Pivotal Infrastructure Ltd Vs Addl. CIT (ITAT Delhi)
No TDS is required to be deducted on EDC payments made to HUDA, as these payments were made on the directions of DTCP which are deposited with the Consolidated Fund of State, which has also been clarified by DTCP vide Memo No. DTCP/ACCFTS/AO(AQ)/CAO/2894/2018 dated 19-06-2018 issued by Directorate of Town & Country Planning, Haryana. As these payments though made to HUDA, but for and on behalf of DTCP which are being further deposited with Consolidated Fund of State. This is the reason HUDA in its financial accounts showing EDC received as Current Liabilities and not being taken to income. As these payments are to State Government, and consequently not liable for which TDS is to be deducted.
A.O. was of the opinion that HUDA is taxable entity who was rendering services for External Development Work and receiving the consideration for such services, in view of Circular No. 681 of CBDT dated 08/03/1994, the TDS was applicable on EDC charges. Thereafter, the AO has reproduced various circulars dated 15.01.2002, 08.07.2002, 25.09.2009 and 14.08.1996 issued by Accounts Officer, for Chief Controller of Finance. HUDA, Panchkula vide which EDC charges were fixed. The Ld. A.O. was of the opinion that the assessee has paid EDC for the work carried out by Huda and hence the same was liable for TDS and passed penalty order u/s 271 C of the Act by imposing penalty for the year under consideration of Rs. 14,24,000/-.
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 that EDC has been received for execution of various external development works and as and when the development works are carried out, the EDC’s liabilities are reduced accordingly. It is also not in dispute that HUDA is engaged in acquiring land, developing it and finally handing it over for a price. It is also not in dispute that EDC is fixed by HUDA from time to time. However, the fact of the matter remains that payment has been made to HUDA through DTCP which is a Government Department and the same is not in pursuance to any contract between the assessee and HUDA. Thus, the payment of EDC is not for carrying out any specific work to be done by HUDA for and on behalf of the assessee but rather DTCP which is a Government Department which levies these charges for carrying out external development and engages the services of HUDA for execution of the work. Therefore, it is our considered view that the assessee was not required to deduct tax at source at the time of payment of EDC as the same was not out of any statutory or contractual liability towards HUDA and, therefore, the impugned penalty was not leviable. We note that similar view has been taken by the Coordinate Benches of ITAT Delhi in the cases of Santur Infrastructure Pvt. Ltd. vs. ACIT in ITA 6844/Del/2019 vide order dated 18.12.2019, Sarv Estate Pvt. Ltd. vs. JCIT in ITA No.5337 & 5338/Del/2019 vide order dated 13.09.2019 and Shiv Sai Infrastructure (Pvt.) Ltd. vs. ACIT in ITA No.5713/Del/2019 vide order dated 11.09.2019. A similar view was also taken by the Coordinate Bench of ITAT Delhi in case of R.P.S Infrastructure Ltd. vs. ACIT in 5805, 5806 & 5349/Del/2019 vide order dated 23.07.2019. Therefore, on an identical facts and respectfully following the orders of the Coordinate Benches as aforesaid, we hold that the impugned penalty u/s 271C of the Act is not sustainable. The order of the Ld. CIT (A) is set aside and the penalty is directed to be deleted.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is filed by the assessee against the order dated 27/06/2019 of the ld. Commissioner of Income Tax (Appeals)–31, New Delhi [hereinafter referred to CIT (Appeals)] for Assessment Year 2017-18.
2. The assessee has raised the following substantive grounds of appeal:-
“1. That on the facts and in the circumstances of the case and in law, Ld CIT-A grossly erred in not deleting the impugned penalty order of Rs 14,24,000,00 u/s 271(l)(c) passed by the Ld Add! CIT, Range-76, Delhi (Ld AO) as the same was passed without application of mind and was purely based on whims and wishes of the Ld AO and was based on vague and ambivalent notices.
