TaxTMI 
TaxTMI 
2024 (1) TMI 600
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....he Learned ITO(TDS) in computing the tax liability of Rs. 47,79,260/- and also liability of interest u/s 201(1A) at Rs. 45,88,089/-. 3. That order passed u/s 250 by the Learned CIT(A) is bad in law in as much as the appellant was not afforded an opportunity by virtual mode despite the fact that a specific request had been made by the appellant in this regard. 3. Briefly the facts of the case are that during the year under consideration, the assessee society paid External Development Charges(EDC) to Greater Mohali Area Development Authority(GMADA) amounting to Rs. 23,89,63,000/- without deduction of tax. During the course of TDS proceedings before the ITO(TDS), Chandigarh, a show cause was issued to the assessee to furnish the details of payment made to GMADA and compliance with the TDS provisions under section 194C of the Act. In response, the assessee society submitted the details of the payment and submitted that TDS provisions are not applicable on the payment made to GMADA as the latter was not working as contractor on behalf of the assessee. However as per the AO, the payment made by the assessee on account of EDC charges as an advance payment for a work which is i....
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....ed but it does not mean that the External Development is carried out by the government on behalf of the developer / Appellant on account of its contractual liability. Merely because the developers are required to deposit EDC on account of proportionate cost of infrastructure development, would not constitute an agreement or a work contract. The External Development so as to connect the residential areas or industrial project with the main roads, system, water supply, sewerage/ drainage, electricity supply or any other works, so required are to be carried out by the Govt./ local authority out of its own responsibility and even if the contactor does not pay the EDC charges that does not absolve the government from carrying out the development works relating to the connectivity of the project. The government has also issued notifications from time to time so as to give concessions to the developer / promoters regarding EDC charges and also to formulate a policy regarding utilization of the EDC charges not only to provide infrastructure along with the approved project but also for the overall development of the area in general The State government vide its Notification No. 17/....
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....ficer held that tax was required to be deducted u/s 194C and treated the assessee as assessee-in-default and created demand u/s 201(1) and 201(1 A) of the Act. On first appeal, the Hon'ble CIT(A) reversed the order of AO observing as under: "...These payments were received by GAMADA on behalf of Punjab Government, since GAMADA was a nodal agency and so tax was not required to be deducted by the PR on these payments. Therefore, it is held that the Assessing Officer was not right in creating demand u/s 201(1) & 201(1 A) on these payments and demand created is accordingly deleted" Revenue filed an appeal to the ITAT against the order of the CIT(A) and after detailed deliberations, the Hon'ble ITAT affirmed the order of CIT(A) and held that tax was not deductible on payments made on account of External Development Charges Relevant extracts of the order of the Hon'ble ITAT are reproduced as under: "...11. A perusal of the above reproduced agreement reveals that the agreement in question was executed between the assessee and the Governor of Punjab through the Secretary, Department of Industries and Commerce, State Government of Punjab and not with G....
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.... work is carried out by the Govt, /local authority out of its own responsibility. Merely because the developers are required to deposit EDC on account of proportionate cost of infrastructure development, would not constitute the agreement a work contract." Thus, in light of the above it is humbly submitted that given that payment of EDC charges by the Appellant to GAMADA was not in the nature of any contractual payments rather the same was in the nature of a mandatory statutory levy, the same was not liable for deduction of taxes u/s 194C of the Act. 4.2 It was further submitted that the matter is squarely covered by the decision of Coordinate Chandigarh Bench in case of ITO(TDS) Chandigarh Vs. M/s Sukham Infrastructure (P) Ltd. in ITA No. 638/Chandi/2015 for AY 2012-13 and the ACIT Circle 2(1) Chandigarh Vs. M/s Sukham Infrastructure (P) Ltd in ITA No. 249 and 250/Chandi/2015 for A.Y. 2010-11 and 2011-12 dt. 07/06/2018. It was submitted that in the said case, the Coordinate Bench has taken note of the Notification No. 17/17/2001 dt. 22/06/2010 and the policy framed by the Government of Punjab for utilization of External Development Charges and it was held that Section ....
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....d 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 EDC charges are chargeable to tax in the hands of GMADA is not subject matter of examination before us and the scope of the present adjudication is therefore limited to applicability of provisions of section 194C of the Act and we find that an identical issue has been decided by the Coordinate Chandigarh Benches in the case of M/s Sukham Infrastructure Pvt Ld. Chandigarh (supra) wherein the relevant findings read as under:- "9. We have considered the rival submissions and have gone through the records. So far as the plea that the collection of the EDC charges by the GMADA from the developer / assessee was on behalf of the state government and that it is not an income of the GMADA and that the GMADA has shown this amount as liability in its account, in our view, any finding on this issue at this stage cannot be conclusively arrived in the case of a third par....
