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TMI Blog2024 (2) TMI 756X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Utkarsh Kumar Gupta, Mr. Tarun Chanana & Mr. Sumit Lalchandani, Advs. Mr. Kamal Kant Jha, Sr. PC with Mr. Avinash Singh, Adv. for UOI. Mr. Tapas Ram Mishra, Adv. Mr. Kapil Goel & Mr. Sandeep Goel, Advs. For the Respondents Through: Mr. Aseem Chawla, SSC with Ms. Pratishtha Chaudhary, Mr. Aditya Gupta & Mr. Navin Rohila, Advs. Mr. Zoheb Hossain, SSC with Mr. Sanjeev Menon, JSC., Mr. Sanjay Kumar, Ms. Easha & Ms. Hemlata Rawat, Advs. Ms. Bakshi Vinita, SPC for R-1/ UOI. Mr. Puneet Rai, Mr. Ashvini, Kumar, Mr. Rishabh Nangia, Advs. for Income Tax. Ms. Shivang Jain & Ms. Swati Tiwari, Advs. for R-2. Mr. Asheesh Jain, CGSC with Mr. Gaurav Jain, Adv. for R-1. Mr. Ravi Prakash, CGSC with Ms. Usha Jamnal, Adv. for Resp./UOI. Mr. Sunil Agarwal, Sr. SC with Mr. Shivansh Pandya, Mr. Utkarsh Tiwari, Advs., Mr. Sumit Batra, Mr. Manish Khurana, Ms. Priyanka Jindal, Advs. Ms. Akanksha Kaul, Ms. Versha Singh, Advs. for UOI. Mr. Vipul Agrawal, SSC with Mr. Gibran Naushad & Ms. Sakshi Shairwal, Adv. for R- 1 & R-3. Mr. Gigi C. George & Mr. Dheeraj Singh, Advs. for Resp./UOI. Mr. Bhagwan Swaroop Shukla, CGSC with Mr. Vinay Shukla & Mr. Sharvan Kumar Shukla, Advs. for Resp./UOI. Mr. Kunal Sharma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atch of writ petitions assail the action initiated by the respondents predicated upon a purported failure on the part of the writ petitioners to deduct tax on payments made to the Haryana Shahari Vikas Pradhikaran [HSVP] (earlier known as the Haryana Urban Development Authority, for short "HUDA") under Section 194C of the Income Tax Act, 1961 [The Act]. The respondents assert that the External Development Charges [EDC] which were paid by the writ petitioners to HSVP albeit on the directions of the Director General, Department of Town and Country Planning [DTCP], Haryana, a department functioning under the Government of Haryana, would clearly fall within the ambit of Section 194C of the Act and as a consequence of default, the petitioners are liable to be proceeded under Section 201 as also to answer why penalty be not levied in terms of Section 271C of the Act. 2. We at the outset deem it appropriate to note and observe that we have heard learned counsels for respective sides solely on the question of whether the payment of EDC would fall within the ambit of Section 194C of the Act and whether the writ petitioners can be held liable to have deducted tax at source in terms of that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the eyes of law; B. Issuance of a writ, order and/or directions in the nature of certiorari, prohibition, mandamus or any other appropriate writ, order or direction staying the operation of the impugned show cause notice dated 12.03.2021 issued by the Respondent. C. Issuance of a writ, order and/or directions in the nature of certiorari, prohibition, mandamus or any other appropriate writ, order or direction staying all consequential proceedings, that may be initiated pursuant to the impugned notice under challenge issued under section 201(1)/201(1A) by the Respondent in the case of Petitioner for FY 2013-14. D. Grant an ad-interim ex-parte stay in terms of prayers (a), (b) and (c) above; E. Issuance of a writ in the nature of mandamus or any other writ, order or direction, as deemed fit and proper in the facts and circumstances of the present case. It is further prayed that during the pendency of the present writ petition, the further proceeding before the Respondent may kindly be stayed in the interest of justice and equity." 6. Natureville Promoters is stated to be engaged in the business of construction, promotion and development of land and real estate. It was gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue (Central Board of Direct Taxes) TPL Division ******* New Delhi, 23rd December, 2017 OFFICE MEMORANDUM Sub: Recommendations for relief from applicability of TDS provisions on External Development Charges (EDC) payable to Directorate of Town & Country Planning (DTCP) State Government of Haryana-regarding. Kindly refer to your letter dated 21st November, 2017 addressed to the Finance Secretary, along with the enclosures on the captioned subject. 2. In this regard it is submitted that provisions of non-deduction of tax under Section 196 of the Income-tax Act, 1961, is applicable to the Government and to the other authorities as mentioned under the Section. Accordingly, External Development Charges (EDC) if paid to Government of Haryana would be exempt from TDS provisions. However, in the instant case, it appears that the developer has made the payment in the nature of External Development Charges (EDC) not to the Government but to HUDA [Haryana Urban Development Authority) which is a development authority of State Government of Haryana and is a taxable entity under the income-tax Act, 1961. Hence, TDS provisions would be applicable on EDC payable by the developer to HUD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been granted under Act No.8 of 1975 and the persons to whom permission for change of Land use have been granted under Act No. 41 of 1963, in the shape of bank draft drawn in favour of CA, HSVP and sent the same to CA, HSVP. 4. As the receipt on account of EDC was not sufficient to carry out the all development works under EDC for the urban estate as per approved development plans, therefore, to meet out the shortfall, a new scheme Swaran Jayanti Haryana Urban Infrastructure Development Scheme (renamed as Mangal Nagar Vikas Yojana was approved by the State Govt. and appropriate budget provision for execution of development works has been made in the said scheme. From Financial Year 2017-18, the receipts on account of EDC is being deposited in the consolidated fund of the State under Major Receipt Head 0217 receipts and all license / CLU holders have also been directed vide order dated 12.05.2017 that payment of EDC in respect of license/ CLU granted by TCP Deptt. May be made online through e-payment gateway or in shape of demand drafts favouring Director, Town & Country Planning, Haryana. Required funds for execution of development works are released to HSVP after granting the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the various writ petitions forming part of this batch. It is this interim order which has continued on all the writ petitions forming part of this batch. 12. The sequence of events insofar as RPS Infrastructure is concerned follow a similar chronology. A notice under Section 201 and Section 201(1A) of the Act came to be issued against that writ petitioner on 16 December 2020. The charge in that notice was identical to that laid against Natureville Promoters, namely, the liability to deduct tax on EDC payments made to HSVP. 13. Responding to the aforesaid notice, RSP Infrastructure took the position that TDS was not liable to be deducted and prayed for the proceedings being dropped. Ultimately and by an order dated 12 March 2021, the Income Tax Department issued a final notice holding that HSVP was a taxable entity and consequently there was an evident failure on the part of RSP Infrastructure to deduct tax in accordance with the provisions made in Chapter XVII-B of the Act. 14. It becomes pertinent to note that the present litigation stems from the stand taken by the Income Tax Department that tax was liable to be deducted by virtue of the provisions made in Section 194C. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as subject to tax deduction at source. The Revenue in its counter-affidavit has sought to elaborate on the aforesaid reasons by contending that the external development charges payment is akin to rent. However, we are not impressed with this submission. Firstly, such an understanding is not borne out from the recorded reasons and, secondly, the Department cannot by way of a counter-affidavit supplement the recorded reasons by introducing such legal submissions. The source of the power in this case, as sought to be argued, is not discernible. 27. If the Assessing Officer harboured a reason to believe that the payment of external development charges requires deduction of tax at source under the provisions of the Income-tax Act, it ought to have disclosed the basis for such a view. The entire reasoning disclosed in the recorded reasons, for initiating the proceedings is completely silent on this aspect. It merely states that "Since, external development charges has income character, therefore it should have been subjected to tax deducted at source by assessee". The Assessing Officer has further proceeded to observe since the assessee is a development authority of State Government of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18) 406 ITR 209 (SC), the relevant portion whereof is reproduced herein below (page 218 of 406 ITR): "The definition of rent as contained in the Explanation is a very wide definition. The Explanation states that 'rent' means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land. The High Court has read the relevant clauses of the lease deed and has rightly come to the conclusion that payment which is to be made as annual rent is rent within the meaning of section 194-1, we do not find any infirmity in the aforesaid conclusion of the High Court. The High Court has rightly held that tax deducted at source shall be deducted on the payment of the lease rent to the Greater Noida as per section 194-1. Reliance on circular dated January 30, 1995 has been placed by the Noida/Greater Noida. A perusal of the circular dated January 30, 1995 indicate that the query which has been answered in the above circular is 'Whether requirement of deduction of Income-tax at source under section 194-1 applies in case of payment by way of rent to the Government, statutory authorities referred to in section 10(20A) and local ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to the views expressed by different benches of the Income Tax Appellate Tribunal [ITAT] while dealing with penalty proceedings. However, insofar as RPS Infrastructure is concerned, it appears to have been placed on notice with respect to a levy of penalty under Section 271C for Financial Years [FY] 2013-14, 2014-15 and 2015-16. While dealing with the aforesaid issue the Additional Commissioner of Income Tax in terms of an order made on 15 January 2018 took the following stand:- "4.1. HUDA was constituted under Haryana Urban Development Authority Act, 1977. The functions of HUDA are: a. To promote and secure development of urban areas with the power to acquire. sell and dispose off property, both movable and immovable. b. To acquire develop and dispose off land for residential. Industrial. commercial and institutional purposes. c. To make available developed land to Haryana Housing board and other bodies for providing houses to Economically Weaker Sections of the society, and d. To undertake building works and other engineering works. 4.1.1 HUDA is developer of urban areas. It develops urban infrastructure. It is doing business of development of large real estat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charging of EDC by HUDA- 4.2.1 External Development Work (hereafter EDW) is defined in the Haryana Development and Regulation of Urban Area Act. 1975 (hereafter HDRUA). Definition of EDW is given in section 2(g) of this Act It is as follows: 'External Development works include water supply. sewerage, drains. necessary provisions of treatment and disposal of sewage, sullage and storm water, roads, electrical works. solid waste management and disposal slaughter houses, colleges, hospitals, stadium/sports complex. fire stations grid sub-stations etc and any other work which the directory may specify to the executed in the periphery of or outside colony/area for the benefit of the colony/area' 4.2.2 HUDA charges EDC as per section 3(3)(a)(ii) of HDRUA, which reads as under: 'To pay proportionate development charges if the external development works as defined in clause (g) of Section 2 are to be carried out by the Government or any other local authority The proportion in which and the time within which such payment is to be made, shall be determined by the Director' 4.2.3 HUDA charges EDC for EDWs by issuing letters/circulars which are documented from time to time: Sr.No. