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TMI Blog2023 (2) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was supposed/liable to pay proportionate External Development Charges (in short "EDC") as per rate, schedule, terms and conditions as set out in the agreement. During the year under consideration the Assessee paid EDC to the tune of Rs. 31,58,00,000/- to the Haryana Development Authority (in short "HUDA"). 2.2 Subsequently, a survey/ inspection was carried out in the office of HUDA and a detailed report of the survey was forwarded to the Assessing Officer (TDS). A notice u/s 271C of the Act was issued to the Assessee by the Additional Commissioner of Income-tax Range- 76, New Delhi (in short "Addl. CIT"), for imposition of penalty for non-deduction of tax on payments made on account of EDC charges. 2.3 In response the said notice, the Assessee claimed that payment qua EDC is made to the Government and therefore the same is not liable to TDS. 2.4 Such claim of the Assessee was found not acceptable by the Addl. CIT on the fowling reasons: "That payments made are in the name of Chief Administrator, HUDA. HUDA, primarily, is a new urban area development instrumentality. It undertakes large green field urban area development projects. It develops urban infrastructure. It also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is arising out of an agreement which is in the nature of service contract wherein colonizers pay EDC to HUDA is rendering a service to colonizers for which EDC is paid. EDC is charged for development work received by HUEA from private builders and the work carried out is civil work in nature for providing amenities. EDC enhance the value of property and the value additions fetch higher price from prospective customers. Thus, EDC payments made by the builders to HUDA are covered under service contract. Therefore, a private builder is liable to deduct tax at source on such payments under the provisions of Section 194C of the Act. Hence, EDC ought be subjected to TDS by payers @ 2% u/s 194C of the Act." 2.5 The Addl. CIT also referred various orders/Circulars etc., issued by HUDA in respect of EDC for various years and ultimately held that the deductor/Assessee has failed to deduct/deposit part of tax at source, as required under various applicable provisions of Chapter XVII-B of the Income-tax Act, 1961. The Assessee/deductor in view of the above discussion is liable for penalty u/s 271C of the Act. Consequently the Addl. CIT imposed the penalty to the tune of Rs. 63,16,000/- @ 2% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a debatable issue; whether there was reasonable cause/bona fide reason within the meaning of Section 273B of the Act for not deducting the TDS; and whether the penalty can be levied when the conduct of the appellant is not contumacious, held as under: " That till date the appellant before this episode (F.Y. 2013- 14) was not required to deduct tax u/s 194C of the Act with regard to payment of External Development Charges to HUDA. Even the Hon'ble CBDT issued a clarification on this issue vide its memorandum F.No. 370133/37/2017-TPL, dated 23rd December, 2017. This indicates that the issue at hand required clarification. " 3.3 The learned Commissioner also perused the judgment of the Hon'ble Punjab and Haryana High Court in the case of DLF Utilities Ltd. vs. DCIT (TDS) in CWP No. 1866/2018 (O&M) dated 29.01.2018, wherein it was held: " That prima facie the agreements are with the Governor of Haryana. This shows that the prima facie view was that payments were made to Government. Even the receiving authority i.e. HUDA has been advised by the Directorate of Town and Country Planning, Haryana, vide its letter dated 19.06.2018 that no TDS is to be deducted with regard to payment f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessee. 3.6 The Ld. Commissioner also observed as under: "The Assessee in response to issue no. F, which relates to the point of limitation as the Assessee has raised the issue that genesis of the penalty proceedings is a letter dated 21.3.2017 issued by DCIT (TDS) Panchkula, which is covered within the meaning of definition of Assessing officer a per provisions of Section 2(7A) of the Act. Since this letter dated 21.03.2017 is the genesis of penalty order dated 22.01.2018, then the penalty proceedings should have been completed uptill 30.09.2017. However, the penalty has been levied on 22.01.2018. This being the situation, the penalty is liable to be treated as time barred. The while coming to the aforesaid conclusion followed the dictum of the Hon'ble Apex Court in the case of K.M. Sharma vs. ITO 254 ITR 772 dated 11.04.2002, wherein it was held that: "Fiscal statute, more particularly a provision such as the present one regulating period of limitation must receive strict construction. The law of limitation is intended to give certainty and finality to legal proceedings and to avoid exposure to risk of litigation to litigant for indefinite period on future unforeseen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coordinate Bench in the case of Shree Vardhman Developers Pvt. Ltd. Vs. JCIT, Range-77, New Delhi [ITA no. 1957/Del/2020 dated 7.11.2022 (2022) (11) TMI 1053 - ITAT Delhi] while deciding the identical issue, has also taken into consideration the judgments passed by the coordinate benches in the case of Tulip Infratech Pvt. Ltd. vs. ACIT [ITA nos. 6734, 6735 & 6736/Del/2019]; and in the case of M/s RPS Infrastructure Ltd. vs. ACIT (supra), which also dealt with the identical issue as involved in the instant case. For ready reference, we are reproducing the concluding part of the order passed by the coordinate Bench in Shree Vardhman Developers Pvt. Ltd. Vs. JCIT (supra): "7. The Co-ordinate Benches in M/s. Perfect Constech P. Ltd. case and ITA No. 5805, 5806, 5349/Del/2019 title of the case RPS Infrastructure Ltd. vs. ACIT have held that assessee was not required to deduct tax at source at the time of payment of EDC. 7.1 As for convenience the relevant findings at para no. 5 in M/s. Perfect Constech Pvt. Ltd (supra) is reproduced; "5. We have heard the rival submissions and have also perused the material on record. It is seen that in Para 4.3.2, subparagraph (iv) of the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. A similar view was also taken by the Coordinate Bench of ITAT Delhi in case of R.PS Infrastructure Ltd. vs. ACIT in 5805, 5806 & 5349/Del/2019 vide order dated 23.07.2019. Therefore, on an identical facts and respectfully following the orders of the Co-ordinate Benches as aforesaid, we hold that the impugned penalty u/s 271C of the Act is not sustainable. The order of the Ld. CIT (A) is set aside and the penalty is directed to be deleted." 7.2 Similarly para no. 11 in the case RPS Infrastructure Ltd ( Supra) is also reproduced below; "11. We have heard the rival submissions, 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 LD.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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Appellate Tribunal. The Income Tax Appellate Tribunal vide order dated 31.03.2006 entered the following findings: "11. We have carefully considered the rival submissions. In the instant case we are not dealing with collection of tax u/s 201(1) or compensatory interest u/s 201(1 A). The case of the assessee is that these amounts have already been paid so as to end dispute with Revenue. In the present appeals we are concerned with levy of penalty u/s 271-C for which it is necessary to establish that there was contumacious conduct on the part of the assessee. We find that on 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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