EDC Attracts Section 194C TDS; Administrative Charges Remanded: ITAT Delhi

ITO Vs Ashutosh Infra Private Limited (ITAT Delhi)

Summary: The Delhi Bench of the Income Tax Appellate Tribunal dealt with the Revenue’s appeal for AY 2016-17 concerning tax deduction at source on payments connected with External Development Charges (EDC) and other amounts paid to Haryana authorities. The assessee, Ashutosh Infra Private Limited, was engaged in real estate activities. Following information received after a survey/inspection of Haryana Urban Development Authority (HUDA), now Haryana Sheheri Vikas Pradhikaran (HSVP), the Assessing Officer initiated proceedings under Sections 201(1) and 201(1A) of the Income-tax Act, 1961. The dispute principally concerned applicability of Section 194C.

The AO initially proceeded on the basis that the assessee had made EDC/IDC payments aggregating to Rs.1,33,28,550/- without deducting TDS. This comprised Rs.18,00,000/- admittedly paid towards EDC on 23.07.2015 and Rs.1,15,28,550/- which the assessee initially denied having paid. The AO held the assessee to be an assessee-in-default and raised demands of Rs.2,66,571/- under Section 201(1) and Rs.2,36,994/- under Section 201(1A). The CIT(A), accepting the assessee’s contentions, directed deletion of the demands.

Before the Tribunal, the Revenue relied principally on Puri Construction Pvt. Ltd., reported in (2024) 462 ITR 326 (Delhi), wherein the Delhi High Court held that EDC payments to HUDA attract TDS under Section 194C. Reliance was also placed on DCIT Vs Ireo Grace Realtech Private Limited and Trehan Promoters & Builders Pvt Ltd Vs ITO. The assessee itself accepted before the Tribunal that its Rs.18,00,000/- EDC payment was covered by the jurisdictional High Court ruling in Puri Construction and could be decided against it. It was, however, pointed out that an SLP against that judgment was pending before the Supreme Court.

The Tribunal accordingly held that the assessee failed to deduct TDS under Section 194C on the Rs.18,00,000/- EDC payment made to HUDA/HSVP on 23.07.2015. This issue was decided in favour of the Revenue. At the same time, since the Puri Construction judgment was stated to be under challenge before the Supreme Court, the Tribunal directed that both parties would remain bound by the outcome of the SLP and directed the AO to record and implement that direction.

A separate factual controversy existed regarding the remaining Rs.1,15,28,550/-. Before the AO and CIT(A), the assessee had denied making these payments. However, during the Tribunal proceedings it admitted that the payments had in fact been made and contended that they represented administrative charges arising from change in beneficial interest/development rights and shareholding under a Haryana Government policy rather than EDC/IDC/IAC liable to TDS. The assessee produced a 15-page paper book containing the licence, policy, applications, demand drafts, DTCP approvals and related material.

Since these facts and supporting evidence were being presented for the first time before the Tribunal and required examination, verification and enquiry, the ITAT restored the Rs.1,15,28,550/- issue to the AO for de novo determination. The AO was directed to examine the Haryana Government scheme, the nature of the payments and the corresponding obligations under Chapter XVII-B, admit the evidence filed by the assessee and provide proper and adequate opportunity of hearing. The Revenue’s appeal was thus allowed in the manner indicated by the Tribunal.

Cases Discussed

• Puri Construction Pvt. Ltd. — (2024) 462 ITR 326 (Delhi); relied upon as the binding jurisdictional High Court ruling holding that EDC payments to HUDA are subject to TDS under Section 194C; SLP stated to be pending before the Supreme Court.
• DCIT Vs Ireo Grace Realtech Private Limited — ITA Nos. 24 & 28/Del/2025, dated 18.08.2025; relied upon by Revenue for the proposition that EDC payments attract TDS under Section 194C.
• Trehan Promoters & Builders Pvt Ltd Vs ITO — ITA No. 2058/Del/2025, dated 29.10.2025; relied upon by Revenue for the similar view that EDC is liable to TDS under Section 194C.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal in ITA No. 2475/Del/2025for Assessment Year: 2016-17 has been filed by Revenue which has arisen from the learned Addl./JCIT(A)-8, Mumbai appellate order u/s 250 of the Income-tax Act, 1961(in short “1961 Act”) dated 24.02.2025 in DIN and Order No. ITBA/APL/S/250/2024-25/1073631788(1), which appeal in turn has arisen from the order dated 27.02.2023 passed by the learned Assessing Officer u/s 201(1) and 201(1A) of the 1961 Act.

2. Grounds of appeal raised by Revenue in Memo of appeal filed with Income Tax Appellate Tribunal, Delhi Benches, reads as under :-

“1. On the facts and in the circumstances of the case, the Addl./JCIT (A)-8, Mumbai has erred in not holding the assessee to be assessee in default’ u/s.201(1)/201(1A) of the Act on account of non-deduction of TDS u/s 194C of the Act by the Deductor Company on EDC payments made to HUDA.