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harges (EDC) is made as under: A) Charges for Commercial area =Rs. X Lakhs (@ Rs. Y lakhs/Acre) B) Total cost of Development = Rs. X Lakhs C) 25% bank guarantee required = Rs. 0.25 X Lakhs iv) The demand drafts of EDC amounts are drawn in favour of the Chief Administrator, HUDA though routed through the Director General Town and Country Planning, Sector 18, Chandigarh. This state of affairs as for as the EDC is concerned is stated by HUDA in the 'Notes to The Accounts Forming Part of The Balance Sheet As on 31.03.2016' filed with the return of income. It reads as under: "2(i) Other liabilities also include external developmental charges received through DGTCP Department Haryana for execution of various EDC works. The expenditure against which have been booked in Development Work in Progress. Enhancement compensation and Land cost. (iv) This establish the fact that the land is owned and developed by HUDA which receives EDC as return/income on the money invested in the EDWs. There is specific quid pro quo for EDC. EDC would never be returnable and would never be returned because it is a consideration paid by EDW users. 4.3.3 EDC is worked out for a particular urban esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the word 'service* is work {Associate Cement Co. Ltd. Vs. CIT, 120 ITR 444 (Patna)]. The Circular at para (v) states that the *service contract would be covered by the provisions of this section since service means doing any work. It further states at para (i) that 'the provisions of section 194C shall apply to all types of contracts for carrying out any work including transport contracts, service contracts." The relevant portion of Circular No. 681 of CBDT dated 8/3/94 is as under: " ..... ....... 3. Section 194C was introduced with effect from 1st April, 1972. Shortly after its introduction, the Board Issued Circulars No. 86, dated 29th May, 1972 (F.No. 275/9/72-ITJ), No. 93, dated 26 September, 1972 (F.No. 275/100/72-ITJ), and No. 108, dated 20 March, 1973 (F.No. 131(9)/73- TPL), in this regard. 4. Some of the issues raised in the above-mentioned circulars need to be reviewed in the light of the judgment dated March 23, 1993, delivered by the Supreme Court of India in Civil Appeal No. 2860(NT) of 1979* Associated Cement Co. Ltd. Vs. CIT 1993] 201 ITR 435. 5. The Supreme Court has held that " ... there is nothing in the sub-.section which could make us hold that the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... executed in the periphery of or outside colony/area for the benefit of the colony/area. 4.6 EDC is worked out for a particular urban estate on the basis of the cost of external development services such as Master Water Supply, Master Sewage, Master Roads. Master Storm Water Drainage Master Horticulture. Master Community building and other services is determined on the basis of a price index of a particular year in respect of a particular urban estate. The cost is determined by the Engineering Wing of HUDA keeping in view the requirement of development plan of an urban estate. EDC is charged from the sectors floated by HUDA or the license granted by the Town & Country Planning Department to the developers. EDC is charged from colonizers for using the developed urban infrastructure in urban estates wherein they are allowed to establish their commercial set ups. The EDC 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 HUOA from private builders and the work carried out is civil work in nature for providing amenities. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 3AC of the HDRUA which are reproduced hereinbelow:- "3. Application for licence- [(1) Any owner desiring to convert his land into a colony shall, unless exempted under section 9, make an application to the Director, for the grant of license to develop a colony in the prescribed form and pay for it such fee and conversion charges as may be prescribed: [xxx]; Provided that if the conversion charges have already been paid under the provisions of the Punjab Scheduled Roads and Controlled Areas Restriction of Unregulated Development Act, 1963 (41 of 1963), no such charges shall be payable under this section [Provided further that owner may enter into an agreement jointly or severally with a developer for pooling of land for grant of licence [Provided further that in case of migration of licence, the colonizer shall pay the outstanding renewal fee with interest accrued upto the date of payment. However, the external development charges including interest paid thereon for the area under migration shall be adjusted in the licence and the colonizer shall not be liable to deposit the unpaid interest amount on external development charges and infrastructure development charges of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or cyber park purposes] as certified by the director and has undertaken- (i) to enter into an agreement in the prescribed form for carrying out and completion of development works in accordance with licence granted; (ii) to pay proportionate development charges if the external development works as defined in clause (g) of section 2 are to be carried out by the Government or any other local authority. The proportion in which and the time within which, such payment is to be made, shall be determined by the Director. (iii) the responsibility for the maintenance and upkeep of all roads, open spaces, public park and public health services for a period of five years from the date of issue of the completion certificate unless earlier relieved of this responsibility and thereupon to transfer all such roads, open spaces, public parks and public health services free of cost to the Government or the local authority, as the case may be; (iv) to construct at his own cost, or get constructed by any other institution or individual at its cost, schools, hospitals, community centres and other community buildings on the lands set apart for this purpose, in a period as may be specified, and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny and to carry out all directions issued by him for ensuring due compliance of the execution of the layout and development works in accordance with the licence granted; [(vi) to fulfill such terms and conditions as may be specified by the Director at the time of grant of licence through bilateral agreement as may be prescribed:] Provided that the Director, having regard to the amenities which exist or are proposed to be provided in the locality, is of the opinion that it is not necessary or possible to provide one or more such amenities, may exempt the licensee from providing such amenities either wholly or in part [Provided further that the applicant shall have an option to mortgage a part of the land for which licence has been granted or being granted in lieu of submission of bank guarantee against cost of internal development works and external development works.] (b) refuse to grant a licence, by means of speaking order, after affording the applicant an opportunity of being heard. (4) The license so granted shall be valid for a period of 44 [five years], and will be renewable from time to time for a period of [two years], on payment of prescribed fee: [Provided that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or this purpose only. The date of first inviting applications for sale of plots in any colony by it shall be deemed to be the date of granting of license under this Act for the purpose of deposit of {infrastructure development charges}. (3) The {infrastructure development charges} shall be deposited by the colonizer with such officer or person as may be appointed by the government in this behalf. (4) The colonizer shall in turn be entitled to pass on the {infrastructure development charges} paid by him to the plot holder. (5) The amount of {infrastructure development charges} if not paid within the prescribed period shall be recoverable as arrears of land revenue. [(6) The amount of infrastructure development charges so deposited by the colonizer shall constitute a fund called the Fund, for stimulating socio-economic growth and development of major infrastructure projects for the benefit of the State of Haryana (hereinafter referred to as the Fund)]. [(7) The Fund shall be collected and managed by the Director and passed on for the purpose of its further utilisation to the Board to be constituted by the Government for this purpose.] (8) The amount of infrastructure deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernally or through external consultants or service providers engaged for the purpose, all necessary documents including the bid or tender documents, draft contracts including the various contractual arrangements and incentives to be offered by the Government; (iii) assist public infrastructure agencies and concessionaires in obtaining statutory and other approvals; (iv) recommend the grant of concessions to a public infrastructure agency in accordance with the provisions of this Act, the rules and the bye-laws made there under; (v) assist in determining the level and structuring of investments of the Government and public bodies into infrastructure projects with private participation including holding the investment or part thereof; (vi) create a special purpose vehicle for implementation of any infrastructure project in co-ordination with the Government or public infrastructure agencies; and (vii) administer the Fund and projects under this Act. (3) The Board shall not play any role in the infrastructure projects undertaken by the Government exclusively through its budgetary provisions. (4) In order to carry out its functions consistent with the provisions of this Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ense for development which may have been granted vests solely with the Director as would be evident from Section 8 of the Act. That provision reads thus:- "8. Cancellation of license.