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TMI Blog2023 (4) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision of law. The question as to the nature of EDC payment was squarely one of the issues that was required to be addressed by the AO. As concluded that the same was rent as it was in nature of an arrangement to use land. It is not open for the respondents to now contend that EDC charges are payment made to a contractor under a contract and not rent under an arrangement to use land. As noted above, it was specifically contended on behalf of the petitioner that provisions of Sections 194C/194J of the Act did not apply. AO did not allude to the said provisions, which requires a resident person paying any amount to a contractor to deduct TDS; according to the AO, the nature of the EDC is rent - AO has reasoned that the agreement between the petitioner and the State Government of Haryana (license under the HDRUA Act and the HDRUA Rules made thereunder) would be covered under the expression, any other agreement or arrangement for use of land . As conceded by the learned counsel appearing for the respondents that the view of the AO is patently erroneous. In the present case, the Revenue does not seek to support the decision of the AO that EDC are rent or in the nature of rent . Thus, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 022 For the Petitioners: Ms. Kavita Jha, Mr. Vaibhav Kulkarni, Mr. Anant Mann Mr. Himanshu Aggarwal, Advs. in item nos.78,84,85,95, 98,99 100. Mr. Yuvraj Singh Mr. Chetan Kumar Shukla, Advs. in item nos.104, 108,111 112. Mr. Salil Kapoor, Ms. Ananya Kapoor, Mr. Utkarsh Kumar Gupta, Mr. Sumit Lalchandani Mr. Sanat Kapoor, Advs. in item no.107. For the Respondents: Mr. Sunil Agarwal, Mr. Shivansh B. Pandya Mr. Utkarsh Tiwari, Advs. in item nos.84,85,98,99 100. Mr. Shailendera Singh, Ms. Dacchita Shahi Mr. Akash Saxena, Advs. in item no.84. Mr. Abhishek Khanna Mr. N.K. Aggarwal, Advs. in item no.104. Ms. Aakanksha Kaul, Adv. for UOI in item no.112. Mr. Puneet Rai, Mr. Ashvini Kumar Ms. Madhavi Shukla, Advs. in item no.107. Mr. Zoheb Hossain Mr. Sanjeev Menon, Advs. in item nos.108, 111 112. Mr. Niraj Kumar, Adv. in item nos.108 111. VIBHU BAKHRU, J. (Oral) 1. The petitioners in these petitions impugn orders passed under Section 201(1)/201(1A) of the Income Tax Act, 1961 (hereafter the Act ), whereby demands of Tax Deducted at Source (hereafter TDS ) were raised by the Assessing Officer (hereafter the AO ) against the respective petitioners (assessees) on the premise that they were lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Areas Act, 1975 (hereafter HDRUA Act ) and HDRUA Rules and pay a proportionate development charges as and when required and as determined by the Director General Town and Country Planning. 8. The respondents issued four show cause notices dated 20.02.2021, 22.03.2021, 24.03.2021 and 25.03.2021 calling upon the petitioner to show cause, inter alia, as to why the petitioner may not be treated as an assessee in default in respect of TDS deductible in terms of Sections 194C 2 /194J of the Act on the amount of EDC paid to HUDA. 9. The petitioner responded to the said show cause notices, inter alia, contending that the EDC were paid pursuant to the statutory obligations under the HDRUA Act and the Rules made thereunder. Payment of EDC is one of the conditions for obtaining license from Director General, Town Country Planning for developing land. The petitioner claimed that the said payments were, in fact, payments of charges to the State Government of Haryana and therefore, the petitioner had no obligation to deduct TDS. 10. The petitioner also referred to various other provisions of the Act relating to withholding of TDS and submitted that none of the Sections (that is, Section 192 to 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for land to LAO. (e) LAO transfers the ownership and possession of land to HUDA. As narrated above that the cost of land is paid by HUDA. HUDA develops urban infrastructure on land by undertaking EDWs. HUDA transfers land to private builders who has to pay user fee for this developed urban infrastructure which is name as EDC under the license to set up commercial set ups. EDC would be called Rent ... any other agreement or arrangement for the use of (either separately or together) any, - (a) land; or ... Therefore, EDC ought to be subjected to TDS undersection 1941 of the Act@10%. 13. The learned counsel appearing for the respondents readily admitted that Section 194-I of the Act is not applicable and the payment of EDC cannot be construed as rent attracting the obligation to deduct TDS at the rate of 10% on the said payment. However, they earnestly contended that since the AO has the jurisdiction to determine whether TDS is payable or not, the impugned order be set aside and the matter be remanded to the AO. According to them, the AO has erroneously mentioned that TDS was required to be deducted under Section 194-I of the Act instead of Section 194C of the Act. It is contended tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td s case 2019 SCC OnLIne Del 12358 , the Revenue sought to sustain the initiation of reassessment proceedings by contending that TDS on EDC was required to be withheld under Section 194 of the Act, which related to TDS on dividends. However, during the course of the proceedings, it was also contended by the Revenue that EDC was in the nature of rent. This Court found the said contentions unmerited. 