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TMI Blog2019 (9) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. - I.T.As. No.5805, 5806, 5349/DEL/2019 - - - Dated:- 23-7-2019 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER Appellant by: Shri Ved Jain, Adv, Ms. Surbhi Goya, CA And Shri Nischay Rautoar, CA Respondent by: Shri Surender Pal, Sr. D.R. ORDER PER BENCH: The aforesaid appeals have filed by the assessee against the penalty levied under section 271 C on account of default in deducting tax at source, for the Assessment Years 2014-15 and 2015-16, (being ITA No. 5805/Del/2019 ITA No. 5806/Del/2019), which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015-16 ₹ 42,20,760/- 2015-16 2016-17 ₹ 5,50,000/- 3. Aggrieved by the order of the AO, assessee filed appeal before the Ld. CIT (A). However, Ld. CIT (A) confirmed the penalty levied by the AO. 4. Now in the second appeal, for the Assessment Year 2014-15, assessee has challenged the impugned orders on following grounds of the appeal:- 1. On the facts and circumstances of the case, the order passed by the leamed Commissioner of Income Tax (Appeals) [CIT (A)] is bad both in the eye of law and on facts. 2. On the facts and circumstance of the case, the Learned CIT(A) has erred both on facts and in laws in confirming penalty amounting to ₹ 47,79,714/-, under Section 271 C of the Act. 3. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the order passed by the learned AO under section 271 C of the Income tax Act despite the fact that the same is barred by limitation. 4. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the assessee are not in the nature of payments as specified under section 194C of the Act. 12. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the penalty rejecting the contention of the assessee that the payments have been made to comply with the terms and conditions of an agreement named Bilateral Agreement executed between Assessee and Governor of Haryana, acting through Directorate of Town and Country Planning and thus provisions of TDS are not applicable on such payments. 13. The appellant craves leave to add, amend or alter any of the grounds of appeal. 5. Before us, Ld. Counsel for the assessee, Sri Ved Jain reiterated the facts and submitted that the assessee company for the purpose of development of urban area was required to obtain license for developing Group Housing Colony on the land falling in revenue estate of Village Kheri Kalan and Baselwa, sector 88, Faridabad from Govt. of Haryana in accordance with provisions of Haryana Development Regulation of Urban Areas Act, 1975 (HRDUA Act). The assessee company made an application to the Director, T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich included letter dated 26.05.2006 issued to assessee by DTCP in response to the application made for grant of license,(the copy of which has been placed in the PB at Pages 65-67); Copy of Bank Guarantee dated 13.06.2006 entered into between Oriental Bank of Commerce and Governor of Haryana, acting through DTCP (PB Page 68-77); Copy of Bilateral Agreement and LC-IV dated June, 2006 entered into between the assessee company and Governor of Haryana acting through DTCP (PB Page 78-93); Copy of License issued by DTCP to the assessee company for setting up Group Housing Colony at village Kheri Ka1an and Baselwa District, Faridabad (PB Page 94-99); Copy of letter of payments issued by the assessee company to DTCP (PB Page 100-106); Copy of order dated 12.05.2017 issued by DTCP (PB page 107); Copy of Buyer's Agreement dated 24.10.2006 for allotment of a residential unit in the group housing colony to be developed by the assessee company (PB Page 108-111). It was submitted by the Ld. Counsel that the AO disregarded all the above explanations and documents filed by the assessee and alleged that since the payment was made through a demand draft in the name of HUDA, which is a taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi in the case of Sunstar Exposition P Ltd Vs ITO in ITA No. 4869/Del/2012 dated. 12.4.2017 6.1 On the basis of the above judgments, the Ld. Counsel contended that the AO has failed to specify in the notice issued under section 274 read with 271C of the Act, as to whether assessee has failed to deduct tax at source under section 194C or 194-I. Thus, in these circumstances, penalty levied by the AO and confirmed by Ld. CIT (A) is not sustainable in the eyes of law. 7. The Ld. Counsel further submitted that penalty is otherwise untenable as there was no obligation on the assessee to deduct tax at source in respect of the payment made on account of EDC charges. The AO has wrongly assumed that these payments are to HUDA, whereas from the documents placed in the paper book, it is clear that these payments are required to be made as a condition for granting license to DTCP. The assessee being engaged in the business of real estate development/developing projects in Haryana, had to obtain a license from the