- (1) A license granted under this Act, shall be liable to be cancelled by the Director if the colonizer contravenes any of the conditions of the license or the provisions of the Act or the rules made thereunder; provided that before such cancellation the coloniser shall be given an opportunity of being heard. [(2) After cancellation of the licence, the Director may himself, carry out or cause to be carried out, the development works in the colony and recover such charges as the Director may have to incur on the said development works from the colonizer and the plot-holders in the manner prescribed as arrears of land revenue. (3) The liability of the colonizer for payment of such charges shall not exceed the amount the colonizer has actually recovered from the plot-holders less the amount actually spent on such developments works, and that of the plot-holders shall not exceed the amount which they would have to pay to the colonizer towards the expenses of the said development works under the term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - section to stop further construction and to appear and show cause why he should not be ordered to restore to its original state or to bring it in conformity with the provisions of this Act or the rules framed thereunder, as the case may be, any building or land in respect of which a contravention such as is described in the said subsection has been committed and if such person fails to show cause to the satisfaction of the Director or such authorized officer within a period of seven days, the Director or such authorized officer may pass an order requiring him to restore such land or building to its original state or to bring it in conformity with the provisions of this Act or the rules framed there-under, as the case may be, within a further period of seven day. (3) If the order made under sub-section (2) is not carried out within a specified period, the Director, or any other officer authorized in writing by him in this behalf may, himself at the expiry of the specified period, take such measures, as may appear necessary to give effect to the order and the cost of such measure shall, if effect to the order and the cost of such measure shall, if not paid on demand being made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t least 30 metres of the said land and existing means of access to it from existing roads; (v) layout plan of the colony on a scale of 1 centimetre to 10 metres showing the existing and proposed means of access to the colony the width of streets, sizes and types of plots, sites reserved for open spaces, community buildings and schools with area under each and proposed building lines on the front and sides of plots; (vi) an explanatory note explaining the salient feature of the colony, in particular the sources of wholesome water supply arrangement and site for disposal and treatment of storm and sullage water; (vii) plans showing the cross-sections of the proposed roads indicating in particular the width of the proposed carriage ways cycle tracks and footpaths, green verges, position of electric poles and of any other works connected with such roads; (viii) plans as required under sub-clause (vii) indicating, in addition the position of sewers, storm water channels, water supply and any other public health services; (ix) detailed specifications and designs of road works shown under sub-clause (vii) and estimated costs thereof; (x) detailed specifications and designs of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the scrutiny fee under the New Integrated Licensing Policy, 2016 shall be applicable on per square metre basis for the permissible covered area.] (3) If the applicant fails to furnish the requisite fee as provided in sub-rule (2) above, the Director shall reject the application. 9. Rejection of application [Section 3].- The Director may after making inquiry as mentioned in sub-rule(1) of rule 8 and after giving reasonable opportunity of being heard to the applicant by an order in writing reject the application to grant licence in [form LC II], if- (a) it does not conform to the inquirements of rule 3,4, and 5 and 8; (b) the plants and designs of the development works submitted with the application are not technically sound and workable; or (c) the estimated expenditure on water-supply mains or extramural and outfall sewers is not commensurate with the size of the colony. 10. Applicant to be called upon to fulfill certain conditions for grant of licence [Section 3 (3)].-(1) If after scrutiny for the plans and other necessary inquiries which the Director may deem fit, he is satisfied that the application is not for the grant of licence, he shall before granting lice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be made shall be determined by the Director; (d) undertake responsibility for the maintenance and upkeep of all roads, open spaces, public parks and public health services for a period of five years from the date of issue of the completion certificate under rule 16 unless earlier relieved of this responsibility and there upon to transfer all such roads, open spaces, public parks and public health services free of cost to the Government or the local authority, as the case may be; (e) undertake to construct at his own cost, or get constructed by any other institution or individual at its cost, schools, hospitals, community centers and other community buildings on the land set apart for this purpose, within a period of four years from the date of grant of licence extendable by the Director for another period of two years, for reasons to be recorded in writing, failing which the land shall vest with the Government after such specified period, free of cost, in which case the Government shall be at liberty to transfer such land to any person or institution including a local authority, for the said purposes, on such terms and conditions, as it may deem fit; Provided that a sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e DTCP and nowhere contemplates the involvement of HSVP. It was submitted that the bilateral agreements, templates of which are embodied in Forms LC IV-A and LC IV-B, would also indicate that the agreement is essentially between the owner/developer on the one hand and the Director, DTCP on the other. It was his submission that this supports the contention of the writ petitioner that the contractual arrangement is only between the owner/developer and DTCP. Our attention was also drawn to Form LC IV-D as appended to the Rules and which incorporates the following provisions:- "FORM LC-IV-D [See Rule 11(1)(h)] Bilateral Agreement by owner of land intending to set up a Commercial Colony This agreement made on_____ day of___ between Shri/M/s____s/o Shri_____resident of____(hereinafter called the "owner") of the one part and the Governor of Haryana, acting through the Director, Town and Country Planning, Haryana (hereinafter referred to as the "Director") of the other part. Whereas in additional to agreement executed in pursuance of the provisions of rule-11 of the Haryana Development and Regulation of Urban Areas Rules, 1976 (hereinafter referred to as the "Rules") and the conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-requisite along with valid licence and bank guarantee. (v) The unpaid amount of external development charges would carry an interest at a rate of 15% per annum and in case of any delay in the payment of installments on the due date an additional penal interest of 3% per annum (making the total payable interest 18% simple per annum) would be chargeable upto a period of three months and an additional three months with the permission of Director. (vi) That the owner shall derive maximum net profit @ 15% of the total project cost of development of the above noted industrial colony after making provisions of statutory taxes. In case, the net profit exceeds 15% after completion of the project period, surplus amount shall be deposited, within two months in the State Government Treasury by the Owner. (vii) The owner shall submit the certificate to the Director within thirty days of the full and final completion of the project from a Chartered Accountant that the overall net profits (after making provisions for the payment of taxes) have not exceeded 15% of the total project cost of the scheme. (viii) In case Haryana Urban Development Authority executes external development works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icence and the second instilment within six months from the date of grant of the licence. The unpaid amount of service charges shall carry an interest @ 18% (simple) per annum for the delay in the payment of installments. (h) That the owner shall carry out at his own expenses any other works which the Director may think necessary and reasonable in the interest of proper development of the colony. (i) That the owner shall permit the Director or any other officer authorized by him in his behalf to inspect the execution of the development works and the owner shall carry out all direction issued to him for ensuring due compliance of the execution of the development works in accordance with the licence granted. (j) That without prejudice to anything contained in this agreement, all provisions contained in the Act and the Rules shall be binding on the owner. (k) That the owner shall make his own arrangement for disposal of sewerage till the external sewerage system is provided by Haryana Urban Development Authority and the same is made functional. 2. Provided always and it is hereby agreed that if the owner commits any breach of the terms and conditions of this bilateral agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owledged as being a statutory levy since in case of a default in payment thereof, it is open to the DTCP to recover the same as areas of land revenue. Our attention in this respect was drawn to Section 10A of the HDRUA which reads as follows:- "10A. Recovery of dues.-All dues payable under the Act, which have not been deposited within the time specified, shall be recovered as arrears of land revenue." 26. According to learned counsel since EDC is a payment which is imbued with statutory character, no tax is liable to be deducted thereon. Mr. Jain relied upon the following observations as appearing in the decision of the Calcutta High Court in Star Paper Mills Ltd. vs. Commissioner of Income Tax 2001 SCC OnLine Cal 851: "14. Now it brings us to the issue whether the royalty payable by the assessee in pursuance of the order dated April 30, 1979, is a statutory liability. To consider this issue first we would like to refer to some observations, decisions, relevant to the issue. 15. In the case of CIT v. Gorelal Dubey, [1998] 232 ITR 246 the issue before the Madhya Pradesh High Court was whether royalty is a tax. Following the decision of their Lordships in India Cement Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest produce by auction. This statutory liability can be enforced even though there is no contract as envisaged under article 299 of the Constitution. This construction of section 82 is strongly supported by the decision of the Supreme Court in A. Damodaran v. State of Kerala, (1976) 3 SCC 61 : AIR 1976 SC 1533." 18. Now the question is when the Madhya Pradesh High Court has taken a view that section 82 of the Forest Act creates a statutory liability and their Lordships of the Supreme Court have taken the view in the case of Gorelal, [2001] 248 ITR 3 that royalty is a tax, how it can be said that royalty liability is not a statutory liability. 