TMI Blog2022 (11) TMI 1439X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of its own obligations and duties towards the public and thus, the contract cannot be said to be a work/service contract and thus, on both accounts, the provisions of section 194C are not attracted. Nothing has been brought on record or to our notice during the course of hearing that the aforesaid findings of the Coordinate Benches have been disturbed by an order of a Higher Court and therefore, taking the same into consideration and following the principle of consistency, we are of the considered view that the provisions of section 194C are not attracted on payment of EDC charges to GMADA and thus, the demand raised u/s 201(1) read with Section 201(1A) of the Act are hereby set aside. Decided in favour of assessee. - Smt. Diva Singh, Judicial Member And Shri Vikram Singh Yadav, Accountant Member For the Assessee : Sh. Tarandeep Singh, Advocate and Sh. A.S. Aneja, Advocate. For the Revenue : Smt. Priyanka Dhar, Sr. DR. ORDER PER VIKRAM SINGH YADAV, ACCOUNTANT MEMBER: These are three appeals filed by the assessee against the orders of the CIT(A) NFAC, for different assessment years as per following details:- S. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve to add, amend, modify or alter the grounds of appeal. 3. Briefly the facts of the case are that the assessee firm is in the business of land and real estate development for which it has sought and got approval from Punjab Urban Planning and Development Authority and for the purposes, the assessee has paid External Development Charges (EDC) of Rs. 2,91,33,000/- to Greater Mohali Area Development Authority (GMADA). During the course of TDS proceedings before the ITO(TDS), Chandigarh, a show cause was issued to the assessee to furnish the details of the payments made to GMADA and compliance with the TDS provisions u/s 194C of the Income Tax Act, 1961 (hereinafter called 'the Act'). 4. In response to the show cause, the assessee submitted that it is not required to deduct tax at source u/s 194C of the Act on payment to GMADA and for the purposes, reference was drawn to the letter received from GMADA wherein it was stated that the provisions of section 194C of the Act are not applicable to EDC payments and, hence, keeping in view the contents of the said letter, TDS was not deducted on payment of EDC charges. The reply so filed by the assessee was considered but not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be work / service contract, hence, the provisions of section 194C will be attracted in this case. 6.2 Therefore as such the GMADA being a development authority is kin to the HUDA, which is a development authority of State Government of Haryana taxable entity under the Income-tax Act, and TDS provisions are applicable on EDC payable by the developer to HUDA, therefore I hold that EDC charges paid to GMADA is also liable to deduction of Tax by the developer. Thus, the Assessing Officer (TDS) has rightly held as the appellant in assessee in default under the provision of section 201(1)/201 (1A) of the Act. Therefore, the grounds of appeal raised by the appellant is hereby dismissed. 7. It was submitted that in the context of ground Nos. 1 and ground No. 3.2 taken in assessee s appeal, the provisions of section 194C of the Act are not applicable in the instant case since there is no contract executed by the assessee with GMADA for payment of EDC and secondly even otherwise there is no work / service contract. In this regard, our reference was drawn to the agreement executed by the assessee dated 1.6.2006 with the State Govt. It was submitted that the background of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as further submitted that the provisions of section 194C are different and cannot be equated with the provisions of section 195 of the Act wherein the payer can examine whether the payments are chargeable to tax in the hands of the nonresident payee or not. It was submitted that no such examination can be done by the payer within the ambit of section 194C and in support reliance was placed on the decision of Hon'ble Supreme Court in the case of PILCOM Vs. CIT reported in 425 ITR 312 (SC) and a copy of the CBDT Circular No. 12 of 2022 dated 16.6.2022. 11. It was submitted that the arguments taken by the Ld. Senior DR are in the context of whether the EDC charges are in the nature of income in the hands of GMADA or not and the said issue has at all no relevance as to adjudication of whether the provisions of section 194C are applicable or not and as far as the issue of whether EDC charges is in the nature of income saying can be decided while adjudication of mater in the hands of GMADA. It was accordingly submitted that the orders so passed by the Ld. CIT(A) NFAC be set aside and the necessarily relief be provided to the assessee. 