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TMI Blog2024 (1) TMI 600X X X X Extracts X X X X X X X X Extracts X X X X ..... : Shri Ashwani Kumar, C.A For the Revenue : Shri Dharam Vir, JCIT, Sr. DR ORDER PER VIKRAM SINGH YADAV, A.M. : This is an appeal filed by the Assessee against the order of the Ld. CIT(A), NFAC, Delhi dt. 19/12/2022 pertaining to Assessment Year 2011-12. 2. In the present appeal, the assessee has raised the following grounds of appeal: 1. That order passed u/s 250 of the Income Tax Act, 1961 is against law and facts on the file in as much as the Learned Commissioner of Income Tax (Appeals) gravely erred in upholding the action of the Learned Income Tax Officer, TDS-2 Chandigarh that the appellant was liable to deduct tax at source on payments made to GAMADA by way of external development charges. 2. That the Learned CIT(A) gravely erred in upholding the action of the Learned ITO(TDS) in computing the tax liability of Rs. 47,79,260/- and also liability of interest u/s 201(1A) at Rs. 45,88,089/-. 3. That order passed u/s 250 by the Learned CIT(A) is bad in law in as much as the appellant was not afforded an opportunity by virtual mode despite the fact that a specific request had been made by the appellant in this regard. 3. Briefly the facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EDC paid by the Appellant to GAMADA is in the nature of statutory levy which is to be mandatorily deposited before the grant of license by GAMADA and is a compulsory levy under the provisions of law. The rates are also fixed by the Government by way of notifications No separate agreement has been entered into by the Appellant with GAMADA. Under these circumstances it cannot be said that the Appellant has paid EDC charges to GAMADA out of any contractual liability with GAMADA. GMADA has been authorized to collect the EDC charges as per the policy decision of the Govt, and not out of the free consent of the parties. The Appellant is required to deposit proportionate cost of infrastructure development which will be carried out by the State Government in the area where project is located but it does not mean that the External Development is carried out by the government on behalf of the developer / Appellant on account of its contractual liability. Merely because the developers are required to deposit EDC on account of proportionate cost of infrastructure development, would not constitute an agreement or a work contract. The External Development so as to connect the residential area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a work / service contract, hence, the provisions of section 194C will not be attracted in this case. In support of our contention, we rely on the judgement of Hon'ble Division Bench B of Chandigarh Income Tax Appellate Tribunal in the case of the ITO(TDS) Chandigarh vis M/s Sukham Infrastructure (P) Ltd. in ITA No. 638/ Chandi/ 2015 for AY 2012-13 and the ACIT Circle 2(1) Chandigarh vis M/s Sukham Infrastructure (P) Ltd in ITA No. 249 and 250/ Chandi/ 2015 for AY 2010-11 and 2011-12 respectively. Our case gets squarely covered in this judgement as the facts are identical to the instant case. In this case also, the Appellant had made payment to GAMADA on behalf of the Government of Punjab on account of EDC Charges without deduction of TDS. The Assessing Officer held that tax was required to be deducted u/s 194C and treated the assessee as assessee-in-default and created demand u/s 201(1) and 201(1 A) of the Act. On first appeal, the Hon'ble CIT(A) reversed the order of AO observing as under: ...These payments were received by GAMADA on behalf of Punjab Government, since GAMADA was a nodal agency and so tax was not required to be deducted by the PR on these paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is required to deposit proportionate cost of infrastructure development which will be carried out by the State Government in the area where project is located but it does not mean that the External Development is carried out by the government on behalf of the developer / assessee on account of its contractual liability. The Development of the external area is carried out by the Govt, so as to provide road connectivity, water supply connectivity, sewerage connectivity etc. to the project which also includes the acquisition of land by the Govt as may be required for such purpose. In our view, it will be illogical to say that the land is acquired/ agreed to be acquired by the Govt, in lieu of any work/ service contract with the assessee, external work is carried out by the Govt, /local authority out of its own responsibility. Merely because the developers are required to deposit EDC on account of proportionate cost of infrastructure development, would not constitute the agreement a work contract. Thus, in light of the above it is humbly submitted that given that payment of EDC charges by the Appellant to GAMADA was not in the nature of any contractual payments rather the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided 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. 14. Therefore, what is relevant to examine is whether any sum is paid for carrying out any work in pursuance of a contract between the contractor and the specified person. Whether said sum is chargeable to tax in the hands of the payee and to what extent, is not a subject matter of examination as far as the applicability of section 194C of the Act. In the instant case, therefore whether EDC charges are chargeable to tax in the hands of GMADA is not subject matter of examination before us and the scope of the present adjudication is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nistration office at SCO No. 161- 162. Sector-8 C, Chandigarh (hereinafter referred to as the company') of the one part and the Governor of Punjab, through the Secretary Industries Commerce, Government of Punjab, UdyagBhawan, Sector 17. Chandigarh (hereinafter referred to as 'State Government') of the other part. 1. Whereas the State Government with a view to attract new investment in Punjab has under Industrial Policy 2003 provided for consideration and determination of a special package of incentives for new as well as existing industrial units undertaking expansion through an Empowered Committee duly notified uinder the said policy for this purpose, provided fixed capital investment in the new unit or expansion is Rs. 100 crore and above. 