19. Once a particular status is conferred to the nature of liability that cannot be changed unless otherwise warranted under the provisions of the Act. In the case of contractual liability, if the liability is disputed that cannot be recovered as land revenue or to enforce the terms of the agreement, for that one has to approach the court. If it is a statutory liability like royalty in this case that royalty liability which is fixed by the Government can be recovered as land revenue without approaching the court." In view of the above, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and electricity are to be laid out and constructed by the Government or any other local authority. The proportion in which and the time within which such payment is to be made shall be determined by the Director; (d) undertake responsibility for the maintenance and upkeep of all roads, open spaces, public parks and public health services for a period of five years from the date of issue of the completion certificate under rule 16 unless earlier relieved of this responsibility and there upon to transfer all such roads, open spaces, public parks and public health services free of cost to the Government or the local authority, as the case may be; (e) undertake to construct at his own cost, or get constructed by any other institution or individual at its cost, schools, hospitals, community centers and other community buildings on the land set apart for this purpose, within a period of four years from the date of grant of licence extendable by the Director for another period of two years, for reasons to be recorded in writing, failing which the land shall vest with the Government after such specified period, free of cost, in which case the Government shall be at liberty to transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imum of twenty five persons per acre." 28. Mr. Agarwal laid emphasis on the fact that even this provision does not obligate the owner to make any payments to HSVP. Learned counsel submitted that a reading of the bilateral agreement which ultimately comes to be executed in Form LC IV-D clearly places the onus of paying EDC upon the owner. It was pointed out that the payment of an EDC is envisaged to be made to HSVP through the DTCP. Taking us through the various clauses of the bilateral agreement, Mr. Agarwal highlighted the clauses which, according to him, establish that the rate of EDC, schedule of payment, and all other terms and conditions in connection therewith are regulated by the Director. It was submitted that even if the owner were to seek condonation of delay in the payment of EDC, permission in that respect is to be obtained from the Director. It was further submitted that the Bank Guarantee equivalent to 25% of EDC is made out in favour of the Governor of Haryana. Mr. Agarwal further contended that the LC-V format would unerringly point towards the substance of the agreement being one between the owner and the DTCP. 29. It was pointed out that although the demand draf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Agarwal contended that EDC is liable to be viewed as an amount which was payable to the Government and consequently the case squarely falling within the scope of Section 196. 33. Proceeding to deconstruct Section 194C, Mr. Agarwal submitted that the said provision would be attracted only if there be a person responsible for paying a sum to any resident for carrying out work in pursuance of a contract between the contractor and a specified person. According to learned counsel, the petitioner is not responsible to pay any sums to HSVP who would be liable to be viewed as the contractor in terms of Section 194C. Emphasis was laid on the fact that there is no contractual relationship between the petitioner and the HSVP. According to Mr. Agarwal merely because the sum is routed to the HSVP through the DTCP, the same would be insufficient to attract the provisions of Section 194C. 34. It was further contended by Mr. Agarwal that in some of the cases the respondents had also sought to invoke Section 194I of the Act. According to learned counsel, Section 194I on its plain reading would be wholly inapplicable. Learned counsel pointed out that the said provision is concerned with income e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on limitation has become academic in these cases because, even assuming that the Department is right on the issue of limitation still the question would arise whether on such debatable points, the assessee(s) could be declared as assessee(s) in default under Section 192 read with Section 201 of the Income Tax Act, 1961." (II) Chennai Port Trust Rajaji Salai Chennai v. The Income Tax Officer 2012 SCC OnLine Mad 2272 "12. The Supreme Court observed that till the decision of the Apex Court reported in (2009) 312 ITR 225 (CIT v. Eli Lilly & Company (India) (P) Ltd.), there was a debate on the question as to whether TDS was deductible on foreign salary payment as a component of total salary paid to an expatriate working in India. In the face of such debatable issue, the assessee could not be declared as an assessee in default under Section 192 read with Section 201 of the Income Tax Act. Further, the Apex Court pointed out that since the foreign company-assessees therein had paid the differential tax and the interest and had further undertook not to claim refund for the amount paid, the Supreme Court held that the orders passed under Section 201(1) and 201(1A) could not be upheld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in acquiring land, developing it and finally handing over to the customers for a price. It is also not in dispute that EDC are fixed by HUDA from time to time by issuing letters/circulars. It is also not in dispute that the assessee has not credited the amount of EDC paid to Shri Vardhman Infra Heights Pvt. Ltd. in its P & L account. It is also not in dispute that Agreement between the land owners intended to set up a Group Housing Society dated 30.11.2010 was entered into between M/s. Dial Softech Pvt. Ltd., Shri Tek Ram, Smt. Saroj Singhal, Smt. Luxmi Devi and Smt. Sunehra Devi c/o M/s. Santur Infrastructure Pvt. Ltd. and the Governor of Haryana acting through the Director, Town & Country Planning (DTCP), Haryana, whereby owner undertakes to pay proportionate EDC as per rate, schedule, terms and conditions contained in the Agreement. 6. When we examine the question "as to whether TDS on payment of EDC to HUDA was not to be deducted by assessee because levy is made by DTCP having control over the EDC and not HUDA as contended by the ld. AR for the assessee" in the light of the aforesaid undisputed facts, we are of the considered view that the assessee has no liability to deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification on TDS deduction on EDC payments vide letter dated 19.06.2018 which is self explanatory and thus reproduced herein for ready reference: "To The Chief Administrator, Haryana Shahari Vikas Pradhikaran, Panchkula, Memo No.DTCP/ACCTTS/Assessing Officer (HQ)/CAO/ 2894/2018 Date: 19.6.2018 Subject: Clarification on TDS Deductions on EDC Payments. Please refer to the matter cited as subject above. 1. Section 2(g) of the Haryana Development and Regulation of Urban Areas Act, 1975 defines that external development works (hereinafter referred as EDW) shall includes any or all infrastructure development works like water supply, sewerage, drains, provisions of treatment and disposal of sewage, sullage and storm water, roads, electrical works, solid waste management and disposal, slaughter houses, colleges, hospitals, stadium/sports complex, fire stations, grid sub-stations etc. and/or any other work which the Director may specify to be executed in the periphery of or outside colony/area for the benefit of the colony/area. 2- As per Section 3(3)(ii), license holder has to pay proportionate development charges if the external development works as defined in clause (g) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is exempt from obligations to deduct TDS in view of Section 196 of the Act." (IV) M/S Perfect Constech Pvt. Ltd. Versus Addl. CIT 2020 (12) TMI 1158 ITAT Delhi "5.0 We have heard the rival submissions and have also perused the material on record. It is seen that in Para 4.3.2, sub-paragraph (iv) of the order passed u/s 271C of the Act, the AO has himself noted that the demand-draft of the EDC amounts are drawn in favour of the Chief Administrator, HUDA though routed through the Director General, Town and Country Planning, Sector-18, Chandigarh. He has also referred to the notes to accounts to the financial statements of HUDA wherein it has been stated that "other liabilities also include external development charges received through DGTCP, Department of Haryana for execution of various EDC works. The expenditure against which have been booked in Development Work in Progress, Enhancement compensation and Land cost." Undisputedly, the payment of EDC was issued in the name of Chief Administrator, HUDA. It is also not in dispute that HUDA has shown EDC as current liability in the balance sheet, but in the 'Notes' to the Accounts Forming part of the Balance Sheet, it has been shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that authority outside the ambit of Section 196 of the Act. It was his submission that authorities constituted under State legislations cannot claim coverage under Section 196, since the same is confined to sums payable to either the Government, the Reserve Bank or a corporation established by or under a Central Act. Mr. Hossain cited for our consideration the decision of the Supreme Court in Adityapur Industrial Area Development Authority v. Union of India [(2006) SCC OnLine SC 530] where a contention that an authority constituted under a State Legislation would be exempt from taxation by virtue of Article 289 of the Constitution, came to be negatived in unequivocal terms. Mr. Hossain laid emphasis on the following passages from that decision: "11. It is true, as submitted by Shri Venugopal, that clause (2) of Article 289 empowers Parliament to make a law imposing a tax on income earned only from trade or business of any kind carried by or on behalf of the State. It does not authorise Parliament to impose a tax on the income of a State if such income is not earned in the manner contemplated by clause (2) of Article 289. This, to our mind, does not answer the question which aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). The reason is obvious. Under the Constitution, the State has no power to tax any income other than agricultural income. Under the Constitution, power to tax "income" is vested only in the Union. Therefore, while any property of the Union is immune from State taxation under Article 285(1), income derived by the State from business, as distinguished from governmental purposes, shall not have exemption from Union taxation unless Parliament declares such trade or business as incidental to the ordinary functions of the Government of the State [see Article 289(3)] (emphasis supplied) xxxx xxxx xxxx 14. In A.P. SRTC v. ITO [(1964) 7 SCR 17 : AIR 1964 SC 1486] the question arose as to whether the income derived from trading activity by the Andhra Pradesh Road Transport Corporation established under the Road Transport Corporation Act, 1950 was not the income of the State of Andhra Pradesh within the meaning of Article 289(1) of the Constitution and hence exempted from Union taxation. This Court considered the scheme of Article 289 and observed as follows: (SCR p. 25) "The scheme of Article 289 appears to be that ordinarily, the income derived by a State both from governmental and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the State?" It was observed that if a trade or business is carried on by a State departmentally or through its agents appointed exclusively for that purpose, there would be no difficulty in holding that the income made from such trade or business is the income of the State. Difficulties arise when one is dealing with trade or business carried on by a corporation established by a State by issuing a notification under the relevant provisions of the Act. In this context, the Court observed: (SCR p. 26) "The corporation, though statutory, has a personality of its own and this personality is distinct from that of the State or other shareholders. It cannot be said that a shareholder owns the property of the corporation or carries on the business with which the corporation is concerned. The doctrine that a corporation has a separate legal entity of its own is so firmly rooted in our notions derived from common law that it is hardly necessary to deal with it elaborately; and so, prima facie, the income derived by the appellant from its trading activity cannot be claimed by the State which is one of the shareholders of the corporation." xxxx xxxx xxxx 17. Considerable reliance was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y a trade or business carried on with profit motive, by or on behalf of the State Government, such land or building shall be subject to the levy of the property taxes levied by the said enactments. In other words, State property exempted under clause (1) means such property as is used for the purpose of the Government and not for the purpose of trade or business. That was a case where the question arose in relation to the levy of property tax on lands and buildings owned by the State Governments which was "property of the State Government". In the instant case, we are concerned with the income of the appellant Authority and the same principles apply. The exemption can be claimed only if the income can be said to be the income of the State Government. In the facts of this case, it is not possible to hold that the income of the appellant Authority is the income of the State Government." 