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TMI Blog2023 (2) TMI 501X X X X Extracts X X X X X X X X Extracts X X X X ..... ccountant Member Sh. Yogesh Kumar US, Judicial Member For the Assessee : None For the Revenue : Sh. Sanjay Nargas, Sr. DR ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the assessee against the order of ld. CIT(A)-31, New Delhi dated 28.06.2019. 2. Following grounds have been raised by the assessee: 1. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in sustaining a penalty of a sum of Rs. 61,38,000/-, on account of non-deduction of tax on payments being made for External Development Charges (EDC) paid / payable to HUDA and while sustaining the instant penalty, the learned CIT (A) has proceeded on irrelevant and extraneous considerations, relying on case laws not applicable to the facts of the case of assessee - appellant and as such the penalty so sustained is wholly untenable either on facts or in law. 1.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate the fact that payment of EDC by assessee - appellant is to the State Government and that too for creation of fund which is to be utilized by the said government for urba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years under the head Welfare Expenses, internal excess charges, deposited charges, business promotion . 3. Ld. CIT(A) had sustained the same, therefore assessee has come in appeal raising following grounds:- 1. On the facts and circumstances of the case, the LA/- CIT(A) has erred both in facts and law in rejecting the contention of the appellant that the payments of EDO have been made to comply with the terms and conditions of the agreement executed between the appellant and the Governor of Haryana, acting through Director Town and Control Planning, Haryana and thus provisions of TDS are not applicable on such payments, and therefore disallowance of Rs. 1,48,57,247/- made u/s 40(a)(ia) of the Act is highly unjustified, uncalled for and bad in law. 2. On the facts and circumstances of the case, the Ed/- CIT(A) has erred both in facts and law in rejecting the contention of the appellant that the payments of EDC made by the appellant company are not in the nature of payments specified under section 194C of the Act. 3. The Ed/- CIT(A) has erred in law and facts of the case in confirming the action of the Ed/- AO in disallowing the club expenses of Rs. 1,90,52 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso include external development charges received through DGTCP, Department of Haryana for execution of various EDC works. The expenditure against which have been booked in Development Work in Progress, Enhancement compensation and Land cost. Undisputedly, the payment of EDC was issued in the name of Chief Administrator, HUDA. It is also not in dispute that HUDA has shown EDC as current liability in the balance sheet, but in the Notes to the Accounts Forming part of the Balance Sheet, it has been shown that EDC has been received for execution of various external development works and as and when the development works are carried out, the EDC s liabilities are reduced accordingly. It is also not in dispute that HUDA is engaged in acquiring land, developing it and finally handing it over for a price. It is also not in dispute that EDC is fixed by HUDA from time to time. However, the fact of the matter remains that payment has been made to HUDA through DTCP which is a Government Department and the same is not in pursuance to any contract between the assessee and HUDA. Thus, the payment of EDC is not for carrying out any specific work to be done by HUDA for and on behalf of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yments 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 licence was granted by the Government and EDC charges was direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (Appeals) as well as by the Income Tax Appellate Tribunal . Thus, we see no merits in the appeal and it is accordingly dismissed. 8. Further in case of TDI Infrastructure Ltd Versus Addl CIT, ITA no 6653/Del/2019, vide order dated 6/7/2022, the Bench, to which one of us was in quorum, had taken into consideration a clarification memo no DTCP/ACCFTS/AO(AQ) /CAO/2894/2018 dated 19.06.18 issued by the Directorate of Town and Country Planning, Haryana which made it very obvious that receipts on account of EDC are being deposited in the Consolidated Fund of the State, accordingly directions were issued to colonizer like present assessee, to not deduct TDS. Once the fact of receipt of amounts received by HUDA being deposited in Consolidated Fund of State is established, there can be no second opinion that Assessee was rightly directed by DTCP, Haryana to not deduct the TDS. Even otherwise no intentional default is attributed to assessee and the default, if any, was on account of ambiguity which had arisen out of a direction contained in a statutory document, so no penalty can be justified u/s 271C of the Act, which is meant to address contumacious conduct. Ground is allowed in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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