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2019 (9) TMI 631 - AT - Income TaxPenalty u/s 271C - bonafide belief - TDS liability on payment paid for external development charges (EDC) to Govt. by issuing payment in the name of Haryana Urban Development Authority (HUDA) for and on behalf of and on instructions of Govt. - bonafide belief - HELD THAT - As decided in RPS INFRASTRUCTURE LTD. VERSUS ACIT, RANGE-78, NEW DELHI. 2019 (9) TMI 39 - ITAT DELHI assessee was under a bonafide belief that no tax is required to be deducted at source on such payments, firstly, for the reason that agreement was between DTCP, who is Governmental authority and licence was granted by the Government and EDC charges was directed to be paid to HUDA, therefore, this could led to reasonable cause that TDS was not required to be deducted; Secondly, DTCP had issued a clarification dated 29.06.2018 to the effect that no TDS was/is required to be deducted in respect of payments of EDC and this clarification issued by DTCP, covers both past and future as the words used are was/is. This shows that Governmental authority itself has demanded not to deduct TDS. In case even if tax was required to be deducted on such payment but not deducted under a bonafide belief then no penalty shall be leviable under section 271 C of the Act as there was no contumacious conduct by the assessee. - Decided in favour of assessee.
Issues:
Challenge to levy of penalty u/s 271C for assessment year 2017-18 based on various grounds including jurisdiction, legality, sustainability, and absence of default. Interpretation of provisions of chapter XVIIB of the Act regarding payment of external development charges (EDC) to Govt. without TDS deduction. Examination of reasonable cause for non-deduction of TDS on payments made to Govt. for EDC charges. Analysis of CBDT clarification and its impact on TDS applicability. Comparison with similar cases and judgments regarding penalty under section 271C. Analysis: Issue 1: Challenge to Penalty u/s 271C The appeal challenges the penalty imposed under section 271C for the assessment year 2017-18, questioning its legality, jurisdiction, and sustainability. The assessee contests the levy of penalty on various grounds, including the absence of default for initiating penalty proceedings under section 271C. The argument revolves around the interpretation of the provisions of the Income Tax Act related to the payment of external development charges (EDC) to the Government without deduction of TDS. Issue 2: Reasonable Cause for Non-Deduction of TDS The case involves an assessment of whether there existed a reasonable cause for the non-deduction of TDS on payments made to the Government for EDC charges. The assessee asserts a bonafide belief that the payments were covered under section 196 of the Income Tax Act, hence not subject to TDS deduction. This belief is supported by a clarification issued by the Directorate of Town & Country Planning, Government of Haryana, stating that no TDS was required even before the clarification date. Issue 3: Interpretation of CBDT Clarification The analysis delves into the interpretation and impact of a CBDT clarification dated 23.12.17 regarding the applicability of TDS on payments made to the Government for EDC charges. The argument dissects the nature of the CBDT clarification, emphasizing that it was an opinion rather than a directive under section 119 of the Act. The relevance of the clarification in determining the liability for TDS on payments made to the Government is a crucial aspect of the case. Issue 4: Comparison with Similar Cases and Judgments The judgment extensively references and compares the current case with similar cases and judgments, particularly the decision of the Coordinate Bench in RPS Infrastructure Ltd. vs. ACIT. The Tribunal's analysis in the cited case regarding the reasonable cause for non-deduction of TDS on EDC payments to HUDA serves as a precedent in determining the outcome of the present appeal. The application of legal principles and precedents from previous cases plays a significant role in the final decision to delete the penalty under section 271C. This detailed analysis of the issues involved in the judgment showcases the complex legal arguments, interpretations of statutory provisions, and reliance on precedents to arrive at a conclusion favoring the assessee in challenging the penalty imposed under section 271C.
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