and policies of the Govt, also clearly reveal that for the purpose of development of infrastructure, the proportionate cost at fixed rates is got deposited by the government ....
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.... carrying out any work / service to the assessee. 8. It was further submitted that an identical issue came up for consideration before the Chandigarh Benches of the Tribunal in the case of Sukham infrastructure (ITA No. 638, 249 & 250/Chd/2015 dated 7.6.2018). It was submitted that the agreement in Sukham's case is similar to that of the assessee's and therein the Tribunal has taken note of the notification No. 17/17/2001 dated 22.6.2010 and the policy framed by the State of Punjab for utilization of the External Development Charges and it was held that section 194C of the Act is not applicable as there is no contract between the assessee and the GMADA, rather, the agreement is between the assessee and the State Govt. and it was further held that even otherwise the agreement is not for work / services. It was submitted that undisputedly the facts in assessee's case are identical to that of the case of Sukham Infrastructure (supra) as is also evident from the assessment order passed by the AO dated 3.8.2021 for assessment year 2014-15. 9. It was further submitted that similar view has been taken by the Coordinate Chandigarh Benches of the Tribunal in the case of Pree....
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....le for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor 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." 14. Therefore, what is relevant to examine is whether any sum is paid for carrying out any work in pursuance of a contract between the contractor and the specified person. Whether said sum is chargeable to tax in the hands of the payee and to what extent, is not a subject matter of examination as far as the applicability of section 194C of the Act. In the instant case, therefore whether ED....
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.... made this 11" day of October 2006 between the M/s Sukhm Infrastructure Pvt. Ltd., a Company (Registered under the Companies Act, 1956) and having its Administration office at SCO No. 161162. Sector-8 C, Chandigarh (hereinafter referred to as 'the company') of the one part and the Governor of Punjab, through the Secretary Industries & Commerce, Government of Punjab, Udyog Bhawan, Sector 17. Chandigarh (hereinafter referred to as 'State Government') of the other part. 1. Whereas the State Government with a view to attract new investment in Punjab has under Industrial Policy 2003 provided for consideration and determination of a special package of incentives for new as well as existing industrial units undertaking expansion through an Empowered Committee duly notified under the said policy for this purpose, provided fixed capital investment in the new unit or expansion is Rs. 100 crore and above. 2. Whereas the company proposes to set up Information Technology / Industrial Park in an area of 125 acres of land each at Mohali with an investment of about Rs. 952 crores over a period of 3 years w.e.f. 29.03.2006. 3. Whereas the compan....
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....b. Permissible saleable area in the industrial pocket shall be 65%, in the residential pocket 60% and for the commercial pocket 40%. Balance of area shall be used for common facilities, open spaces, green bell. as per approved zoning plan and as per applicable byelaws. c. Zoning and Layout plan will be cleared by a competent authority declared by Director of Industries & Commerce, Punjab. d. Common facilities would include the facilities for air conditioning, roads (including approach roads water supply, sewerage facilities, common effluent treatment facilities, telecom networks, generation and distributor of power, provided that the facilities are used for more than 2 industrial units in the industrial Park e. Infrastructure development would include roads (including approach roads) water supply and sewerage facilities, common effluent treatment facilities, telecom networks, generation and distribution of power, parking facilities parks, street lights and such other facilities as are of common use tor industrial activities which are identifiable and arc to be commonly used. f. Industrial Parks with a residential component shall have only non- po....
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....the project area is not covered in any master plan or planning zone under PUDA Act, the land use thereof shall not be changed or amended later on and shall be incorporated as such and included in any future master plan or zoning which shall be prepared under the PUDA Act. The project shall not be advertised / launched and no money will be collected from general public for allotment of land / plot / flat / any space till such time the layout / zoning plans are cleared from the competent authority. d) Permission under Punjab State Tubewell Act, 1954 to dig Tubewell in project area for requirement of the project was allowed. e) Permission under the provisions of Punjab Mines & Mineral Act shall be allowed within the project area for works relating to development of the project. However, due charges will be payable. f) High-rise buildings upto 45 mtrs, shall be allowed subject to Air Safety Regulations, Traffic Circulation and Fire Safety Norms. g) Work contract tax on construction material required for the project shall be charged at minimum floor rate. h) FAR of 2 shall be allowed for industrial and commercial purpose. However, the relevan....
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....hich will relate to the Government Departments or Punjab Government Public Sector Undertakings/Authority/Local Body. q) Proportionate cost of infrastructure development which will be carried out by the State Government in the area where project is located, shall be borne by all the developers of Information Technology Park/Industrial Park proportionately. 6. In case the above company fails to comply with provisions of para- 5 (i), 5(ii) & (iii) above, within the stipulated period mentioned therein, the concession enumerated in para-5 (iv) above shall stand automatically withdrawn and the company shall have no claim or liability whatsoever on the State Government in this regard. The Government of Punjab shall be entitled to recover the cost of the aforesaid relief / concession availed by the Company (as dues recoverable by the Government as arrears of land revenue) under Para 5 (iv) above in the event of failure on the part of the Company to fulfill its obligations under Para 5(i), 5(ii) & 5(iii) above. In witness whereof the company has cause its common seal to be affixed and the Government of Punjab both hereunto set their hand and seal on the day and ye....