2. That on the facts and in the circumstances of the case and in law, Ld CIT-A grossly erred in not deleting the impugned penalty order was passed without appreciating that underline payments of EDC/IDC to HUDA is a statutory obligation levied by the State Govt of Haryana under the HUDA Act and the payment of which is to be essentially made without any choice / option to the payer.
3. That on the facts and in the circumstances of the case and in law, Ld CIT-A grossly erred in not deleting the impugned penalty order was passed without appreciating that there exists no master servant or contractual relationship between the DTCP/HUDA and the assessee.
4. That on the facts and in the circumstances of the case and in law, Ld CIT-A grossly erred in not deleting the impugned penalty order was passed without appreciating that the provisions of Chapter XVII of the Act in as much as no tax was required to be withheld on EDC/IDC payments made to DTCP/HUDA and the assessee could not be treated as assessee in default.
5. That on the facts and in the circumstances of the case and in law, Ld CIT-A grossly erred in not deleting the impugned penalty order was passed without appreciating that the initiation of proceedings under Sec 201(1)/201(1A) of the Act is illegal, bad in law, prejudice to the interest of the assessee, void ab initio, without any basis and is purely on non-application of mind.
6. That on the facts and in the circumstances of the case and in law, Ld CIT-A grossly erred in not deleting the impugned penalty order was passed without appreciating that all the payments were made at the directions of the DTCP & and it was a pre-condition to grant a license for colonization, being payments made to State Government are not amenable to tax withholding under Chapter XVII in terms of Sec 196 of the Act.
7) That on the facts and in the circumstances of the case and in law, Ld CIT-A grossly erred in not deleting the impugned penalty order was passed without appreciating that the revenue is failed to pin point the precise provisions / sections under which the assessee is required to withhold the tax on EDC/IDC payments and the penalty orders are passed purely on the mercy of Ld AO & relying on the basis of survey report.
8) That on the facts and in the circumstances of the case and in law, Ld CIT-A grossly erred in not deleting the impugned penalty order which passed without appreciating that the HUDA is liable to assessment u/s 143(3) & tax alleged to be not deducted there from cannot once again be received from the assessee, in terms of Sec 201(1) of the Act.
9) That on the facts and in the circumstances of the case and in law, Ld CIT-A grossly erred in not deleting the impugned penalty order which was passed without appreciating that there exists no contract between HUDA/DTCP for payments of EDC/IDC, rather it is a statutory obligation. In contract there exists always a wish to change the contractor, but in the present case it has to be paid without any negotiations & bargaining’s under compulsion. No control over pricing or terms of work, time framework or other normal provisions of the Act. There also exists no right with the assessee to terminate the contract, change the terms of the contract. Rather these options are available to HUDA/DTCP under statutory / legal provisions
10) That on the facts and in the circumstances of the case and in law, Ld CIT-A grossly erred in not deleting the impugned penalty order was passed without appreciating that on the facts and in the circumstances of the case and in law, Ld AO in passing the penalty order u/s 271(l)(c) by violating the principles of audi-alterm pattern i.e. Principles of natural justice, and are prejudicial to the interest to the assessee.”
3. Brief facts of the case are that, a survey u/s 135A was carried out at the business/office premises of the Haryana Urban Development Authority. (H0DA) by the DOT (TDS), Panchkula who forwarded the details and findings of the survey. On detailed examination of the survey report and verification of the facts of the ease of assesses, the AO noticed that TDS was not made on payment of External Development Charges (EDC) and accordingly penalty u/s 271C Act was initiated on 24/07/2017 In response, the assessee filed a reply dated 09.11. 2017 stating that provisions of section 194C of the Act were not applicable on payment, of EDC because the payment was made to the Government and not to the HUDA. The AO noticed that demand drafts for EDC payment were issued in the name Chief Administrator, HUDA and the amount paid by the assessee for the years under consideration i.e. A.Y 2013-14 & 2016-17 was Rs. 19,90,00,000/- Rs. 7,12,00,000/-, respectively. The AO further mentioned that HUDA Develops Urban Infrastructure for which it was receiving EDC charges from various parties and quantum of such charges received are under: –
