JCIT Vs Experion Developers Pvt Ltd (Supreme Court of India)
Delhi High Court Ruling on TDS on External Development Charges
The controversy concerned the liability of real-estate developers to deduct tax at source (TDS) on External Development Charges (EDC) paid to the Haryana Urban Development Authority (HUDA). In the Delhi High Court proceedings, the petitioners challenged orders passed under Sections 201(1) and 201(1A) of the Income-tax Act, 1961, whereby the Assessing Officer had treated EDC payments as attracting TDS. The lead matter was DLF Homes Panchkula Pvt. Ltd. v. JCIT (OSD), with the connected petitions involving materially similar orders.
The petitioners were real-estate developers who had entered into agreements with the State Government of Haryana through the Director General, Town & Country Planning, under the Haryana Development and Regulation of Urban Areas Act, 1975 and the Rules framed thereunder. Payment of proportionate development charges was one of the requirements associated with obtaining licences for development projects. The petitioners contended that EDC represented statutory development charges and not consideration for services, rent or a contractual arrangement attracting TDS.
The Assessing Officer nevertheless treated EDC as “rent” and invoked Section 194-I, quantifying substantial demands under Sections 201(1) and 201(1A). Before the High Court, the Revenue conceded that Section 194-I was not applicable and that EDC could not be characterised as rent, but argued that the matter should nevertheless be remanded because the correct provision could be Section 194C.