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....roperty Regulation Act, 1996 (PAPR Act). The Hon'ble High Court though held that the assessee was exempt from PAPR Act, yet, the assessee was liable to pay proportionate cost of infrastructure development which included EDC charges out of its contractual liability with the State Govt. However, it was established that the GMADA has no authority to assume the role of State Govt. to deny the concessions to the assessee by invoking Para 6 of the agreement. The relevant part of the order of the Hon'ble High Court is reproduced as under: "The State Government thereafter at its own has extended the time limit repeatedly and its latest policy dated 06.02.2015 (R3) conclusively establishes its inclination towards the completion of projects by granting concession/relief in the agreed time schedules, for which an offer has been made even to the petitioner also. Since the respondents themselves are not keen to adhere to the time schedule, we hold that GMADA has no authority to assume the role of State Government or to invoke Para 6 of the Agreement to say that the petitioner has lost its right to claim concessions due to the 'expiry' of time period, within which the project wa....
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....a and further commitment of the state government not to allow hazardous industry with 500 meters of the project area, NOC from the Pollution Control Board and consent to operate to the Green Category Industry within the period of 30 days and the state government's commitment not to erect any barrier or create hindrance in various connectivities. However thee clauses (i) and (q) are seemed to be relevant for the adjudication of the issue. Clause (i) provides that the State Government will try to ensure that connectivity to power, roads, accessibility, communication, civic and other infrastructure up to project is provided within 240 days from the date the same is applied for to the concerned department / agency / authority / local body on fulfillment of various terms and conditions required in this regard at such rates / fee etc. which shall not be less favorable to them compared to similarly placed projects / customers, whereas Clause (q) provides that Proportionate cost of infrastructure development which will be carried out by the State Government in the area where project is located shall be borne by all the developers of Information Technology Park / Industrial Park proportiona....
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....DC charges have been explained as under:- "3) External Development Charges (EDC) are the charges for utilization and repair/ maintenance/ strengthing of existing infrastructure proposed infrastructure and License/ Permission fee is the fee for granting permission for the projects. The External Development Charges and Licence fee shall be utilized by the concerned Local Planning and Urban Development Authorities for providing infrastructure. In case the concerned Authority feels that connectivity is required from any local body or any work is to be got executed from a local body, the proportionate amount may be deposited by the authority with the Local Body on case to case basis." 17. Apart from that, the state government has also made a policy for utilization of EDC charges in the State of Punjab, which reads as under:- "Policy for utilization of External Development Charges in the State of Punjab. In pursuance of the provisions contained in the Punjab Regional and Town Planning and Development Act, 1995 and Punjab Apartment and Property Regulation Act, 1995, the State Government issued Notification No. 17/17/2001 5Hg2/53077/11 date....
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....will be charged for the developer for the main sewer, however the user charges for flow of treated or untreated water from the project to the STP or disposal are not included in the EDC. 2. The EDC can be utilized for up gradation of Electric grid Station of 66kv and above if required for providing adequate power supply to the project. However, where the provision of electricity is made through Partial load, its expenditure shall be covered under EDC. Where any installation below 66kv or part of the project which caters to the needs of the project only will be the responsibility of the project owner and is not included in EDC. B. OTHER DEVELOPMENT WORKS FOR THE OVERALL DEVELOPMENT OF AREA: These works may include the up gradation and construction of major roads/ Master Plan Roads, construction of bye-passes, provision and up gradation of educational, health and sports facilities, or any other infrastructure in the area for the benefit of area and public at large as decided by the authority. (i) Major Road Network/Bye Pass (ii) Water Supply Network (iii) Sewerage Network and disposal sites. (iv) Power Stations (....
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....The action program should be approved by the concerned development authority. "Promoter may submit suggestions regarding the works to be undertaken out of EDC around his project; However the committee constituted to prepare & scrutinize the Action Plan for the utilization of EDC should finalize the priorities after considering the suggestions of promoter." 4. In case of areas falling within municipal limits, where Local government has already prepared any Action Plan for the provision and upgradation of existing infrastructure, there should be no need to prepare a fresh Action Plan for the utilization of EDC Local Government may constitute its own advisory committee if required for the preparation of action plan. Preparation of Action Plan. Annual Action Plan for up gradation of existing infrastructure and provision of proposed infrastructure in view of the proposals of Master Plan in general and for its provision to the approved projects in particular be prepared by every local Planning and development Authority. An advisory committee may be constituted in each local planning and development authority to prepare and scrutinize the Annual Action ....
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....s own obligations/duties. The entire discussion can be summed up in the manner that though the promoter contributes towards the proportionate cost of infrastructure development, however, the works are not carried out by the local authority in consequence of specific performance of the agreement/contract but out of its own obligations and duties towards the public. In view of this, since the agreement cannot be said to be a work / service contract, hence, the provisions of section 194C will not be attracted in this case." 15. In the aforesaid decision, the Coordinate Benches have held that GMADA has been authorized to collect the EDC charges as per the policy decision of the Government and not out of free consent of the parties to the contract which has been executed between the assessee and the Govt. and therefore, it cannot be said that assessee has paid the EDC charges to GMADA out of any contractual obligations and liability towards GMADA. It has been further held that the though the developer contributes towards the proportionate cost of infrastructure development by way of EDC Charges, the work so carried out by the local authority is not in consequence of specific performa....