9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (6) TMI 1847 - AT - Income TaxTDS u/s 194C and 194A - External Development Charges (herein referred to as EDC ) and interest on late payment of EDC to Greater Mohali Area Development Authority ( GMADA ) - AO held that tax was required to be deducted u/s 194C and u/s 194A on interest payment made to GMADA - As the assessee had not deducted tax at source he treated the assessee/person responsible as assessee in default and created demand u/s 201(1) / 201(1A) HELD THAT - A perusal of the notifications and policies of the Govt. also clearly reveal that though in lieu of the benefits concessions incentives given by the government to the promoter for the purpose of development of infrastructure the proportionate cost at fixed rates is got deposited by the government from the promoter for external development work yet the development is carried out by the local authority out of its own obligations/duties. The entire discussion can be summed up in the manner that though the promoter contributes towards the proportionate cost of infrastructure development however the works are not carried out by the local authority in consequence of specific performance of the agreement/contract but out of its own obligations and duties towards the public. Since the agreement cannot be said to be a work / service contract hence the provisions of section 194C will not be attracted in this case. Interest paid on account of delayed payment of EDC charges - The perusal of the above statutory provisions of section 29 of the Punjab Regional and Town Planning and Development Act 1995 read with notification dated August 14, 2006 reveals that the GMADA has been established by the State Act. As per the sub section (4)(1) of section 29 GMADA is a body corporate as well as local body. In the case of CIT (TDS) Vs. Canara Bank 2016 (5) TMI 570 - ALLAHABAD HIGH COURT has elaborately discussed the distinction between a corporation established under an Act and body incorporated under an Act. Hon ble High Court while replying upon the decision in the case of Dalco Engineering (P.) Ltd. v. Satish Prabhakar Padhye 2010 (3) TMI 912 - SUPREME COURT has observed that a company incorporated under the Companies Act is not created by the Company Act but comes into existence in accordance with the provisions of the said Act and that there was a well-marked distinction between body created by a statute and a body which after coming into existence is governed in accordance with the provisions of a statute. The Hon ble High Court while discussing about the status of New Okhla Industrial Development Authority Noida which was established under the Uttar Pradesh Industrial Area Development Act 1976 has held that the said corporation (Noida) was established by the State Act and therefore was entitled to exemption payment of tax u/s 194A of the Act. The above decision of the Hon ble Allahabad High Court is squarely applicable to the facts and circumstances of the case as the GMADA has been constituted by the State Government Act and it has been specifically provided that it is a body corporate and in view of the notification dated October 22 1977 of the Central Government the GMADA falls under the definition of any Corporation established by the Central State or Provincial Act and thus the provisions of section 194A are not applicable. In view of this the assessee was not liable to deduct TDS while remitting interest on delayed EDC charges to the GMADA. We uphold the order of the CIT(A) in setting aside the impugned demand but on different grounds as discussed above. It is clarified that any observation made in this order will not be construed to or subscribing to or approving of the view in any manner of the CIT(A) that the EDC charges or interest thereupon by GMADA was not the taxable income of the GMADA. The above question is left open to be decided in an appropriate case. This appeal of the revenue is dismissed
Issues Involved:
1. Application of Section 194C of the Income Tax Act, 1961 regarding External Development Charges (EDC). 2. Application of Section 194A of the Income Tax Act, 1961 regarding interest on delayed payment of EDC. 3. Determination of whether GMADA is a nodal agency acting on behalf of the Punjab Government. Detailed Analysis: Issue 1: Application of Section 194C on External Development Charges (EDC) The Revenue contended that the payments made to GMADA for EDC should attract TDS under Section 194C of the Income Tax Act, 1961, as they were in the nature of a service contract. The Assessing Officer held the assessee in default for not deducting tax at source on these payments. The CIT(A), however, deleted the demand, relying on a previous decision for the assessment year 2009-10, where it was held that GMADA, being a nodal agency, received payments on behalf of the Punjab Government, and thus, tax was not required to be deducted. The Tribunal examined the agreement between the assessee and the Punjab Government, noting that the agreement was for the development of infrastructure as part of the state’s policy to attract investment. The Tribunal found that the payments were not made under a work or service contract but were statutory obligations. The Tribunal concluded that the provisions of Section 194C were not applicable as the development work carried out by GMADA was part of its statutory duties and not a contractual obligation with the assessee. Issue 2: Application of Section 194A on Interest on Delayed Payment of EDC The Revenue argued that the interest paid on delayed EDC payments was in the nature of interest other than interest on securities and should attract TDS under Section 194A of the Income Tax Act, 1961. The CIT(A) deleted the demand, stating that the payments were made to GMADA, a nodal agency acting on behalf of the Punjab Government, and therefore, TDS was not applicable. The Tribunal upheld this view, referencing a notification dated 22 October 1970, which exempts corporations established by a Central, State, or Provincial Act from the provisions of Section 194A. The Tribunal noted that GMADA was established under the Punjab Regional and Town Planning and Development Act, 1995, making it a body corporate and a local authority. Consequently, GMADA fell under the exemption provided by the notification, and the assessee was not liable to deduct TDS on the interest payments. Issue 3: Determination of GMADA’s Role as a Nodal Agency The Tribunal considered whether GMADA acted as a nodal agency on behalf of the Punjab Government. The Tribunal noted that GMADA was created by a state act and was responsible for the development and regulation of the area as per the state’s policies. The Tribunal observed that GMADA collected EDC charges as part of its statutory duties and not under a contractual obligation with the assessee. The Tribunal also referred to a decision by the Punjab & Haryana High Court, which confirmed that GMADA acted as a nodal agency for the state government and was not authorized to deny concessions to the assessee. Conclusion: The Tribunal dismissed the appeals by the Revenue, confirming that: 1. Section 194C was not applicable to the EDC payments as they were statutory obligations and not part of a work or service contract. 2. Section 194A was not applicable to the interest on delayed EDC payments as GMADA was exempt under the notification issued by the Central Government. 3. GMADA acted as a nodal agency on behalf of the Punjab Government, and the payments made to it were not subject to TDS. The Tribunal upheld the CIT(A)’s orders on different grounds, emphasizing that the EDC charges and interest thereon did not constitute taxable income of GMADA. The appeals for the assessment years 2010-11, 2011-12, and 2012-13 were dismissed.
|
