Case Law Details
M/s Perfect Constech Pvt. Ltd. Vs ACIT (ITAT Delhi)
Penalty not leviable for non deduction of TDS under section 271C for EDC charges paid to HUDA as it is non statutory contractual liability
It is seen that in Para 4.3.2, subparagraph (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 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 a similar view has been taken by the Co-ordinate 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 Co-ordinate 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 Co-ordinate 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 ITAT JUDGEMENT
This appeal is preferred by the assessee against order dated 21.06.2019 passed by the Learned Commissioner of Income Tax (Appeals), New Delhi [CIT (A)] for Assessment Year 2014-15, wherein he has upheld the imposition of penalty of Rs.83,80,000/- imposed u/s 271C of the Income Tax Act, 1961 (hereinafter called ‘the Act’).
2.0 The brief facts of the case are that a survey/inspection u/s 133A of the Act was carried out at the premises of Haryana Urban Development Authority (HUDA), Panchkula on 09/02/2017 and 14/02/2017. During the course of search, it was noticed that the assessee had made a payment of External Development Charges (EDC) to HUDA amounting to Rs.41,90,00,000/- during the Financial Year under consideration. The Assessing Officer (AO) noted that the participating private developers were required to pay EDC as provided in the license for setting up a commercial colony on urbanisable land held by it in vicinity and developed by HUDA and that the license is issued by Director, Town and Country Planning, Haryana. The AO further observed that the assessee had failed to deduct/deposit tax at source as required under various applicable provisions of the Act with respect to the EDC paid to HUDA. Therefore, penalty proceedings u/s 271C of the Act were initiated and a penalty of Rs.83,80,000/- was imposed being 2% of the EDC amount paid to HUDA on which tax was alleged to be deducted at source u/s 194C of the Act.
2.1 Aggrieved, the assessee approached the Ld. First Appellate Authority challenging the levy of penalty. The Ld. CIT (A), however, upheld the imposition of penalty.
2.2 The assessee is now before this Tribunal challenging the levy of penalty by the Ld. First Appellate Authority by raising the following grounds of appeal:
“1. That on the facts, circumstances and legal position of the case, the Worthy CIT(A) in Appeal No.149/18-19/289/17-18 dated 21.06.2019 has erred in passing that order in contravention of the provisions of Section 250(6) of the Income Tax Act, 1961.
2. That on the facts, circumstances and legal position of the case, the Worthy CIT(A) was unjustified in confirming the action of the Ld. AO wherein he imposed penalty of Rs.83,80,000/- u/s 271C of the Act on alleged failure to deduct tax at source even when the said penalty was not exigible and more-so when the show cause notice for penalty proceedings was totally vague.
3. That on the facts, circumstances and legal position of the case, the Worthy CIT(A) was unjustified in confirming the action of the Ld. AO wherein he has imposed penalty of Rs. 83,80,000/- u/s 271C of the Act beyond the limitation period and hence the same deserves to be quashed.
4. That on the facts, circumstances and legal position of the case, the Worthy CIT(A) was unjustified in confirming the action of the Ld. AO wherein he has erred in imposing penalty of Rs. 83,80,000/- u/s 271C of the Act in haste, without affording reasonable opportunity and with a biased and prejudiced mind.
5. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same.”
3.0 The Ld. Authorized Representative (AR) submitted that the imposition of penalty was incorrect in as much as the payment of EDC had been made by the assessee in accordance with the license granted by the Department of Town and Country Planning (DTCP) and the payment to HUDA was not made in pursuance of any works contract or under any statutory obligation meaning thereby that when the assessee had no privity of contract with HUDA, the assessee cannot be held liable for imposition of penalty u/s 271C of the Act. The Ld. Authorized Representative reiterated that the assessee had privity of contract with DTCP as per the agreement and that HUDA had merely received the payment for and on behalf of the DTCP. The Ld. Authorized Representative placed reliance on numerous orders of the ITAT wherein a similar levy of penalty had been directed to be deleted by the Co-ordinate Benches of this Tribunal.
4.0 Per contra, the Ld. Sr. Departmental Representative (DR) laid emphasis on section 194C of the Act and contended that HUDA was neither a Government Department nor a local authority and, therefore, any payment being made to it was to be subjected to deduction of tax at source u/s 194C of the Act.
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, subparagraph (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 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 Co-ordinate 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 Co-ordinate 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 Co-ordinate 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.
6.0 In the final result, the appeal of the assessee stands allowed.
Order pronounced on 29th December, 2020.
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