39. According to learned counsel, the statutory scheme in the context of which Adityapur Industrial Area came to be rendered, is similar to that which underlies the 1977 Act. Mr. Hossain laid emphasis on the right of HSVP to manage its own funds, its right to independently own assets, as well as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. According to learned counsel, a plain reading of Section 10(20) of the Act would establish that HSVP cannot be treated to be a local authority. In any case according to Mr. Hossain this aspect stands conclusively settled and answered against the writ petitioners by the Supreme Court in terms of its decision rendered in New Okhla Industrial Development Authority v. CIT (2018) 9 SCC 351. Mr. Hossain relied upon the following observations as rendered in that judgment: "27. The KishansingTomar v. Municipal Corpn., Ahmedabad [Kishansing Tomar v. Municipal Corpn., Ahmedabad, (2006) 8 SCC 352], noticing the object and purpose of the Constitution (74th Amendment) Act, 1992, stated the following: (SCC p. 358, para 12) "12. It may be noted that Part IX-A was inserted in the Constitution by virtue of the Constitution (Seventy-fourth) Amendment Act, 1992. The object of introducing these provisions was that in many States the local bodies were not working properly and the timely elections were not being held and the nominated bodies were continuing for long periods. Elections had been irregular and many times unnecessarily delayed or postponed and the elected bodies had been superseded o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in question to be answered? Clause (1) of Article 243-Q provides that there shall be constituted in every State, a Nagar Panchayat, a Municipal Council and a Municipal Corporation, in accordance with the provisions of this Part. The proviso to clause (1) provides that: "Provided that a Municipality under this clause may not be constituted in such urban area or part thereof as the Governor may, having regard to the size of the area and the municipal services being provided or proposed to be provided by an industrial establishment in that area and such other factors as he may deem fit, by public notification, specify to be an industrial township." 29. Thus, the proviso does not contemplate constitution of an industrial establishment as a Municipality rather clarifies an exception where Municipality under clause (1) of Article 243-Q may not be constituted in an urban area. The proviso is an exception to the constitution of Municipality as contemplated by clause (1) of Article 243-Q. No other interpretation of the proviso conforms to the constitution scheme. 30. A Constitution Bench of this Court had noticed the principles of statutory interpretation of a proviso in S. Sundaram P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that prima facie a proviso should be limited in its operation to the subject-matter of the enacting clause, the stand we have taken is sound. To expand the enacting clause, inflated by the proviso, sins against the fundamental rule of construction that a proviso must be considered in relation to the principal matter to which it stands as a proviso. A proviso ordinarily is but a proviso, although the golden rule is to read the whole section, inclusive of the proviso, in such manner that they mutually throw light on each other and result in a harmonious construction.' 42. In Hiralal Rattanlal v. State of U.P. [Hiralal Rattanlal v. State of U.P., (1973) 1 SCC 216 : 1973 SCC (Tax) 307 : AIR 1973 SC 1034] , this Court made the following observations: [SCC p. 224, para 22: SCC (Tax) p. 315] '22. ... Ordinarily a proviso to a section is intended to take out a part of the main section for special treatment. It is not expected to enlarge the scope of the main section. But cases have arisen in which this Court has held that despite the fact that a provision is called proviso, it is really a separate provision and the so-called proviso has substantially altered the main section.' 43. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learly in contradistinction with the word "constituted" as used in Article 243-P(e) and Article 243-Q. Thus, notification under the proviso to Article 243-Q(1) is not akin to constitution of Municipality. We, thus, are clear in our mind that industrial township as specified under the Notification dated 24-12-2001 is not akin to Municipality as contemplated under Article 243-Q. 32. At this juncture, we may also notice the two judgments as relied on by the High Court and three more judgments where Article 243-Q came for consideration. The first judgment which needs to be noticed is Adityapur Industrial Area Development Authority [Adityapur Industrial Area Development Authority v. Union of India, (2006) 5 SCC 100]. The Adityapur Industrial Development Authority was constituted under the Bihar Industrial Area Development Authority Act, 1974. In para 2 of the judgment the constitution of the authority was noticed which is to the following effect: (SCC p. 103) "2. The appellant Authority has been constituted under the Bihar Industrial Area Development Authority Act, 1974 to provide for planned development of industrial area, for promotion of industries and matters appurtenant thereto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income from other sources" or from a trade or business carried on by it was earlier excluded in computing the total income of the Authority of a previous year. However, in view of the amendment, with effect from 1-4-2003 the Explanation "local authority" was defined to include only the authorities enumerated in the Explanation, which does not include an authority such as the appellant. At the same time Section 10(20-A) which related to income of an authority constituted in India by or under any law enacted for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, which before the amendment was not included in computing the total income, was omitted. Consequently, the benefit conferred by clause (20-A) on such an authority was taken away. 7. The High Court by its impugned judgment [Adityapur Industrial Area Development Authority v. Union of India, 2003 SCC OnLineJhar 227 : 2003 AIR Jhar R 876] and order held that in view of the fact that Section 10(20-A) was omitted and an Explanation was added to Section 10(20) enumerating the "local authorities" contemplated by Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the status and character of AMC(s) is no more applicable to the provisions of Section 10(20) after the insertion of the Explanation/definition clause to that sub- section vide the Finance Act, 2002." B. Section 10(20) as amended by the Finance Act, 2002 44. We have already noticed that by the Finance Act, 2002 an Explanation has been added to Section 10(20) of the 1961 IT Act and Section 10(20-A) has been omitted. Prior to the Finance Act, 2002 there being no definition of "local authority" under the IT Act, the provisions of Section 3(31) of the General Clauses Act, 1897 were pressed into service while interpreting the extent and meaning of local authority. The Explanation having now contained the exhaustive definition of local authority, the definition of local authority as contained in Section 3(31) of the General Clauses Act, 1897 is no more applicable. Section 3 of the General Clauses Act begins with the words "In this Act, and in all Central Acts and Regulations made after the commencement of this Act, unless there is anything repugnant in the subject or context...". The definition given of the local authority under Section 3(31) does not now govern the field in view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asions, there is no equity in matters of taxation. One cannot read into a section which has not been specifically provided for and therefore, we do not agree with the submissions of the learned counsel appearing for the appellant and we are not prepared to read something in the section which has not been provided for. The judgments referred to hereinabove support the view which we have expressed here." 47. It shall be useful to refer to the Explanatory Notes on the Finance Act, 2002. Explanatory Notes both on Section 10(20) and Section 10(20-A) are relevant and contained in paras 12.2 to 12.4 and 13.1 to 13.4. Paras 12.2. to 12.4 under the heading: Income of certain local authorities to become taxable are to the following effect: "12.2. Through the Finance Act, 2002, this exemption has been restricted to the Panchayats and Municipalities as referred to in Articles 243(d) and 243-P(e) of the Constitution of India respectively. Municipal Committees and District Boards, legally entitled to or entrusted by the Government with the control or management of a Municipal or a local fund and Cantonment Boards as defined under Section 3 of the Cantonments Act, 1924. 12.3. The exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 2002 the exemption under Section 10(20) has been restricted to the Panchayats and Municipalities as referred to in Articles 243-P(d) and 243-P(e). Further by deletion of clause (20-A), the income of the Housing Boards of the States and of Development Authorities became taxable. 50. On a writ petition filed by the appellant before the Allahabad High Court where the notices issued in the year 1998 under Section 142 of the Income Tax Act were challenged vide its judgment dated 14-2-2000, the High Court held that the appellant's case comes squarely under Section 10(20-A) of the Income Tax Act, hence, the appellant was liable to be exempted under the said Act, although, the High Court did not express any opinion on the question whether the appellant was exempted under Section 10(20) in that judgment. 51. After omission of Section 10(20-A), the only provision under which a body or authority can claim exemption is Section 10(20). Local authority having been exhaustively defined in the Explanation to Section 10(20) an entity has to fall under Section 10(20) to claim exemption. It is also useful to notice that this Court laid down in State of Gujarat v. Essar Oil Ltd. [State of Guja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the court in interpreting the true purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming a hindrance in the interpretation of the same.'" 53. This Court in Adityapur Industrial Area Development Authority [Adityapur Industrial Area Development Authority v. Union of India, (2006) 5 SCC 100] after considering Section 10(20) as amended by the Finance Act, 2002 and consequences of deletion of Section 10(20-A) has laid down the following in para 13: (SCC p. 107) "13. Applying the above test to the facts of the present case, it is clear that the benefit, conferred by Section 10(20-A) of the Income Tax Act, 1961 on the assessee herein, has been expressly taken away. Moreover, the Explanation added to Section 10(20) enumerates the "local authorities" which do not cover the assessee herein. Therefore, we do not find any merit in the submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he literary construction. All that [the Court has] to see at the very outset is what does the provision say? If the provision is unambiguous and if from that provision, the legislative intent is clear, [the Court] need not call into aid the other rules of construction of statutes. The other rules of construction of statutes are called into aid only when the legislative intent is not clear.' Vide HiralalRattanlal v. State of U.P. [HiralalRattanlal v. State of U.P., (1973) 1 SCC 216 : 1973 SCC (Tax) 307 : AIR 1973 SC 1034] , SCC p. 224, para 22." 