2. Whereas the company proposes to set up Information Technology / Industrial Park in an area of 125 acres of land each at Mohali with an investment of about Rs. 952 crores over a period of 3 years w.e.f. 29.03.2006. 3. Whereas the company for implementation of the aforesaid project, requested the State Government for grant of special package of concessions enabling them to implement this project. Request of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zoning plan and as per applicable byelaws. c. Zoning and Layout plan will be cleared by a competent authority declared by Director of Industries Commerce, Punjab. d. Common facilities would include the facilities for air conditioning, roads (including approach roads water supply, sewerage facilities, common effluent treatment facilities, telecom networks, generation and distributor of power, provided that the facilities are used for more than 2 industrial units in the industrial Park e. Infrastructure development would include roads (including approach roads) water supply and sewerage facilities, common effluent treatment facilities, telecom networks, generation and distribution of power, parking facilities parks, street lights and such other facilities as are of common use tor industrial activities which are identifiable and arc to be commonly used. f. Industrial Parks with a residential component shall have only non- polluting units and distance between industrial area and other areas will be in. accordance with guidelines issued by Punjab Pollution Control Board from time to lime. g. Necessary clearances from various central/state agencies will have t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The project shall not be advertised / launched and no money will be collected from general public for allotment of land / plot / flat / any space till such time the layout / zoning plans are cleared from the competent authority. d) Permission under Punjab State Tubewell Act, 1954 to dig Tubewell in project area for requirement of the project was allowed. e) Permission under the provisions of Punjab Mines Mineral Act shall be allowed within the project area for works relating to development of the project. However, due charges will be payable. f) High-rise buildings upto 45 mtrs, shall be allowed subject to Air Safety Regulations, Traffic Circulation and Fire Safety Norms. g) Work contract tax on construction material required for the project shall be charged at minimum floor rate. h) FAR of 2 shall be allowed for industrial andcommercial purpose. However, the relevant building Bye-laws / regulations shall be applicable to the area. The Guidelines issued by the Department of Industries Commerce for Industrial Parks shall also be applicable. i) The State Government will try to ensure that connectivity to power, roads, accessibility, communica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nology Park/Industrial Park proportionately. 6. In case the above company fails to comply with provisions of para- 5 (i), 5(ii) (iii) above, within the stipulated period mentioned therein, the concession enumerated in para-5 (iv) above shall stand automatically withdrawn and the company shall have no claim or liability whatsoever on the State Government in this regard. The Government of Punjab shall be entitled to recover the cost of the aforesaid relief / concession availed by the Company (as dues recoverable by the Government as arrears of land revenue) under Para 5 (iv) above in the event of failure on the part of the Company to fulfill its obligations under Para 5(i), 5(ii) 5(iii) above. In witness whereof the company has cause its common seal to be affixed and the Government of Punjab both hereunto set their hand and seal on the day and year first above written Sd/- Sd/- Signed on behalf of the company The state Government. 11. A perusal of the above reproduced agreement reveals that the agreement in question was executed between the assessee and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... establishes its inclination towards the completion of projects by granting concession/relief in the agreed time schedules, for which an offer has been made even to the petitioner also. Since the respondents themselves are not keen to adhere to the time schedule, we hold that GMADA has no authority to assume the role of State Government or to invoke Para 6 of the Agreement to say that the petitioner has lost its right to claim concessions due to the 'expiry' of time period, within which the project was required to be completed. 13. In view of this, so far as the EDC charges paid by the assessee to the GMADA are concerned, in our view, provisions of section 194C are not attracted to the agreement/ contract in question executed by the assessee with the Governor/Govt. of Punjab. 14. Even if, we assume it otherwise, let us see whether the agreement executed by the assessee with the Governor of Punjab constitute a work / service contract, the contents of which have been reproduced above. A perusal of the above agreement reveals that the same was executed as per the policy of the State Government with a view to direct new investments in Punjab and for that purpose to gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment / agency / authority / local body on fulfillment of various terms and conditions required in this regard at such rates / fee etc. which shall not be less favorable to them compared to similarly placed projects / customers, whereas Clause (q) provides that Proportionate cost of infrastructure development which will be carried out by the State Government in the area where project is located shall be borne by all the developers of Information Technology Park / Industrial Park proportionately. 