TaxTMI 
TaxTMI 
2019 (9) TMI 686
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....9;EDC') aggregating to Rs. 3,58,00,000. 1.1 That the CIT(A) erred on facts and circumstances of the case and in law in not appreciating EDC payment was made to Haryana Urban Development Authority ('HUDA') for and on behalf of Department of Town and Country Planning ("DTCP"), which is not amenable to tax withholding under Chapter XVII, in terms of section 196 of the Act. 1.2 That the CIT(A) erred in alleging that the act of appellant in depositing demand drafts in the office of DTCP issued in the name of the Principal Officer of HUDA was an eye wash to circumvent the provisions of section 194C of the Act. 1.3 That the CIT(A) erred in not appreciating that provisions of section 194C of the Act are not applicable, inter alia, since: (a) there was no privity of contract between HUDA and the appellant; (b) external development is undertaken by DTCP/ HUDA for the community at large and no 'work' is undertaken specifically for the appellant. 2. Without prejudice, the CIT(A) erred in not appreciating that the appellant, in any case, had 'reasonable cause' for not deducting tax at source and therefore, there was no warrant to impose penalty under section ....
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....e the use of the land in order to prevent ill planned urbanization and haphazard urbanization in or around the towns in the State of Haryana, also governs the grant of license to a colonizer/ developer upon terms set out in the license agreement. iv. That he HDRUA Act was enacted with a view to regulate the use of land in order to prevent ill-planned urbanization in or around the towns in the State of Haryana. v. Section 2(g) of the HDRUA Act defines the phrase 'external development works' to include all such amenities required for development of the urban area in the periphery of / or outside the limits of the colony/ area for the benefit of such colony/ area such as water supply, sewerage, roads, electrical works, drainage, etc., which are necessary to ensure access to basic civic amenities to the public at large with a view to bring the urban area into a habitable condition. The said external development amenities are required to be carried out by the local authority/ State Government in the State on the periphery off outside any particular colony/ area. vi. Further, any company/ association possessing land for conversion thereof into colonies is required to apply ....
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.... same to HUDA (which is a local authority as per the provisions of Section 3 of the HDRUA Act) which effectively is a payment to DTCP in discharge of legal obligation under the said Act. 5. Thereafter, Shri Rohit Jain drew our attention to the various provisions of various tax and rules and modalities which govern the levy, collection and payment of EDC and default thereof and submitted that: (i) Chargeability for levy and collection of EDC charges arises under the HDRUA Act and Rules framed thereunder. The said Act specifically provides that the amount of EDC is required to be determined and levied by Director, DTCP; (ii) DTCP is a department of State Government of Haryana; (iii) Amount of EDC is payable to DTCP at the prescribed rates and in the manner demand by it. Further such rates or terms of EDC may be revised by DTCP and the appellant/developer is bound to pay the balance of enhanced charges. DTCP also provides for the manner and mechanism to discharge such liability and follow-up for the outstanding dues, if any; (iv) The payment of EDC is made in the office of DTCP and acknowledged at the counter of DTCP only; (v) DTCP has the authority to invoke bank guarantee....
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....missions, perused the relevant findings given in the orders passed by the authorities below and the various judgments and materials relied upon by both the sides. On going through the facts, we note that dispute is with regard to non-deduction of tax in respect of payment of EDC charges made by the assessee to HUDA. As per the AO, HUDA is neither a local authority nor Government, thus, the payments made to it by the assessee on account of EDC charges were liable for TDS under section 194C of the Act. Since, assessee has failed to deduct the TDS; therefore, 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 beh....
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....n similar facts Hon'ble Delhi High Court have deleted levy of penalty u/s 271-C in the case of Itochu Corporation 268 ITR 172 (Del) and in the case of CIT v. Mitsui & Company Ltd. 272 ITR 545. Respectfully following the aforesaid judgments of Hon'ble Delhi High Court and the decision of the ITAT, Delhi in the case of Television Eighteen India Ltd., we allow the assessee's appeal and cancel the penalty as levied u/s 271- C." 3. Being aggrieved, the Revenue took up the matter before the High Court of Delhi against the order of the Income Tax Appellate Tribunal. The High Court rejected the appeal only on the ground that no substantial question of law arises in the matter. 4. On facts, we are convinced that there is no substantial question of law, the facts and law having properly and correctly been assessed and approached by the Commissioner of Income Tax (Appeals) as well as by the Income Tax Appellate Tribunal. Thus, we see no merits in the appeal and it is accordingly dismissed." 12. The above judgment has been followed by the Coordinate Bench of the ITAT DELHI in the case of DCIT TDS) , ACIT, TDS AND JCIT, TDS, Dehradun Versus The Joint Secretary Organizing Com....