2. On the facts and in the circumstances of the case, the Addl./JCIT (A)-8, Mumbai has failed to appreciate that External 2 Development Charges (EDC) paid by assessee to HUDA are liable for deduction of TDS u/s 194C of the Income Tax Act, 1961.

3. On the facts and in the circumstances of the case, the Addl./JCIT (A)-8, Mumbai has failed to consider the judgment of the Hon’ble Delhi High Court in the case of M/s Puri Construction Private Limited Vs. Addl. CIT & Ors., 159 taxmann.com 444 (Delhi) [2024] 462 ITR 326 (Delhi) in which the Hon’ble Court has held that EDC payments by a Developer to HUDA would be subject to TDS u/s 194C of the Act.

4.On the facts and in the circumstances of the case, and in view of the CBDT Circular No. 9/2024 dated 17.09.2024 r/w the Para 3(1)(i) of CBDT Circular No. 05/2024 dated 15.03.2024, the case falls under exceptions given therein and thus appeal is being preferred in this case.

5. That, the appellant craves to add, amend, modify and delete any of the grounds of appeal before or at the time of hearing.”

3. Brief facts of the case are that the assessee is engaged in the business of Real Estate activities. The AO received information on 21.03.2017 from the office of ld. DCIT(TDS) Circle, Panchkula, whereby a survey/inspection u/s 133A of the 1961 Act was carried out at the business/office premises of Haryana Urban Development Authority(in Short ‘HUDA’) (now called Haryana Sheheri Vikas Pradhikaran(In Short ‘HSVP’) and SKY High Land Construction Private Limited by the TDS wing of Panchkula, on 09.02.2017 and 14.02.2017. During the course of survey, it was observed that External Development Charges(EDC) was received by HUDA from Private Builders/persons without deducted Income-tax at Source(TDS). EDC is received by HUDA/HSVP for use of urban development infrastructure known as External Development Work. Revenue observed that HUDA is a taxable entity, and said EDC has income character. The AO observed from survey report received from DCIT(TDS) Circle, Panchkula that the assessee has made payments towards EDC to HUDA/HSVP on 23.07.2015, to the tune of Rs. 18,00,000/-.

3.2 Further, the AO received information from the office of ld. JCIT (OSD), TDS Circle, Panchkula , based on information received u/s 133(6) from the IDF under the office of Director of Town & Country Planning(DTCP) , Haryana, wherein it transpires that DTCP has received IDC/IAC from Private Builders /persons without deduction of income-tax at source(TDS). As per AO, since IDC and IAC have income character, therefore it should have been subjected to TDS by Private Builders/persons. The AO observed that the assessee has made payments towards IDC/IAC/EDC to HUDA(HSVP)/IDF during the year under consideration, as under :

3.3 The AO initiated proceedings against the assessee u/s 201(1)/201(1A) of the 1961 Act ,and statutory notices including SCN’s were issued by the AO to the assessee. The assessee participated in the proceedings u/s 201(1) and 201(1A) conducted by the AO. The assessee denied to have made payments of Rs. 1,15,28,550/- to HUDA(now HSVP) . The assessee contended that it only made payments of Rs. 18,00,000/- related to EDC charges to DTCP on 23.07.2015 by way of demand draft debited from its bank account on 20.07.2015. The assessee contended that the remaining payments of Rs. 1,15,28,550/- does not belong to it. The assessee enclosed bank statement for the financial year 2015-16 before the AO to submit that no such payments to the tune of Rs. 1,15,28,550/- were made by it. The assessee submitted that it has only one bank account with HDFC bank bearing number 01712560013748. It submitted that TDS is not applicable on EDC paid by it to HUDA/DTCP. It submitted that HUDA is collecting agency collecting EDC charges on behalf of DTCP. The AO after detailed analysis and deliberations observed that the assessee has made payments of Rs. 1,33,28,550/- to HUDA/IDF(DTCP) towards EDC/IDC without deducting income-tax at source(TDS), while as per Section 194C of the 1961 Act, the assessee ought to have deducted TDS@2% u/s 194C of the 1961 Act., and hence the assessee was held to be an assessee-in-default by the AO , and demand of Rs. 2,66,571/- was raised by the AO against the assessee u/s 201(1) of the 1961 Act, while further demand of Rs. 2,36,994/- was raised by the AO against the assessee u/s 201(1A) of the 1961 Act, vide orders dated 27.02.2023 passed by the AO u/s 201(1) and 201(1A) of the 1961 Act.

