2023 (2) TMI 168 - AT - Income Tax

Penalty levied u/s 271C - TDS u/s 194C - non-deduction of TDS on the External Development Charges paid to Haryana Urban Development Authority HUDA - HELD THAT - As decided in SATYA DEVELOPERS PVT. LTD. Case 2022 (6) TMI 687 - ITAT DELHI assessee has not committed any violation of provision of Chapter XVII B of the Act by making payment towards EDC charges to DGTCP Haryana through HUDA without deduction of TDS. Thus we direct the Assessing Officer to delete the penalty levied under section 271C of the Act on the payments made to the authorities of HUDA. Decided in favour of assessee.

Summary

Issues:
Penalty under section 271C of the Income Tax Act for non-deduction of TDS on External Development Charges paid to Haryana Urban Development Authority (HUDA).

Analysis:
The appeals were filed against the order of the Commissioner of Income Tax (Appeals) sustaining the penalty under section 271C of the Income Tax Act for non-deduction of TDS on payments to HUDA. The assessee argued that a co-ordinate bench of the Tribunal had previously deleted a similar penalty in a different case, stating that provisions of section 194C were not applicable to payments to an agency like HUDA. The Department relied on the orders of the lower authorities.

The Tribunal examined whether penalty under section 271C was justified for non-deduction of TDS on payments made towards External Development Charges to HUDA. It referred to a previous case where the penalty was deleted due to the nature of the payments and the clarification provided by the Directorate of Town and Country Planning, Haryana. The clarification stated that since HUDA is an executing agency for the State Government, payments made to HUDA were essentially payments to the State Government, exempting them from TDS deduction obligations under Section 196 of the Act.

Considering the previous decisions and the clarification provided, the Tribunal held that the penalty imposed under section 271C was not justified as the assessee had not violated the provisions of Chapter XVII B of the Act by making payments to HUDA without deducting TDS. Therefore, the Tribunal directed the Assessing Officer to delete the penalty levied on the payments made to HUDA, allowing all three appeals of the assessee.

In conclusion, the Tribunal found merit in the assessee's argument based on the previous decisions and the clarification provided, leading to the cancellation of the penalty under section 271C. The judgment emphasized the nature of payments to HUDA as payments to the State Government, exempting them from TDS deduction obligations, and aligned with the decisions of the Co-ordinate Bench in similar cases.