2022 (9) TMI 1450 - AT - Income Tax

Penalty levied u/s 271C - non deduction of TDS on the payments made for External Development Charges (EDC) to HUDA - HELD THAT - Tribunal in the case of TDI Infrastructure Ltd. 2022 (7) TMI 388 - ITAT DELHI held 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 penalty under section 271C of the Act was not leviable. Decided in favour of assessee.

Summary

Issues:
Appeal against penalty under section 271C of the Income Tax Act, 1961 for non-deduction of tax on payments made for External Development Charges (EDC) to HUDA.

Detailed Analysis:
1. The appeal was filed against the penalty levied under section 271C of the Income Tax Act, 1961. The issue revolved around whether the penalty was sustainable for non-deduction of tax on payments made for External Development Charges (EDC) to HUDA. The Tribunal referred to a previous case involving TDI Infrastructure Ltd. where it was held that the assessee was not required to deduct tax at source for EDC payments as there was no statutory or contractual liability towards HUDA. The Tribunal noted that similar views were upheld in various cases by Co-ordinate Benches, emphasizing that the payment of EDC was not for specific work by HUDA but was routed through a Government Department.

2. The Tribunal analyzed the facts and contentions presented, highlighting that the payments made to HUDA were not in pursuance of a works contract, and there was no direct contract between the assessee and HUDA. The Tribunal considered the bonafide belief of the assessee regarding the non-deduction of TDS on EDC payments, especially in light of a clarification issued by DTCP stating that no TDS was required. The Tribunal cited relevant legal precedents and emphasized that if tax was not deducted under a bonafide belief, no penalty under section 271C would be leviable due to the absence of contumacious conduct by the assessee.

3. The Tribunal further discussed a case involving the Bank of Nova Scotia where it was held that for the levy of penalty under section 271C, contumacious conduct on the part of the assessee must be established. The Tribunal concluded that in the present case, there was no substantial question of law, and the facts and law had been correctly assessed by the authorities. Consequently, the Tribunal dismissed the appeal, emphasizing that the levy of penalty under section 271C could not be sustained based on the facts and legal interpretations provided.

4. Considering the identical facts and following the decision in the TDI Infrastructure Ltd. case, the Tribunal deleted the penalty levied under section 271C of the Act. The Tribunal allowed the grounds raised by the assessee and ultimately allowed the appeal, setting aside the impugned orders related to the penalty.

In conclusion, the Tribunal's detailed analysis and interpretation of the legal provisions and precedents led to the deletion of the penalty under section 271C for non-deduction of tax on payments made for External Development Charges to HUDA, highlighting the importance of bonafide belief and absence of contumacious conduct in such cases.