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2025 (4) TMI 902 - AT - Income TaxNon-deduction of TDS u/s 194C - Demand u/s 201(1) read with Section 201(1A) - assessee a private limited company made payment for external development charges (EDC) to Haryana Urban Development Authority (HUDA) who had merely received payment for and on behalf of Department of Town and Country Planning (DTCP) which is admittedly a government department and as per the assessee is not liable to deduct TDS on the said EDC - HELD THAT - It appears that by Finance Act 2014 Sub-Section (1) of Section 2014 w.e.f. 1.10.2014 by substituting the earlier provision and earlier provision with a uniform limitation period of seven years from the end of relevant financial year wherein payments made or credit given was made applicable. It further appears from the above that while making amendment by Finance Act 2012 the provision of Section 201(3) has been given retrospective effect from 1.4.2010. Thus it is quite clear that in the event the legislature intended to apply the amended provision of sub-Section (3) brought in by the Finance Act 2014 w.e.f. 1.10.2014 for such retrospective effect then they would have certainly mentioned the same a date prior to 1.10.2014 and not w.e.f. 1.10.2014 as has been specifically mentioned by the Finance Act 2014. Therefore the argument advanced by the learned counsel for the assessee that the amended provision made by the Finance Act 2014 in respect of the limitation prescribed in Section 201(3) of the Act cannot at all be made applicable to the instant case in hand as for the particular reason that the assessee s case was much before than that of the amendment made and the assessee since filed their TDS statement under Section 200 in due time the order under Section 201(1) read with Section 201(1A) could not have been passed on 30.03.2021 rather the same ought to have been passed within two years from the end of the financial year in which the statement was filed particularly having regard to the provisions of Section 200 of the Act is found to be acceptable. We also note that the DR has not been able to bring on record anything contrary to the facts made available before us. We also find that the identical issue has been considered in the case of Turner General Entertainment Net Works India Limited Mahipalpur Delhi 2024 (11) TMI 866 - ITAT DELHI wherein under identical facts and circumstances of the case the assessment order completed on 28.03.2018 for F.Y. 2010-11 was found to be beyond the prescribed time limit and therefore quashed. We find no reason to deviate from the stand taken therein and respectfully relying upon the same we find that the order impugned dated 30.03.2021 for A.Y. 2014-15 is beyond limitation in view of the amended provision of Section 201(3) of the Act and the same is not found to be sustainable and thus quashed. Assessee s appeal is allowed.
The core legal questions considered in this appeal revolve around the applicability and limitation period under Section 201 of the Income Tax Act, 1961, specifically:
Issue-wise Detailed Analysis 1. Validity of Order under Section 201(1) for Non-Deduction of TDS on Payment of EDC The assessee, a private limited company, made payments for External Development Charges (EDC) to Haryana Urban Development Authority (HUDA), which acted merely as a collection agent for the Department of Town and Country Planning (DTCP), a government department. The assessee contended that since the payment was to a government department, it was not liable to deduct tax at source under Section 194C of the Act. The Assessing Officer raised a demand under Section 201(1) read with Section 201(1A) for non-deduction of TDS, including interest, and levied a penalty under Section 271C. However, a Coordinate Bench had earlier deleted the penalty observing that the payment of EDC was not out of any statutory or contractual liability towards HUDA and thus no TDS deduction was required. In the present appeal, the Tribunal refrained from adjudicating the merit of applicability of Section 194C, consciously leaving it open for future proceedings, since the appeal was decided on limitation grounds. This approach preserves the assessee's right to contest the substantive issue in appropriate proceedings. 2. Limitation under Section 201(3) of the Income Tax Act for Passing Orders under Section 201(1) The principal issue before the Tribunal was whether the order dated 30.03.2021 passed by the AO for assessment year 2014-15 was barred by limitation as per Section 201(3) of the Act. The legal framework governing limitation under Section 201(3) evolved as follows:
The assessee's case pertained to financial year 2013-14 (assessment year 2014-15), and the TDS statement under Section 200 was filed within time. The AO's order dated 30.03.2021 was thus sought to be challenged as barred by limitation under the earlier two-year period applicable for cases where TDS statements were filed. The Tribunal analyzed the legislative intent and the retrospective effect of amendments:
The Tribunal relied on authoritative precedents, including decisions of Coordinate Benches and High Courts, which uniformly held that the 2014 amendment to Section 201(3) does not apply retrospectively and cannot extend limitation periods which had already expired under the earlier provisions. Key precedents cited include:
Applying these principles, the Tribunal concluded that since the AO's order was passed on 30.03.2021, well beyond two years from the end of the financial year in which the TDS statement was filed (for FY 2013-14), it was barred by limitation and hence invalid. 3. Treatment of Penalty under Section 271C The penalty under Section 271C was levied by the AO prior to the impugned order under Section 201. The Coordinate Bench had earlier deleted the penalty on the ground that the assessee was not liable to deduct TDS on the payment of EDC, as it was not a statutory or contractual liability towards HUDA. In the present appeal, the Tribunal noted the deletion of penalty by the Coordinate Bench and found no reason to interfere with that view. The penalty was thus held to be unsustainable. 4. Application of Law to Facts and Treatment of Competing Arguments The assessee's argument that the order under Section 201(1) was barred by limitation was accepted based on statutory provisions and judicial precedents. The Department's contention that the 2014 amendment with a seven-year limitation period applied retrospectively was rejected due to absence of explicit legislative intent and settled legal principles against retrospective taxation. The Tribunal also observed that the Department failed to produce any contrary material to rebut the assessee's factual position regarding timely filing of TDS statements. In respect of the substantive issue of applicability of Section 194C on payment of EDC, the Tribunal refrained from adjudicating, leaving the matter open for determination in appropriate proceedings. Significant Holdings "If the legislature intended to apply the amended provision of Sub-Section (3) brought in by the Finance Act 2014 w.e.f. 1.10.2014 for such retrospective effect, then they would have certainly mentioned the same a date prior to 1.10.2014 and not w.e.f. 1.10.2014, as has been specifically mentioned by the Finance Act, 2014." "The Hon'ble Supreme Court... observed that unless a contrary intention appears, a legislation is presumed not to be intended to have retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past." "Since no such retrospective effect was given by the legislature while amending subsection (3) by Finance Act, 2014, it has to be construed that the legislature intended the amendment made to sub-section (3) to take effect from 1st October 2014 only and not prior to that." "The order passed under section 201(1) and 201(1A) having been passed after expiry of two years from the financial year wherein the TDS statements were filed by the assessee under section 200 of the Act, is barred by limitation, hence, has to be declared as null and void." "Since we have decided the appeal on the issue of limitation we have consciously restrained ourselves from touching upon the merits of the issue regarding applicability of section 194C of the Act which is left open to be decided if it arises in case of the assessee in any other assessment year." The Tribunal's final determination was to quash the order dated 30.03.2021 passed under Section 201(1) and 201(1A) as barred by limitation, uphold the deletion of penalty under Section 271C, and allow the assessee's appeal.
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