12. Per contra, the Ld. Sr. DR relied on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the state government and that it is not an income of the GMADA and that the GMADA has shown this amount as liability in its account, in our view, any finding on this issue at this stage cannot be conclusively arrived in the case of a third party (assessee before us) as the GMADA is not a party to the present litigation/appeals. Whether the EDC charges received by the GMADA would constitute income at the hands of the GMADA is an important issue which has been strongly contested by the GMADA and even by other such authorities in other appeals, but, no specific or conclusive findings, arrived at in any of such cases either by the Tribunal or any higher authority, has been brought into our knowledge. Hence, at this stage in this case of the assessee due to lack of the adequate facts and evidences and at the back of GMADA, neither it is appropriate nor possible to give any conclusive finding as to whether the receipts of the GMADA on account of EDC charges from various developers would constitute taxable income of GMADA or not? However, after hearing the Ld. representatives of the parties at length, we are of the view that these payments made by the assessee would not attr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany to enter into the Agreement with the Governor of Punjab hereinafter contained. Now this indenture witnessed that it hereby agreed end declared as follows: - (i) The Company shall make an investment of Rs. 952 crore including fixed capital investment of at least Rs. 100 crore at one location, as defined by the Department of Industries under Industrial Policy 2003, by setting up of information Technology Parks projects in 125 acre of land at Mohali with an investment of about Rs. 952 crore within a period of 3 years, effective from 29.03.2006. (ii) The said project shall have to be fully implemented and brought into commercial production within the said stipulated period (iii) The company shall develop the Industrial Estate first and housing and commercial projects subsequently. Before developing or disposing off the residential and commercial pockets in any manner, the company shall not only first develop industrial pockets but also dispose off atleast 50% of the industrial plots to industrial units which will be set up in the industrial pocket and the entire project shall come up with proposed investment level in stipulated period. (iv) The project of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one unit at single geographical location and shall be developed in contiguity. However, public service which already exists such as road, canal, park etc. shall not be construed to break the unity contiguity of the park. i. Benefits to industrial parks under industrial policy, if provided by the Government shall be withdrawn by State Government in case the park is not put up / developed in accordance with the sanctioned plan within the prescribed time period. (iv) The Government of Punjab has agreed to provide following reliefs and concessions to the company for implementation of aforesaid project:- a) As per the Industrial Policy 2003 exemption will be granted on 100% stamp duty and registration lee on sale / transfer of built up space of the units or land inside the project area. Such exemption shall extend to the project area upto first sale of developed area / plot / built up space to any party by them or to any of its affiliate. There shall be no stamp duly on lease instrument of units located in the project area. Such exemption shall remain operative till the completion of the entire project as per the agreement. b) State Government shall acquire la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k) 50% exemption from electricity duty at current rate for 5 years shall be allowed from the date of release of connection by PSEB. This concession shall, however, be admissible only to such Industrial units which are set up within the area earmarked for industry and start production within 5 years from the date of approval of Industrial Park i.e. 27.1.2006. l) The State Government shall allow the company to connect the project area to the State Transport Network. The State Government shall also allow them to operate their own public transport system within the project area and also for connecting the project area to the main unban center nearest to the project area subject to the fulfillment of required terms and conditions in this regard. m) The State Government shall not allow hazardous industry as defined under Factories Act within 500 metres of the project area and industrial plots within the industrial part shall also not have any hazardous industry. n) Pollution Control Board shall grant NOC and consent to operate to the Green Category Industry to be located in the Industrial Park in 30 days on fulfillment of all the required terms and conditions. o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 4.1.2018 not only from the assessee but also the GMADA officials were summoned with record to reply as to whether any agreement was executed between the assessee and GMADA; whereupon, it was confirmed by them to the Tribunal that no such separate agreement was executed between the GMADA and the assessee. Under the circumstances, it cannot be said that the assessee paid the EDC charges to GMADA out of any contractual liability with the GMADA. GMADA has been authorized to collect the EDC charges as per the policy decision of the Govt. and not out of the free consent of the parties to the contract. Under such circumstances, the GMADA being not a party to the contract, the aforesaid contract can not be enforced against the assessee by the GMADA in its own rights. 