Govt. of Haryana in order to carry out any development activity in any urban area as per the provisions of section 3 of Haryana Development and Regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not current liability. However, the fact remains that HUDA has accounted such amount as its liability and not its income which substantiates the fact that the said payments are made to HUDA on behalf of DTCP. He submitted that there is no liability to deduct TDS in respect of payments made to Government as per section 196 of Income Tax Act, 1961. Thus, payments being made to Government Authority in the case in hand, there is no requirement to deduct TDS and consequently there cannot be any question to levy penalty under section 271C of the Act. The above facts get further supported by the Circular dated 19.06.2018 issued by DTCP, Haryana vide Memo No. DTCP/ ACCTTS/ AO(HO) / CAO / 2894/2018 placed at PB Page 148-149, wherein it has been clarified that the payment of EDC was not liable to TDS deduction, since the payment is made to a Govt. 8. The Ld. Counsel clarified that assessee's case is not that HUDA is a Government Department or a local authority so as to claim exemption. Rather the case of the assessee is that these are charges payable consequent to a license granted by DTCP, Government of Haryana and further, the payment of EDC charges is not in the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted that the issue is a debatable one and not free from controversy. He invited our attention to section 273B, whereby notwithstanding anything contained in section 271C, no penalty is to be on the person or the assessee for failure to deduct tax at source if such person or the assessee proves that there was a reasonable cause for the said failure. In the present case, as established above, there was sufficient reason for assessee to not deduct TDS. In support of this proposition, he placed reliance on the judgement of Supreme Court in the case of Commissioner of income tax vs bank of Nova Scotia, 380 ITR 550. Further, reliance was placed on the following judgments: i. ITAT Delhi in the case of DCIT TDS) , ACIT, TDS AND JCIT, TDS, Dehradun versus The Joint Secretary Organizing Committee For Winter Games ii. ITAT Delhi in the case of Virgin Mobile India Pvt. Ltd Versus JCIT (TDS), Range-51, Room No. 406, New Delhi No. -ITA No. 3431/Del/2015 dated.-November 28, 2018 iii. ITAT Delhi in the case of Addl CIT (TDS) , Ghaziabad Versus Jaypee Agra Vikas Ltd, Jaypee Ganga Infrastructure Corporation Ltd, Kanpur Fertilizers And Cement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e DTCP, the same have been paid to HUDA. Further, these payments are not in the nature of payment or in pursuance of works contract. There is no privity of contract between the assessee and the HUDA. On the contrary, the agreement is between Assessee Company and the DTCP which admittedly is a Government Department as agreement has been signed by DTCP on behalf of Governor of Haryana. We are of the view that we need not go in all these issues. From the facts, it is evident that the payments have been made by the assessee to HUDA which is an authority of Haryana Government created by enactment of Legislature for carrying out developmental activities in the state of Haryana. Such Authorities admittedly are not in the category of local authority or Government. These payments were made during the year 2013-2016 and during this period, that is, prior to issue of CBDT Circular dated 23.12.2017, there was no clarity as regard the deduction of tax on these payments. We are of the view that the assesse 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 licenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there is no substantial question of law, the facts and law having properly and correctly been assessed and approached by the Commissioner of Income Tax (Appeals) as well as by the Income Tax Appellate Tribunal. Thus, we see no merits in the appeal and it is accordingly dismissed. 12. The above judgment has been followed by the Coordinate Bench of the ITAT DELHI in the case of DCIT TDS), ACIT, TDS AND JCIT, TDS, Dehradun Versus The Joint Secretary Organizing Committee For Winter Games whereby the penalty levied under section 271 C has been deleted by recording the following findings: 31. We have carefully considered the rival contentions and perused the orders of the lower authorities. On looking to the facts of the case as discussed by us in appeal of the assessee and revenue in 201(1) and 201(1A) proceedings above, we find that the belief of the assessee is bonafide and failure to deduct tax at source u/s 194C of the Act is for a reasonable cause. The ld Assessing Officer could not show any contemptuous conduct on part of the assessee for non-deduction of tax at source. There could also not be any reason for non-deduction as assessee has made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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