55. A Division Bench of the Delhi High Court also in Agricultural Produce Market Committee v. CIT [Agricultural Produce Market Committee v. CIT, 2006 SCC OnLine Del 1722 : (2007) 294 ITR 549] had occasion to consider Section 10(20) as amended w.e.f. 1-4-2003 where the High Court in para 5 has stated the following: (SCC OnLine Del) "5. The most striking feature of the Explanation is that the same provides an exhaustive meaning to the expression "local authority". The word "means" used in the Explanation leaves no scope for addition of any other entity as a "local authority" to those enlisted in the Explanation. In other words, even if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant is that the appellant is covered by clause (ii) of the Explanation i.e. "Municipality as referred to in clause (e) of Article 243-P of the Constitution". We, while discussing the above provisions, have already held that the appellant is not covered by the word/expression of "Municipality" in clause (e) of Article 243-P. Thus, the appellant is not clearly included in clause (ii) of the Explanation. It is not even the case of the appellant that the appellant is covered by Section 10(20) except clause (ii). 43. Proceeding to the facts of the case, Mr. Hossain pointed out that Form LC IV-D in unambiguous terms provides for the EDC being paid to HSVP. The aforesaid clause as contained in the bilateral agreement, according to Mr. Hossain, is incontrovertible proof of the obligation of the petitioner to pay EDC to HSVP, albeit "through" the DTCP. In any event, according to learned counsel, the payment of EDC is "not to" the DTCP. It was submitted that the petitioners have at no stage questioned HSVP as being the ultimate recipient of the EDC. 44. Learned counsel also questioned the reliance which was sought to be placed on the OM dated 06 October 2017 and contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute the work of transportation of the goods only on freelance and need basis. The submission has been that the question of TDS under Section 194-C(2) would have arisen only if the payment was made to a "sub-contractor" and that too, in pursuance of a contract for the purpose of "carrying whole or any part of work undertaken by the contractor". In our view, the submissions so made remain entirely baseless. 15.1. The nature of contract entered into by the appellant with the consignor company makes it clear that the appellant was to transport the goods (cement) of the consignor company; and in order to execute this contract, the appellant hired the transport vehicles, namely, the trucks from different operators/owners. The appellant received freight charges from the consignor company, who indeed deducted tax at source while making such payment to the appellant. Thereafter, the appellant paid the charges to the persons whose vehicles were hired for the purpose of the said work of transportation of goods. Thus, the goods in question were transported through the trucks employed by the appellant but, there was no privity of contract between the truck operators/owners and the said consig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of his own and was also acting as a commission agent by arranging for transportation through other transporters. As regards the income of assessee relatable to transportation through other transporters, it was found that the assessee had merely acted as a facilitator or as an intermediary between the two parties (i.e. the consignor company and the transporter) and had no privity of contract with either of such parties inasmuch as he only collected freight charges from the clients who intended to transport their goods through other transporters; and the amount thus collected from the clients was paid to those transporters by the assessee while deducting his commission. Looking to the nature of such dealings, the said assessee was held to be "not the person responsible" for making payments in terms of Section 194-C of the Act and hence, having no obligation to deduct tax at source. In contradistinction to the said case of Hardarshan Singh [CIT v. Hardarshan Singh, 2013 SCC OnLine Del 128 : (2013) 350 ITR 427], the appellant of the present case was not acting as a facilitator or intermediary between the consignor company and the truck operators/owners because those two parties had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of work undertaken by it (i.e. transportation of the goods of the company), the operator/owner of that truck became the sub- contractor and all the requirements of Section 194-C came into operation." 15.5. Thus, we have no hesitation in affirming the concurrent findings in regard to the applicability of Section 194-C to the present case. Question 1 is, therefore, answered in the negative; against the appellant assessee and in favour of the Revenue." 47. We at the outset note that Mr. Hossain apart from addressing submissions noticed hereinbefore had also raised an objection to the maintainability of the writ petitions asserting that orders passed under Section 201 are appealable under the provisions of the Act. It was his submission, therefore, that these writ petitions should be dismissed on this score. We, however, find ourselves unable to sustain that objection bearing in mind the undisputed fact that most of these writ petitions were entertained as far back as in 2019 and 2021 and on which, and after hearing counsels for respective sides, the Court had entertained the writ petitions and passed interim orders. It would thus be wholly inequitable to relegate parties to pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondition. This is clearly not a prerequisite for Section 194C being attracted. For the purposes of Section 194C, all that is required is a payment being effected to a contractor who has a contractual relationship with a specified person. 50. HSVP, according to the respondents, has an arrangement with the Government of Haryana to undertake external development work. Undisputedly the Government of Haryana, by virtue of being the State Government, would fall within the meaning of the expression 'specified person' as per the Explanation appended to Section 194C. The critical question which thus arises is whether the arrangement between HSVP and the Government of Haryana could be said to fall within the meaning of the phrase "in pursuance of a contract" as occurring in that provision. 51. The HDRUA Act in Section 2(g) defines EDC to include all infrastructure development work, such as water supply, sewerage, drains, treatment and disposal of sewage, storm water, roads, electrical works and other activities including those which may be additionally specified by the Director, to be executed in the periphery or outside a colony or an area for the benefit thereof. A 'colony' has been defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and maintain a fund to which, amongst others, would be credited all monies received by it from the State Government or the Central Government by way of grants, loans, advances "or otherwise". The aforesaid fund is liable to be applied towards meeting expenditure for development of land and for such other purposes as the State Government might direct or permit. Section 21 of the 1977 Act reads as follows: "(21). Fund of authority (1) the authority shall have and maintain its own fund to which shall be credited - (a) all moneys received by the authority from the State Government and the Central Government by way of grants, loans, advances or otherwise; (b) all moneys borrowed by the authority from source other than the Government, by way of loans or debentures; (c) all fees received by the authority under this Act; (d) all moneys received by the authority from the disposal of lands, building and other properties, movable and immovable; and (e) all moneys received by the authority by way of rents and profits or in any other manner or from any other source. (2) The fund shall be applied towards meeting- (a) expenditure incurred in the administration of this Act; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o HSVP through the DTCP. 57. In para 4 of this communication, the DTCP discloses that since receipts on account of EDC were found to be insufficient to bear the cost of development work, it had formulated a new scheme and for which appropriate budgetary provisions were made for execution of all external development works by it. It was on the promulgation of the aforesaid scheme titled as the "Swarn Jyanti Haryana Urban Infrastructure Development Scheme" that EDC w.e.f. FY 2017-18 was deposited directly with the State Government and constituted a part of the Consolidated Fund of that State. It is further admitted that it was post the promulgation of that scheme and the issuance of an order dated 12 May 2017 that all payments towards EDC were made online through the State Government's e-payment gateway or in the shape of demand drafts favouring the DTCP. It is further averred that the required funds for execution of development works were thereafter released to HSVP upon sanction being granted by the Finance Department of the Government of Haryana. This communication is thus evidence of all EDC charges being made over to the HSVP at least prior to 31 March 2017 pursuant to an unders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re propounded by the Supreme Court in Shree Chaudhary Transport. If the existence of a contract were to be gleaned from the arrangement which existed between HSVP and the Government of Haryana and is also duly acknowledged by the DTCP itself, the absence of a written or codified agreement would not be relevant for the purposes of Section 194C being applicable. 61. We further note that not only the provisions of the HDRUA but also the forms and bilateral agreements executed by the applicants, mandated that all payments of EDC were to be drawn in favour of HSVP. Although they were routed through the DTCP, those payments undoubtedly were to the account of HSVP. The statute as well as the licence conditions thus placed the petitioners under a binding obligation to advance all EDC payments in favour of HSVP. The aforesaid clearly qualifies the responsibility which Section 194C places upon a payer who is contemplating making payments to a contractor. 62. The submission of a lack of privity between the writ petitioners and HSVP is noticed only to be rejected since Section 194C does not contemplate the existence of a contractual relationship between a person who is responsible for paying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income tax thereon at the rates in force: Provided that in the case of interest payable by the Government or a public sector bank within the meaning of clause (23-D) of Section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode: [* * *] [Explanation-1].-For the purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called "Interest payable account" or "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. [Explanation 2.