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.... 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 company for implementation of the aforesaid project, requested the State Government for grant of special package of concessions enabling them to implement this project. Request of the company was duly discussed and considered by the Empowered Committee constituted under Industrial Policy, 2003 in its meeting held on 29.03.2006. 4. Whereas on the basis of decision of the Empowered Committee, 'Letter of Intent' indicating the concessions proposed to be granted to the company by State Government has been issued to the company vide No.CC/JDP/Mega/Sukhm/3058 dated 5.5-2006. 5. Whereas the Government of Punjab has required the Company to enter into the Agreement with the Governor of Punjab hereinafter contained. Now this indenture witnessed that it hereby agreed end declared as follows: - (i) The Company shall make an investment of Rs. 952 crore includin....
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....om 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- polluting units and distance between industrial area and other areas will be in. accordance with guidelines issued by Punjab Pollution Control Board from time to lime. g. Necessary clearances from various central/state agencies will have to be obtained by the developers as per statutory requirements and on payment of such prescribed fees as required under the law. The Department of Industries & Commerce, Government of Punjab will be the single nodal agency for approving and facilitating the projects for getting clearances etc. and will also facilitate in getting resolved various issues which will relate to Government Departments/ Agencies. h. An Industrial Park shall come up as one unit at single geographical location and shall be developed in contiguity. However, public service which already exists such as road, canal, park etc. shall not be construed to break the unity & c....
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....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 andcommercial purpose. However, the relevant building Bye-laws / regulations shall be applicable to the area. The Guidelines issued by the Department of Industries & Commerce for Industrial Parks shall also be applicable. i) 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. j) The project of industrial part shall be exempted from PAPR Act. k) 50% exemption from electricity duty at current rate for 5 years shall be allowed from the date of release of connection by PSEB. This concession shal....
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....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 year first above written Sd/- Sd/- Signed on behalf of the company The state Government. 11. A perusal of the above reproduced agreement reveals that the agreement in question was executed between the assessee and the Governor of Punjab through the Secretary, Department of Industries and Commerce, State Gov....
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....n/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 was required to be completed." 13. In view of this, so far as the EDC charges paid by the assessee to the GMADA are concerned, in our view, provisions of section 194C are not attracted to the agreement/ contract in question executed by the assessee with the Governor/Govt. of Punjab. 14. Even if, we assume it otherwise, let us see whether the agreement executed by the assessee with the Governor of Punjab constitute a work / service contract, the contents of which have been reproduced above. A perusal of the above agreement reveals that the same was executed as per the policy of the State Government with a view to direct new investments in Punjab and for that purpose to give special packages or incentives for new as well as existing industrial uni....
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....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 proportionately. 15. A perusal of all the clauses of the agreement, as discussed above, reveals that it is not a work or service contract between the parties. The various clauses of the agreement just show that if the assessee agrees to develop the infrastructure as per the policy of the Govt., then the assessee would be entitled to various concession and incentives. However, the assessee is required to deposit proportionate cost of infrastructure development which will be carried out by the State Government in the area where project is located but it does not mean that the External Development is carried out by the government on behalf of the developer / assessee on account of its contractual liability. The Development of the external area is carried out by the Govt. so a....
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.... 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 dated 17th May, 2013 and No. 17/17/2001-5Hg2/P.F/47962/1 dated 6 th May, 2013 to recover External Development Charges (EDC) in the State of Punjab. Various special development authorities are authorized to collect EDC from the promoters of various residential, commercial, industrial or any other project in their respective jurisdiction in accordance with the provisions of the Act. It is felt that at the State level there is an urgent need to formulate a policy regarding utilization of EDC not only to provide infrastructure around the approved project but also for the overall development of the area is general. This policy shall detail the works on which EDC charges so collected are to be utilized. A. EXTERNAL DEVELOPMENT WORKS WHERE EDC IS TO BE USED: 1. ....
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....r 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 (v) Social Infrastructure such as education, health, public buildings. The committee constituted to prepare & scrutinize the Action Plan for the utilization of EDC should finalize the priorities of works to be done out of EDC. However, the share for any component will not be fixed. Note: Area means the area included within the limits of local planning area of any Master Plan for special Planning & Development Authority and Area within Municipal limits for the Urban Local Bodies. C. Utilization of EDC These funds may also be utilized for any specific purpose/ work on the special instructions of the state government. D. WHAT IS NOT INCLUDED IN EXTERNAL DEVELOPMENT WORKS: The provision of internal roads, water supply, sewer, storm ....
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....ual 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 Plan. The committee shall be as follows for the Planning & Development Authority. 1. Chief Administrator Chairman 2. Additional Chief Administrator Member Secretary 3. Representative of Deputy Commissioner Member 4. Superintendent Engineer Member (concerned dev. Authority) 5. District Town Planner (concerned) Member 6. XEN PWD (B&R) Member 7. XEN (PH) W/S & Sanitation Deptt.,Pb. Member 8. SE, PWSS. Board Member (Where ever required) 9. Superintendent Engineer (PSPCL) Member 10. Any other special invitee. The committee for Corporation Cities will be as follow:- 1. Commissioner M. Corpn. Chairman 2. Addl./Joint Commissioner Member Secretary 3. . Rep. of Deputy Commissio....