12. We have come across a decision of the Hon ble Punjab Haryana High Court dated 16 December, 2016 in the own cases of the assessee bearing CWP No. 5213 of 2015 (O M) CWP No. 5620 of 2015 (O M) styled as M/s Sukhm Infrastructures Pvt. Ltd. vs. State of Punjab Ors. wherein the assessee had challenged the very action of the Govt. in levying the EDC charges on the ground that as per clause (iv) (j) of the agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed between the assessee and the Governor of Punjab on behalf of the State Government. A perusal of the whole agreement, as reproduced above, shows that the clauses (i) to (iii) along with their sub clauses relate to the obligation of the assessee to invest and develop the stipulated amount and develop the project as per policy and guidelines of the state Government. Clause (iv) further provides for the relief and concessions for which the government of Punjab agreed to provide to the assessee as per its policy of development which included exemption of 100% of stamp duty and registration fee etc., acquisition of land to the extent of 10% of the total area of project by the state government if requested by the assessee, change of land user free of cost, permission to dig tube wells, permission to construct high rise buildings up to to 45 meters etc., concession in work contract tax on construction material, FAR allowability of 2 for industrial and commercial purposes, exemption of the industrial park from PAPR Act, 50% exemption form electricity duty for five years, permission to the company / assessee to connect the project area to the state transport network and to operate its own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out by the Govt./local authority out of its own responsibility. Merely because the developers are required to deposit EDC on account of proportionate cost of infrastructure development, would not constitute the agreement a work contract. The External Development so as to connect the residential areas or industrial project with the main roads, system, water supply, sewerage / drainage, electricity supply or any other works, so required are to be carried out by the Govt./local authority out of its own responsibility and even if the contactor does not pay the EDC charges that does not absolve the government from carrying out the development works relating to the connectivity of the project. The government has also issued notifications from time to time so as to give concessions to the developer / promoters regarding External Development charges and also to formulate a policy regarding utilization of the EDC charges not only to provide infrastructure along with the approved project but also for the overall development of the area in general. 16. The State government vide its notification No. 17/17/20015HG2/P.F/1817 dated 22.6.2010, has prescribed the rates, time and manner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y system for providing connectivity to project. No connection charges if any will be charged from the developer for providing water connectivity, however, the user charges to supply water are not included in EDC and will be charged by the authority according to the policy applicable. 3. It may also include augmentation of major sewer, if required to provide sewerage connectivity to the project, grid sewer or sewer lines for out flow of treated water from the project to the main STP of the area if required. 1. Where outfall sewer is laid by the development authority within sector grid, provision shall be made for the treated sewer to shall fall into that sewer, However for stand alone projects where no major sewer lines are laid or there is no provision to lay such lines in near future by the Local Government /special Development Authority. The promoter shall construct STP on its own cost. The licensee will also provide for the cost of outfall of the treated water into a proper outflow drain etc., as the case may be at its own cost. This condition should be mentioned in the license or exemption to Mega Projects by the Competent Authority. No connection charges if any wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernal development of the infrastructure according to this policy for the project. However, in case the exact detail of all the development work is not possible to be mentioned at the time of license, it may be decided as per the requirements of the project future needs. So that the applicant/project owner is clear on what kind of infrastructure will be provided by the Authority. 2. For the fair and optimum utilization of EDC, every local Planning and Development Authority or Local Authority should prepare an Action plan for up gradation of existing infrastructure, provision of new infrastructure and city level facilities in the periphery of approved projects and within the local planning area limits. 3. EDC collected from all the projects will not only be used for up gradation of infrastructure as explained above but for the overall development of the local planning area as per the policy. Such action program should be prepared in such a manner that the first priority should be given for the provision of infrastructure around approved projects and other city level infrastructure should be considered as second priority. The action program should be approved by the conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Member 9. Chief Engineer/SE(PSPCL) Member The committee for the other Towns will be as follow:- 1. Regional Deputy Director(LG) Chairman 2. E.O.M.C.(Concerned) Convener 3. Rep. of C.T.P. Local Government Member 4. XEN (PH) W/S Sanitation Deptt., Pb. Member 5. XEN, PWSS. Board Member 6. District Town Planner (concerned) Member 7. Superintendent Engineer(PSPCL) Member 8. Any other Special Invitee Member Maintenance of Separate Account. Maintenance of Separate Account. The separate account of amount received under the head of EDC should be maintained by every local planning and development authority or local authority. The expenditure incurred on various development works executed out of this account s ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