21. The relevant extract from the decision in BPTP Ltd s case 2019 SCC OnLIne Del 12358 is set out below: 26. The AO in paragraph 2 of the recorded reasons quotes that EDC is covered by the provisions of section 194 of the Income-tax Act, 1961. The Assessee has failed to deduct TDS on the payments made to the HUDA . There is no explanation or rationale for the aforesaid observation made by the AO. We, therefore, cannot understand as to how the payment of EDC-being in the nature of statutory fees, could be subject to withholding tax under section 194 of the Act, a provision that is applicable to dividends. The nature of dividend payment is intrinsically different from EDC and, therefore, the apparent reason for reopening seems to be erroneous, irrational and fallacious. The subsequent ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educted on the payment of the lease rent to the Greater Noida as per section 194-I. Reliance on circular dated 30-1-1995 has been placed by the Noida/Greater Noida Authority. A perusal of the Circular dated 30-1-1995 indicate that the query which has been answered in the above circular is Whether requirement of deduction of income tax at source under section 194-I applies in case of payment by way of rent to the Government, statutory authorities referred to in section 10(20-A) and local authorities whose income under the head Income from house property or Income from other sources is exempt from income-tax 29. We are unable to see as to how the above provision and decision is of any assistance to the Revenue. It can be seen from the quoted portion of the said judgment that in the said case, the payment of annual rent was considered to be falling within the ambit of section 194-I, a conclusion drawn by the Court on a reading of the relevant clauses of the lease deed. In the present case, the EDC charges, on the aforesaid rationality, cannot he subjected to section 194-I of the Act. Moreover, if such was the understanding of the Revenue, it should have been well founded and disclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO had initiated reassessment proceedings on the ground that assessee was required to deduct TDS under Section 194 4 of the Act; apparently, on the premise that EDC is dividend. However, before the court, it was argued on behalf of the Revenue that EDC is rent and therefore TDS was required to be deducted from payment of EDC. In the present case, the AO has proceeded on the basis that EDC is rent but the Revenue contends that it is a payment to contractor attracting the provisions of TDS under Section 194C of the Act. 25. It is apparent from the above, that the approach of the Revenue is flawed. We reject the contention that the findings of the AO regarding the nature of EDC charges as well at the provisions referred by him for determining the petitioner s liability are not material. 26. Accordingly, for the reasons stated above, the order impugned in W.P.(C) No.4351/2021 is set aside and the said petition is allowed. 27. As already observed at the outset; it is common ground that the decision in W.P.(C) No.4351/2021 would be dispositive of other petitions as well. This is because the orders impugned therein are also founded on finding that the petitioners in these petitions we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein. (2) Where any sum referred to in sub-section (1) is credited to any account, whether called Suspense account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. (3) Where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of clause (iv) of the Explanation, tax shall be deducted at source (i) on the invoice value excluding the value of material, if such value is mentioned separately in the invoice; or (ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice. (4) No individual or Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such income by way of rent is credited or paid, shall be liable to deduct income-tax under this section. 4. Section 194. Dividends. The principal officer of an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India, shall, before making any payment in cash or before issuing any cheque or warrant in respect of any dividend or before making any distribution or payment to a shareholder, who is resident in India, of any dividend within the meaning of sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) or sub-clause (e) of clause (22) of section 2, deduct from the amount of such dividend, income-tax at the rates in force: Provided that no such deduction shall be made in the case of a shareholder, being an individual, if (a) the dividend is paid by the company by an account payee cheque; and (b) the amount of such dividend or, as the case may be, the aggregate of the amounts of such dividend distributed or paid or likely to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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