4. Aggrieved, the assessee filed first appeal with ld. CIT(A). Main bone of contention of the assessee before ld. CIT(A) was that it only made payment of Rs. 18,00,000/- to DTCP through HUDA. It submitted that no other payments by way of EDC/IAC/IDC were made by it. Thus, the assessee denied having made any payments to the tune of Rs. 1,15,28,550/- to HUDA(HSVP)/ DTCP. It submitted that the assessee has no privity of contract with HUDA. It also submitted that DTCP is covered u/s 196 of the 1961 Act , and no TDS is applicable. The assessee denied to have made any other payments apart from payment of Rs. 18,00,000/- towards EDC , on 23.07.2015. Thus, there was complete denial of the assessee in so far as the remaining payment of Rs. 1,15,28,550/-. The ld. CIT(A) accepted the contentions of the assessee, and held that no income tax is required to be deducted (TDS) on EDC charges of Rs. 18,00,000/- paid by the assessee, and directed Revenue to delete the demand of Rs. 2,66,571/- raised by the AO against the assessee u/s 201(1) of the 1961 Act and also demand of Rs. 2,36,994/- raised by the AO u/s 201(1A) of the 1961 Act.

5. Now it was the turn of the Revenue to be aggrieved, and second appeal has been filed by Revenue with the Tribunal raising as many as 5 grounds of appeal. The ld. Sr. DR submitted that EDC/IDC charges paid by the assessee were to the tune of Rs. 1,33,28,550/- which were subject to TDS u/s 194C, and the assessee failed to deduct income-tax at source u/s 194C while making payment for EDC, the AO has rightly passed order u/s 201(1) and 201(1A) , while ld. CIT(A) erred in giving relief to the assessee. It was submitted misrepresented facts before the authorities below, and obtained order in its favour from ld. CIT(A). The ld. Sr. DR relied upon the judgment and order of Hon’ble Delhi High Court in the case of Puri Construction Pvt. Ltd. reported in (2024) 462 ITR 326(Delhi) , wherein it was held by Hon’ble Delhi High Court that EDC charges payable to DTCP are subject to TDS u/s 194C of the 1961 Act. The ld. Sr. DR also relied upon the order of the Delhi Tribunal in the case of Ireo Grace Realtech Private Limited in ITA nos. 24 & 28/Del/2025 , dated 18.08.2025 , wherein the Delhi Tribunal relied on judgment and order of Hon’ble Delhi High Court in the case of Puri Constructions(supra), and held that EDC payments are subject to TDS u/s 194C of the 1961 Act . The ld. Sr. DR also relied upon order of the Delhi Tribunal in the case of Trehan Promoters and Builders Private Limited v. ITO, in ITA No. 2058/Del/2025, vide order dated 29.10.2025, wherein similar view was taken by Delhi Tribunal that EDC is liable to TDS u/s 194C of the 1961 Act.

5.2 The ld. Counsel for the assessee submitted that the assessee has not only paid EDC but also administrative charges. The assessee has filed paper book containing 15 pages, which is placed on record in file. It was submitted that the assessee was granted license no. 62 of 2009 dated 03.11.2009 valid upto 2.11.2013, by DTCP, Haryana to setting up a commercial colony at Village Ajronda , Sector 12, District Faridabad, Haryana on land admeasuring 1.725 Acres(PB/Page 1-3). It was submitted that there was a new policy announced by Haryana Government, wherein change in beneficial interest viz. change in developer was allowed in the license allotted by Town and Country Planning Department, vide Memo No. PF-51A/2015/2708 dated 18.02.2015, on payment of prescribed administrative charges @ 25% of the applicable license fee prevailing on the date of such application , and in the prescribed manner(PB/Page 4-6) . It was submitted that the assessee applied with DTCP for change in beneficial interest/assignment of joint development rights in the name of Pebble Consultants Private Limited and also shareholding beyond 25%, vide application dated 15.07.2015 filed on 31.07.2015, and the assessee paid requisite fee to the tune of Rs. 47,00,000/- ( Rs. 30,00,000 + Rs. 17,00,000/- ) by way of demand draft drawn on HDFC/State Bank of Patiala.(Page 7-8/PB). It was submitted that DTCP, Haryana vide Memo No. NC/LC-2174/2015/19718 dated 09.10.2015 granted in-principle approval to the assessee by granting permission under policy dated 18.02.2015 , by allowing change in beneficial interest/development rights/marketing rights and Shareholdings by way of collaboration agreement to Pebble Consultants Private Limited in license no. 62 of 2009 dated 03.11.2009, subject to stipulated conditions(PB/Page 9-10). It was submitted that the remaining amount of applicable administrative charges amounting to Rs. 69,43,750/- was deposited with DTCP by the assessee vide demand draft of Rs. 44,24,000/- drawn on State Bank of Patiala and demand draft of Rs. 25,00,000/- drawn on HDFC Bank, vide letter dated 12.01.2016, deposited on 14.01.2016(PB/Page 11-12), It was submitted that DTCP, Haryana vide Endorsement No. LC-2174-JE(SK)-2019/11143 dated 03.05.2019 issued order for change in beneficial interest in favour of Pebble Consultants Private Limited(PB/Page 13-15). It was submitted that payments of EDC to the tune of Rs. 18,00,000/- was subject to TDS u/s 194C in view of judgment and order of Delhi High Court in the case of Puri Constructions Private Limited(supra),and since the assessee has not deducted income-tax at source(TDS) on payment of Rs. 18,00,000/- towards EDC, the same may be decided against the assessee. It was also brought to the notice of the Bench that judgment and order of Hon’ble Delhi High Court in the case of Puri Construction(supra) is now pending adjudication by Hon’ble Supreme Court, as SLP was filed before Hon’ble Supreme Court by aggrieved party. It was submitted that for remaining amount of Rs. 1,15,28,550/- paid by the assessee towards administrative charges as detailed above, the same was not subject to TDS under the provisions of Chapter VII-B of the 1961 Act , and the assessee be granted relief to that extent.

