TMI Blog2022 (8) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee/appellant. Receipt of subscription fee to Clubs - The nature of business activity of the assessee company is such that for procurement of business the Managing Director may have to attend the clients and entertain them occasionally at clubs. However, the four clubs to which the payments have been made are all Golf Clubs and how only their membership would benefit the company is not ascertainable. Thus, there is every possibility that the expenditure incurred on subscription or food and beverage, with these Golf Clubs, have traits of personal benefits to the Managing Director, as well. Thus, there is justification to restrict, the disallowance proportionally to Rs. 50,000/-on total disallowance of Rs. 1,90,529/-. Accordingly the ground is decided partly in favour of the assessee/appellant. - ITA No.1856/Del/2020 - - - Dated:- 29-7-2022 - Dr. B.R.R. Kumar, Accountant Member And Sh. Anubhav Sharma, Judicial Member For the Assessee : Shri Sidharth Arora, CA For the Revenue : Shri M. Baranwal, Sr. DR ORDER PER ANUBHAV SHARMA, JM: The appeal has been filed by the assessee against order dated 22.09.2020 in appeal no. 10433/2019-20 in asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejecting the contention of the appellant that the payments ofEDC made by the appellant company are not in the nature of payments specified under section 194C of the Act. 3. The Ed/- CIT(A) has erred in law and facts of the case in confirming the action of the Ed/- AO in disallowing the club expenses of Rs. 1,90,529/- incurred for promoting the business of the appellant company, alleging it to be of personal nature and brushing aside the justification and explanation given by the appellant, which is highly unjustified, uncalled for and bad in law. 4. The appellant company craves the right to leave, add, amend or modify any ground of appeal. 4. Heard and perused the record. 5. At the time of arguments, Ld. Counsel for the assessee stated at Bar, that ground no. 3 is not pressed and submitted that ground no. 1 is covered by judgments of Co-ordinate Benches. In regard to ground no. 2 it was submitted that Ld. Tax Authorities have failed to appreciate that the expenditures were made by the Managing Director of the company for promotion of the business and conducting of business meetings. It was submitted that no personal benefit was derived by the Managing Director. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. 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 ITA No.5713/Del/2019 vide order dated 11.09.2019. A similar view was also taken by the Co-ordinate Bench of IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction 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 : 2 . The matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduct the TDS. Even otherwise no intentional default is attributed to assessee and the default, if any, was on account of ambiguity which had arisen out of a direction contained in a statutory document, so no penalty can be justified u/s 271C of the Act, which is meant to address contumacious conduct. Ground is allowed in favour of assessee/appellant. 9. In regard to ground no. 2 it can be observed that as far as the subscription fee to Clubs is concerned the nature of business activity of the assessee company is such that for procurement of business the Managing Director may have to attend the clients and entertain them occasionally at clubs. However, the four clubs to which the payments have been made are all Golf Clubs and how only their membership would benefit the company is not ascertainable. Thus, there is every possibility that the expenditure incurred on subscription or food and beverage, with these Golf Clubs, have traits of personal benefits to the Managing Director, as well. Thus, there is justification to restrict, the disallowance proportionally to Rs. 50,000/-on total disallowance of Rs. 1,90,529/-. Accordingly the ground is decided partly in favour of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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