-For the removal of doubts, it is hereby clarified that the obligation to comply with sub-section (1) and to make deduction thereunder applies and shall be deemed to have always applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d manner, as may be prescribed. (7) Notwithstanding anything contained in sub-section (1) and sub-section (2), the Board may, by notification in the Official Gazette, specify a class of persons or cases, where the person responsible for paying to a non-resident, not being a company, or to a foreign company, any sum, whether or not chargeable under the provisions of this Act, shall make an application 3636[in such form and manner to the Assessing Officer, to determine in such manner, as may be prescribed], the appropriate proportion of sum chargeable, and upon such determination, tax shall be deducted under sub-section (1) on that proportion of the sum which is so chargeable." 65. The special character of that section and others similar thereto and which speak of "income chargeable" was noticed by the Supreme Court in Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax and Anr. (2022) 3 SCC 321. We deem it apposite to extract paras 27 to 31 of that decision hereunder: "27. The learned Additional Solicitor General further pointed out that the Indian Government had expressed its reservations on the OECD Commentary, especially on the parts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -6-1992).] (37-A) "rate or rates in force" or "rates in force", in relation to an assessment year or financial year, means- *** (iii) for the purposes of deduction of tax under Section 194-LBA or Section 194-LBB or Section 194-LBC or Section 195, the rate or rates of income tax specified in this behalf in the Finance Act of the relevant year or the rate or rates of income tax specified in an agreement entered into by the Central Government under Section 90, or an agreement notified by the Central Government under Section 90-A, whichever is applicable by virtue of the provisions of Section 90, or Section 90-A, as the case may be; *** 4. Charge of income tax.-(1) Where any Central Act enacts that income tax shall be charged for any assessment year at any rate or rates, income tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions (including provisions for the levy of additional income tax) of, this Act in respect of the total income of the previous year of every person: Provided that where by virtue of any provision of this Act income tax is to be charged in respect of the income of a period other than the previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side India or for the purposes of making or earning any income from any source outside India; *** Explanation 2.-For the purposes of this clause, "royalty" means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital gains") for- (i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property; (ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property; (iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property; (iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill; [Inserted by the Finance Act, 2001 (14 of 2001), Section 4(i) (w.e.f. 1-4-2002).] (iv-a) the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in Section 44-BB; (v) the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that country or specified territory, as the case may be, or (ii) income tax chargeable under this Act and under the corresponding law in force in that country or specified territory, as the case may be, to promote mutual economic relations, trade and investment, or (b) for the avoidance of double taxation of income under this Act and under the corresponding law in force in that country or specified territory, as the case may be, without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including through treaty-shopping arrangements aimed at obtaining reliefs provided in the said agreement for the indirect benefit to residents of any other country or territory), or (c) for exchange of information for the prevention of evasion or avoidance of income tax chargeable under this Act or under the corresponding law in force in that country or specified territory, as the case may be, or investigation of cases of such evasion or avoidance, or (d) for recovery of income tax under this Act and under the corresponding law in force in that country or specified territory, as the case may be, and may, by notification in the Official Gazette, mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [Inserted by the Finance Act, 2012 (23 of 2012), Section 77(a)(ii) (w.r.e.f. 1-4-1962).] Explanation 2.-For the removal of doubts, it is hereby clarified that the obligation to comply with sub-section (1) and to make deduction thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has- (i) a residence or place of business or business connection in India; or (ii) any other presence in any manner whatsoever in India. (2) Where the person responsible for paying any such sum chargeable under this Act [Substituted by the Finance Act, 2003 (32 of 2003), Section 80(b) (w.e.f. 1-6-2003).] (other than salary) to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application in such form and manner to the assessing officer, to determine in such manner, as may be prescribed, the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable. *** ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of the Income Tax Act. Certain income is deemed to arise or accrue in India, under Section 9 of the Income Tax Act, notwithstanding the fact that such income may accrue or arise to a non-resident outside India. One such income is income by way of royalty, which, under Section 9(1)(vi) of the Income Tax Act, means the transfer of all or any rights, including the granting of a licence, in respect of any copyright in a literary work. 31. That such transaction may be governed by a DTAA is then recognised by Section 5(2) read with Section 90 of the Income Tax Act, making it clear that the Central Government may enter into any such agreement with the Government of another country so as to grant relief in respect of income tax chargeable under the Income Tax Act or under any corresponding law in force in that foreign country, or for the avoidance of double taxation of income under the Income Tax Act and under the corresponding law in force in that country. What is of importance is that once a DTAA applies, the provisions of the Income Tax Act can only apply to the extent that they are more beneficial to the assessee and not otherwise. Further, by Explanation 4 to Section 90 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contained in Sections 197 and 197A of the Act, and which are reproduced hereinbelow: "197. Certificate for deduction at lower rate.-(1) Subject to the rules made under sub-section (2-A), [where, in the case of any income of any person [or sum payable to any person], income tax is required to be deducted at the time of credit or, as the case may be, at the time of payment at the rates in force under the provisions of Sections 192, 193, 194, 194-A, 194-C 194- D, 194-G, 194-H, 194-I, 194-J, 194-K, 194-LA , 194-LBA, 194-LBB, 194-LBC, 194-M, 194-O [* * *] and 195, the Assessing Officer is satisfied], that the total income of the recipient justifies the deduction of income tax at any lower rates or no deduction of income tax, as the case may be, the Assessing Officer shall, on an application made by the assessee in this behalf, give to him such certificate as may be appropriate. (2) Where any such certificate is given, the person responsible for paying the income shall, until such certificate is cancelled by the Assessing Officer, deduct income tax at the rates specified in such certificate or deduct no tax, as the case may be. (2-A) The Board may, having regard to the convenienc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A] or Section 194-EE [or Section 194-I] or Section 194-K or sub-section (1-B) of this section, no deduction of tax shall be made in the case of an individual resident in India, who is of the age of [sixty years] or more at any time during the previous year [* * *], if such individual furnishes to the person responsible for paying any income of the nature referred to in [Section 192-A or Section 193 or Section 194 or Section 194-A [or Section 194-D] or Section 194-DA] or Section 194-EE [or Section 194-I] or Section 194-K, as the case may be, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil.] (1-D) Notwithstanding anything contained in this section, no deduction of tax shall be made by the Offshore Banking Unit from the interest paid- (a) on deposit made on or after the 1st day of April, 2005, by a non-resident or a person not ordinarily resident in India; or (b) on borrowing, on or after the 1st day of April, 2005, from a non-resident or a person not ordinarily resident i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners urged that the determination and quantification of EDC were subjects exclusively regulated by directives of the DTCP. The petitioners also referred to the power vested in the DTCP to initiate proceedings for recovery of EDC as arrears of revenue and thus constituting a statutory impost exempt from taxation. It was in the backdrop that the petitioners urged us to accept EDC payments as falling within Section 196. We find ourselves unable to sustain that submission bearing in mind the indubitable position which emerges from the discussion which ensues. 69. Section 196 frees sums payable to the Government, RBI or a corporation established by or under a Central Act from the obligation of tax being collected at source. Undisputedly, HSVP would neither fall within the ambit of clause (1) or clause (3) of Section 196. The mere fact that HSVP has been constituted under a statutory enactment does not make it the "Government". Even if it were discharging functions akin to or similar to governmental obligations or performing activities closely connected with State functions, the same would not result in us recognising HSVP as the Government. 70. This issue, in our considered opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that but for its provision, the trading activity which is covered by it would have claimed exemption from Union taxation under clause (1). That is the result of reading clauses (1) and (2) together. Clause (3) then empowers Parliament to declare by law that any trade or business would be taken out of the purview of clause (2) and restored to the area covered by clause (1) by declaring that the said trade or business is incidental to the ordinary functions of the Government. In other words, clause (3) is an exception to the exception prescribed by clause (2). Whatever trade or business is declared to be incidental to the ordinary functions of the Government, would cease to be governed by clause (2) and would then be exempt from Union taxation. That, broadly stated, appears to be the result of the scheme adopted by the three clauses of Article 289." 