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TMI Blog2019 (9) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... hit Jain, Advocate, Ms. Tejasavi Jain, CA And Ms. Somaya Jain, CA For the Department : Shri N.K. Bansal, Sr. DR ORDER PER AMIT SHUKLA, J.M.: The aforesaid appeals have been filed by the assessee against impugned order dated 30.4.2019 passed by Ld. CIT(Appeals) 31 in relation to the penalty proceedings u/s 271C for the assessment years 2014-15, 2015-16. Assessee has challenged levy of penalty u/s 271C mainly on the following grounds:- I. That the Commissioner of Income Tax Appeals ['CIT (A)'] erred on facts and in law in confirming the penalty order dated 29.01.2018 passed by the assessing officer, levying penalty of ₹ 7,16,000 under section 271C of the Income Tax Act, 1961 ('the Act') for alleged failure to deduct tax at source under section 194C on payment of external development work charges ('EDC') aggregating to ₹ 3,58,00,000. 1.1 That the CIT(A) erred on facts and circumstances of the case and in law in not appreciating EDC payment was made to Haryana Urban Development Authority ('HUDA') for and on behalf of Department o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding, but not limited to sections 194C, it is patently clear that any payment made by an assessee to the Government is not liable to TDS; ergo, an assessee making any payment to the Government without withholding tax at source, cannot be deemed/ held to be in default of provisions of Chapter XVII of the Act. ii. In the present case, it is undisputed that EDC, though paid by the appellant to HUDA, is at the direction and / or on behalf of and / or through DTCP, and such payment is made pursuant to agreement entered into with the Government of Haryana through DTCP (referred infra). Being so, the said payment is clearly payment made to the State Government of Haryana, inasmuch as DTCP is a wing of the State Government of Haryana, having no separate legal existence. iii. That payment of EDC is required to be made to the DTCP, the license giving authority of State Government of Haryana, as a precondition for acquiring the license for development of the urban area. DTCP, the nodal department of Government of Haryana which is responsible to regulate the use of the land in order to prevent ill planned urbanization and haphazard urbanization in or around ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parate departments and governed by two different Acts exercising separate functions and having separate governance and also highlighted various provisions relating to these two. He submitted that under the provisions of the HDRUA Act, only DTCP, which is a department of State Government of Haryana, is empowered and authorized to grant license to the private colonizers for development of Residential, Commercial, Industrial and IT Park/Cyber Park Colonies, responsible for external development works to be executed in the periphery of colony for the benefit of area as a whole, determine charges for external development works from each of the colonizer/developer, require each colonizer/developer to furnish the bank guarantee in favour of Director, DTCP for part of the proportionate EDC and decide direct the manner and mode of payment of such EDC. He further pointed out that DTCP, being a department of State Government of Haryana has relied upon HUDA to carry out the external development work as directed by DTCP. Under these circumstances, as a practice, DTCP directs colonizers/developers to pay the proportionate amount of EDC, as decided, determined and recoverable by DTCP to pay the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UDA. He further made a detailed submission as to non applicability of section 194C on such kind of payment and lastly he submitted that penalty is not leviable u/s 271C in view of 273B as there was reasonable cause for the reasons stated above by him and he strongly relied upon the order of the Tribunal in the case of RPS Infrastructure Ltd. vs. ACIT. 7. On the other hand Ld. DR strongly relied upon the order of the Ld. CIT (A) and CBDT Circular wherein the board has clarified that TDS is required to be deducted on such payment. 8. After considering the aforesaid submissions and relevant findings given in the impugned orders, though we may fell persuaded with some of the arguments raised by the Ld. Counsel, however, we find that under the facts and circumstances it is clearly borne out that assessee did had bonafide reason for not deducting the TDS. Firstly, for the reason that the license was granted by DTCP which is a Governing authority and it has clarified that EDC charges are paid to HUDA; and secondly, DTCP has issued a clarification to the effect that no TDS is required to be deducted precisely. Precisely on similar set of facts, this Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 271C of the Act as there was no contumacious conduct by the assessee. Our view is fully supported from the judgment of the Hon ble Supreme Court in the case of Commissioner of income tax vs bank of Nova Scotia, 380 ITR 550, wherein the Hon ble Court has held as under: 2. The matter was pursued by the Revenue before the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal vide order dated 31.03.2006 entered the following findings: 11. We have carefully considered the rival submissions. In the instant case we are not dealing with collection of tax u/s 201(1) or compensatory interest u/s 201(1A). The case of the assessee is that these amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Hon'ble Delhi High Court wherein, it has been held that it is necessary to establish contumacious conduct on the part of the assessee for failure to deduct tax at source for levy of penalty u/s 271C of the act. In the present case, all the recipients have also furnished a certificate that they have received the payment. In view of this, we reverse the order of the ld CIT (A) confirming the levy of the penalty of ₹ 1152461/- u/s 271C of the Act in absence of any finding to show contumacious conduct on the part of the assessee. Ld OA id directed to delete the penalty-levied u/s 271C of the act. Accordingly, appeal of the assessee in ITA No. 1576/Del/2015 for AY 2010-11 is allowed. Similarly 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 dt. November 28, 2018, the Coordinate Bench of ITAT has deleted the penalty levied under section 271C of the Act. 13. In view of the above facts and the analysis, we hold that there was a reasonable cause for non-deduction of tax at source by the assessee company. Further, in the absence of any fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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