TMI Blog2022 (7) TMI 388X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Revenue : Sh. Parikshit Singh, Sr. DR ORDER PER ANUBHAV SHARMA, JM: The appeal has been filed by the assessee against order dated 28.06.2019 in appeal no. 59/2018-19/ 278/17-18 in assessment year 2014- 15 passed by Commissioner of Income Tax (Appeals)-31, New Delhi (hereinafter referred to as the First Appellate Authority in short Ld. F.A.A. ) in regard to the appeal before it arising out of assessment order dated 24.01.2018 u/s 271C of the Income Tax Act, 1961 passed by ACIT, New Delhi (hereinafter referred to as the Assessing Officer AO ). 2. The facts in brief are that a survey u/s 133A was carried out at the business/office premises of the Haryana Urban Development Authority (HUDA) by the DCIT (TDS), Panchkula who forwarded the details and findings of the survey. On detailed examination of the survey report and verification of the facts of the case of assessee, the Ld. AO noticed that TDS was not made on payment of External Development Charges (EDC) and accordingly penalty u/s 271C was initiated. In response, the assessee filed stating that provisions of section 194C. were not applicable on payment, of EDC because the payment was made t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h EDC charges were fixed. Finally, the Ld. AO was of the view the assessee has paid EDC for the works carried out by HUDA and hence the same was liable for TDS u/s 194C Ld. AO also noticed that certain tax deductor sought clarification regarding applicability of TDS provisions on EDC charges paid to HUDA and the CBDT vide OI in F.No. 370133/37/2017-TFL dated 23/12/2017 has clarified that when EDC is paid to Government of Haryana, the same would be exempt from TDS provisions. It was further clarified by the CBDT that in the instant case, it appears that the developer has made the payment in the nature of EDC not to the Government but to the HUDA which is a Development Authority of State Government of Haryana and is a taxable entity under the Income Tax Act, 1961 and hence TDS provisions would be applicable on EDC payable by the developer to HUDA. 2.1 Accordingly after referring to the provisions of section 271C and the decisions of the various authorities particularly the decision of Hon'ble High Court in the case of CIT(TDS) vs M/s IKEA Trading Hong Kong Ltd. in 179 Taxman 309 (Del), the Ld. AO has held that there is no time limit for initiation of penalty, and for impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, vitiated. 4. Heard and perused the record. 5. On behalf of the assessee the Ld Sr. Advocate submitted that the payments made to HUDA were only for the purpose of facilitating the payments due on account of EDC charges towards Town and Country Planning, Government of Haryana. It was submitted that when the payments are made to the Government or local authority, no tax is required to be deducted. Ld. Sr. Counsel specially relied a clarification dated 19.06.2018 issued by Town and Country Planning, Government of Haryana available on page no. 1 of the paper book to impress that HUDA is merely executing agency and there was specific direction of the State Government of Haryana, Directorate of Town and Country Planning, Haryana directing that no TDS is to be deducted out of payment made to Government for EDC. He also referred to judgment of ITAT Delhi Bench in ITA no. 6907/Del/2019 M/s. Perfect Constech (P) Ltd. vs. Additional Commissioner of Income Tax ITA No. 5805, 5806, 5349/Del/2019 RPS Infrastructure Ltd. vs. ACIT to contend that in regard to similar matter the co-ordinate Bench has held that there was no default of non-deduction of TDS in regard to payments ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and finally handing it over for a price. It is also not in dispute that EDC is fixed by HUDA from time to time. However, the fact of the matter remains that payment has been made to HUDA through DTCP which is a Government Department and the same is not in pursuance to any contract between the assessee and HUDA. Thus, the payment of EDC is not for carrying out any specific work to be done by HUDA for and on behalf of the assessee but rather DTCP which is a Government Department which levies these charges for carrying out external development and engages the services of HUDA for execution of the work. Therefore, it is our considered view that the assessee was not required to deduct tax at source at the time of payment of EDC as the same was not out of any statutory or contractual liability towards HUDA and, therefore, the impugned penalty was not leviable. We note that similar view has been taken by the Co-ordinate Benches of ITAT Delhi in the cases of Santur Infrastructure Pvt. Ltd. vs. ACIT in ITA 6844/Del/2019 vide order dated 18.12.2019, Sarv Estate Pvt. Ltd. vs. JCIT in ITA No.5337 5338/Del/2019 vide order dated 13.09.2019 and Shiv Sai Infrastructure (Pvt.) Ltd. vs. ACIT in I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as regard the deduction of tax on these payments. We are of the view that the assesse was under a bonafide belief that no tax is required to be deducted at source on such payments, firstly, for the reason that agreement was between DTCP, who is Governmental authority and licence was granted by the Government and EDC charges was directed to be paid to HUDA, therefore, this could led to reasonable cause that TDS was not required to be deducted; Secondly, DTCP had issued a clarification dated 29.06.2018 to the effect that no TDS was/is required to be deducted in respect of payments of EDC and this clarification issued by DTCP, covers both past and future as the words used are was/is. This shows that Governmental authority itself has demanded not to deduct TDS. In case even if tax was required to be deducted on such payment but not deducted under a bonafide belief then no penalty shall be leviable under section 271C of the Act as there was no contumacious conduct by the assessee. Our view is fully supported from the judgment of the Hon ble Supreme Court in the case of Commissioner of income tax vs. Bank of Nova Scotia, 380 ITR 550, wherein the Hon ble Court has held as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X
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