6. We have considered rival contentions and perused the material on record. The facts in brief are narrated in preceding para’s of this order and are not repeated. It is observed that so far as EDC of Rs. 18,00,000/- paid by the assessee to HUDA/HSVP , on 23.07.2015, the assessee has itself contended that in view of binding judgment and order of Hon’ble Delhi High Court (Jurisdictional High Court) in the case of Puri Constructions(supra), the same may be decided against assessee and in favour of Revenue. That being so , Respectfully following the aforesaid judgment and order of Hon’ble Delhi High Court in the case of Puri Constructions(supra), we hold that the assessee has failed to deduct income-tax at source u/s 194C of the 1961 Act, while making payment of EDC to HUDA(HSVP) to the tune of Rs. 18,00,000/- on 23.07.2015. Thus, this issue is decided against the assessee and in favour of Revenue. It is brought to our notice that against the judgment and order of Hon’ble Delhi High Court in the case of Puri Constructions(supra), SLP is pending adjudication before Hon’ble Supreme Court. Thus, we direct that both the parties shall be bound by the outcome of SLP as adjudicated by Hon’ble Supreme Court. The AO is directed to record our aforesaid directions, and implement the same. We order accordingly.

6.2 This brings us to the next issue of non deduction of income-tax at source(TDS) under Chapter XVII-B of the 1961 Act by the assessee while making payments to the tune of Rs. 1,15,28,550/- towards EDC/IDC/IAC to HUDA(HSVP)/DTCP, during the year under consideration. The assessee was in denial mode before ld. CIT(A) as well before ld. AO, and was contending that the assessee has not made any such aforesaid payments. The ld. CIT(A) erred in granting relief to the assessee by ordering deletion of the entire demand raised by the AO u/s 201(1) and 201(1A) , vide its appellate order, wherein aforesaid contentions of the assessee denying the aforesaid payment to the tune of Rs. 1,15,28,550/- were accepted by ld. CIT(A) without any verification and enquiry. When the matter came up for hearing before the Division Bench of the Tribunal, on 06.01.2026, the assessee for the first time admitted before the Tribunal that it has made aforesaid payments to the tune of Rs. 1,15,28,550/- to HUDA(HSVP)/DTCP , which it was earlier denied to have made . The order sheet entry dated 06.01.2026 of the Tribunal , reads as under:

“ 06.01.2026…… Further, AR has submitted that disputed payment alleged to external development charges are not paid to HUDA as EDC but on account of certain charges arising out of amalgamation of companies and projects for which the assessee needs an opportunity to collate relevant information from HUDA and file in the form of paper book…….”

6.3 Thus, it is for the first time before the Tribunal during hearing conducted on 06.01.2026, the assessee made aforesaid averment. Now, the assessee has filed details of the aforesaid payments to the tune of Rs. 1,15,28,550/- for the fist time before the Tribunal, as culled out in preceding para’s of this order. The aforesaid details as well factual submissions now made by the assessee, requires examination, verification and enquiry by the authorities below. The issue also requires to be adjudicated after considering the scheme of Haryana Government under which aforesaid payments were made and also nature of the payments made vis-à-vis obligations casted under Chapter XVII-B of the 1961 Act. Thus, it is considered fit and appropriate in the interest of justice to restore this matter to the file of the AO for fresh determination of the issue of deductibility of income-tax(TDS) under chapter XVII-B of the 1961 Act. Thus, this matter is restored back to the file of the AO for denovo determination , on merits in accordance with law, after giving proper and adequate opportunity of being heard to the assessee. The evidences filed by the assessee shall be admitted by the AO . We order accordingly.

7.In the result, the appeal of the Revenue is allowed in the manner as indicated above

Order is pronounced in the Open Court on 31.08. 2026.