71. In A.P. SRTC, the Supreme Court had held that a statutory corporation has a personality distinct and separate from that of the State or its shareholders. This would thus appear to lend credence to the stand of the respondents who had argued that even if HSVP be funded by the State Government, it would continue to remain a legal en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome comprised therein' appearing immediately after the words 'deduct an amount equal to two per cent of such sum as income tax' from their purport, cannot be understood as the percentage amount deductible from the income of the contractor out of the sum credited to his account or paid to him in pursuance of the contract. Moreover, the concluding part of the sub-section requiring deduction of an amount equal to two per cent of such sum as income tax, by use of the words 'on income comprised therein' makes it obvious that the amount equal to two per cent of the sum required to be deducted is a deduction at source. Indeed, it is neither possible nor permissible to the payer to determine what part of the amount paid by him to the contractor constitutes the income of the latter. It is not also possible to think that the Parliament could have intended to cast such impossible burden upon the payer nor could it be attributed with the intention of enacting such an impractical and unworkable provision. Hence, on the express language employed in the sub-section, it is impossible to hold that the amount of two per cent required to be deducted by the payer out of the sum credited to the account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct tax flowing from any one of the more than the fifty sections comprised in Chapter XVII-B. A Show Cause Notice fundamentally must apprise the noticee of the case that it is called upon to answer, the context in which an explanation is sought and the charge that it has to answer. The notice thus cannot leave the assessee grappling with or trying to discern the provision which it is supposed to have infringed. In the absence of requisite particulars, the Show Cause Notice would be liable to be quashed on the ground of being wholly vague. As far back as in State of Orissa v. Binapani Dei 1967 SCC OnLine SC 15, the Supreme Court had pertinently observed:- "9. The first respondent held office in the Medical Department of the Orissa Government. She, as holder of that office, had a right to continue in service according to the Rules framed under Article 309 and she could not be removed from office before superannuation except "for good and sufficient reasons". The State was undoubtedly not precluded, merely because of the acceptance of the date of birth of the first respondent in the service register, from holding an enquiry if there existed sufficient grounds for holding such enquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld require the statement of imputations detailing out the alleged breaches and defaults he has committed, so that he gets an opportunity to rebut the same. Another requirement, according to us, is the nature of action which is proposed to be taken for such a breach. That should also be stated so that the noticee is able to point out that proposed action is not warranted in the given case, even if the defaults/breaches complained of are not satisfactorily explained. When it comes to blacklisting, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action." 78. Similar observations find place in UMC Technologies (P) Ltd. v. Food Corpn. of India (2021) 2 SCC 551: "13. At the outset, it must be noted that it is the first principle of civilised jurisprudence that a person against whom any action is sought to be taken or whose right or interests are being affected should be given a reasonable opportunity to defend himself. The basic principle of natural justice is that before adjudication starts, the authority concerned should give to the affected party a notice of the case against him so that he can defend himself. Such notice sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a notice under section 139(2), and section 148 read with section 147 merely authorises the issue of such a notice. [See Kantamani Venkatanarayan and Son v. First Additional Income-tax Officer, (63, I.T.R. 638) (8) Deep Chand Daga v. Income-tax Officer C- Ward, Raipur, (77, I.T.R. 661) (9) Anne Nagendram and BommaReddiVenkayya and Company v. Commissioner of Income- tax, Andhra Pradesh, (66 I.T.R. 46) (10) Sowdagar Ahmad Khan v. Commissioner of Income-tax, Nellore, (66, I.T.R. 55) (11)]. The point to be considered is whether assessment can be defeated or rendered invalid if it can be sustained under any other provision of the Act. However, this aspect of the matter need not further detain us as in view of our discussion above we are of the opinion that the assessment can be sustained under section 153(3)(ii) of the 1961 Act. It is a well settled principle of law that the exercise of a power would be referable to a jurisdiction which confers validity upon it and merely because the Income-tax Officer while proceeding to assess the assessee, has quoted a wrong section, the assessment cannot be rendered invalid if it can be supported under section 153(3)(ii) of the 1961 Act." We note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty be it either under Section 221 or 271C not being an inevitable corollary in case of default. This position is made explicit by the Second Proviso to Section 221 as well as Section 273B. The imposition of penalty where a question with respect to taxability had remained unclear or where an assessee had good and sufficient cause to not deposit the tax were lucidly explained by the Supreme Court in CIT v. Eli Lilly & Co. (India) (P) Ltd (2009) 15 SCC 1. in the following terms: - "91. A bare reading of Section 201(1) shows that interest under Section 201(1-A) read with Section 201(1) can only be levied when a person is declared as an assessee-in-default. For computation of interest under Section 201(1-A), there are three elements. One is the quantum on which interest has to be levied. Second is the rate at which interest has to be charged. Third is the period for which interest has to be charged. The rate of interest is provided in the 1961 Act. The quantum on which interest has to be paid is indicated by Section 201(1-A) itself. Sub-section (1-A) specifies "on the amount of such tax" which is mentioned in sub-section (1) wherein, it is the amount of tax in respect of which the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 194-C of the IT Act, had already paid income taxes on that amount. The Court held : (SCC pp. 464-65, paras 6 & 9) "6. The Tribunal upon rehearing the appeal held that though the appellant assessee was rightly held to be an "assessee in default", there could be no recovery of the tax alleged to be in default once again from the appellant considering that Pradeep Oil Corporation had already paid taxes on the amount received from the appellant. It is required to note that the department conceded before the Tribunal that the recovery could not once again be made from the tax deductor where the payee included the income on which tax was alleged to have been short deducted in its taxable income and paid taxes thereon. There is no dispute whatsoever that Pradeep Oil Corporation had already paid the taxes due on its income received from the appellant and had received refund from the Tax Department. The Tribunal came to the right conclusion that the tax once again could not be recovered from the appellant (the deductor assessee) since the tax has already been paid by the recipient of income. *** 9. Be that as it may, Circular No. 275/201/95- IT(B) dated 29-1-1997 issued by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeded against for recovery of the shortfall in TDS. However, it would be open to the Revenue to seek payment of interest under Section 201(1-A) for the period between the date of default in deduction of TDS and the date on which the recipient actually paid income tax on the amount for which there had been a shortfall in such deduction. 61. As noted earlier, the learned counsel for the parties were ad idem on the fact that the travel agents had already paid taxes on the amounts earned by them. The Revenue had contended that the default in payment of TDS could not be excused purely on this ground. However, the decisions in Hindustan Coca Cola [Hindustan Coca Cola Beverage (P) Ltd. v. CIT, (2007) 8 SCC 463] and Eli Lilly & Co. [CIT v. Eli Lilly & Co. (India) (P) Ltd., (2009) 15 SCC 1] clearly bar their ability to pursue the assessee airlines for recovery of the shortfall in TDS and restricts them to imposing interest for the default. xxxx xxxx xxxx 65. The ambit of "reasonable cause" under Section 273-B requires our scrutiny before we reach the conclusion that the assessing officer is required to also calculate potential penalties to be levied against the assessees. This Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tegory. Furthermore, as we have highlighted earlier, there were contradictory pronouncements by different the High Courts in the ensuing years which clearly highlights the genuine and bona fide legal conundrum that was raised by the prospect of Section 194-H being applied to the supplementary commission. 67. Hence, there is nothing on record to show that the assessees have not fulfilled the criteria under Section 273-B of the IT Act. Though we are not inclined to accept their contentions, there was clearly an arguable and "nascent" legal issue that required resolution by this Court and, hence, there was "reasonable cause" for the air carriers to have not deducted TDS at the relevant period. The logical deduction from this reasoning is that penalty proceedings against the airlines under Section 271-C of the IT Act stand quashed." 86. We find a succinct enunciation of the legal position in this regard in a judgment of this Court in Commissioner of Income Tax (TDS) Vs. M/S American Express Bank Ltd. 2011 SCC OnLine Del 5517 where it was observed as follows: - "8. From the above conclusions of the Income Tax Appellate Tribunal, it is apparent that as a finding of fact, the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e failure to deduct a relevant consideration. Section 201(1A) makes the payment of simple interest mandatory. The payment of interest under that provision is not penal. There is, therefore, no question of waiver of such interest on the basis that the default was not intentional or on any other basis. (See Bennet Coleman & Co. Ltd. v. V.P. Damle, Third ITO, [1986] 157 ITR 812 (Bom.) and CIT v. Prem Nath Motors (P). Ltd., [2002] 120 Taxman 584 (Delhi)." Therefore, the second question is also answered in favour of the Revenue and against the assessee. 11. We would like to reiterate that although the questions have been decided in favour of the Revenue, it must be remembered that the finding of the Tribunal that the assessee acted in a bona fide manner, has to be kept in mind and, therefore, no penalty can be imposed on the assessee under Section 221 because of the specific stipulation in the proviso to Section 201(1) of the said Act. We also note that the exact quantum of the default needs to be computed. It would, therefore, be necessary to remand the matter to the assessing officer for the limited purpose of computing the exact quantum of default and the interest payable under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2022, W.P. (C) 6893/2022, W.P. (C) 7978/2022, W.P. (C) 11706/2022, W.P. (C) 4920/2023, and W.P. (C) 5313/2023 and quash the final orders under Section 201 of the Act. The respondents shall decide the notice proceedings afresh and in accordance with the principles laid down in the instant decision.
92. We also allow W.P.(C) 9483/2019, W.P.(C) 11232/2019, W.P.(C) 4033/2022 and W.P.(C) 299/2022 and set aside the final orders under Section 201 and consequential penalty orders referable to Section 271C impugned therein with liberty reserved to the respondents to retry the issue bearing in mind the judgments in Eli Lilly, Singapore Airlines and American Express.
93. We allow W.P. (C) 6552/2022 and W.P. (C) 6558/2022 and quash the impugned notices and orders of reassessment bearing in mind the undisputed fact that the respondents in these two writ petitions have rested their case on Section 194 of the Act. The said issue stands conclusively answered against the respondents in light of the judgment in BPTP. We however leave it open to the respondents to consider these two cases under Section 201 of the Act and draw proceedings afresh if permissible in law. X X X X Extracts X X X X X X X X Extracts X X X X
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