15. A perusal of all the clauses of the agreement, as discussed above, reveals that it is not a work or service contract between the parties. The various clauses of the agreement just show that if the assessee agrees to develop the infrastructure as per the policy of the Govt., then the assessee would be entitled to various concession and incentives. However, the assessee is required to deposit proportionate cost of infrastructure development which will be carried out by the State Government in the area where project is located but it does not mean that the External Development is carried out by the government on behalf of the developer / assessee on account of its contractual liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om that, the state government has also made a policy for utilization of EDC charges in the State of Punjab, which reads as under:- Policy for utilization of External Development Charges in the State of Punjab. In pursuance of the provisions contained in the Punjab Regional and Town Planning and Development Act, 1995 and Punjab Apartment and Property Regulation Act, 1995, the State Government issued Notification No. 17/17/2001- 5Hg2/53077/11 dated 17th May, 2013 and No. 17/17/2001-5Hg2/P.F/47962/1 dated 6 th May, 2013 to recover External Development Charges (EDC) in the State of Punjab. Various special development authorities are authorized to collect EDC from the promoters of various residential, commercial, industrial or any other project in their respective jurisdiction in accordance with the provisions of the Act. It is felt that at the State level there is an urgent need to formulate a policy regarding utilization of EDC not only to provide infrastructure around the approved project but also for the overall development of the area is general. This policy shall detail the works on which EDC charges so collected are to be utilized. A. EXTERNAL DEVELOPMENT WOR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of major roads/ Master Plan Roads, construction of bye-passes, provision and up gradation of educational, health and sports facilities, or any other infrastructure in the area for the benefit of area and public at large as decided by the authority. (i) Major Road Network/Bye Pass (ii) Water Supply Network (iii) Sewerage Network and disposal sites. (iv) Power Stations (v) Social Infrastructure such as education, health, public buildings. The committee constituted to prepare scrutinize the Action Plan for the utilization of EDC should finalize the priorities of works to be done out of EDC. However, the share for any component will not be fixed. Note: Area means the area included within the limits of local planning area of any Master Plan for special Planning Development Authority and Area within Municipal limits for the Urban Local Bodies. C. Utilization of EDC These funds may also be utilized for any specific purpose/ work on the special instructions of the state government. D. WHAT IS NOT INCLUDED IN EXTERNAL DEVELOPMENT WORKS: The provision of internal roads, water supply, sewer, storm water drainage, street lighting, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision of proposed infrastructure in view of the proposals of Master Plan in general and for its provision to the approved projects in particular be prepared by every local Planning and development Authority. An advisory committee may be constituted in each local planning and development authority to prepare and scrutinize the Annual Action Plan. The committee shall be as follows for the Planning Development Authority. 1. Chief Administrator Chairman 2. Additional Chief Administrator Member Secretary 3. Representative of Deputy Commissioner Member 4. Superintendent Engineer Member (concerned dev. Authority) 5. District Town Planner (concerned) Member 6. XEN PWD (B R) Member 7. XEN (PH) W/S Sanitation Deptt.,Pb. Member 8. SE, PWSS. Board Member (Where ever required) 9. Superintendent Engineer (PSPCL) Member 10. Any other special invitee. The committee for Corporation Cities will be as follow:- 1. Commissioner M. Corpn. Chairman 2. Addl./Joint Commissioner Member Secretary 3. . Rep. of Deputy Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /contract but out of its own obligations and duties towards the public. In view of this, since the agreement cannot be said to be a work / service contract, hence, the provisions of section 194C will not be attracted in this case. 15. In the aforesaid decision, the Coordinate Benches have held that GMADA has been authorized to collect the EDC charges as per the policy decision of the Government and not out of free consent of the parties to the contract which has been executed between the assessee and the Govt. and therefore, it cannot be said that assessee has paid the EDC charges to GMADA out of any contractual obligations and liability towards GMADA. It has been further held that the though the developer contributes towards the proportionate cost of infrastructure development by way of EDC Charges, the work so carried out by the local authority is not in consequence of specific performance of the contract but out of its own obligations and duties towards the public and thus, the contract cannot be said to be a work/service contract and thus, on both accounts, the provisions of section 194C are not attracted. Nothing has been brought on record or to our notice during the cou ..... 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