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TMI Blog2024 (2) TMI 1473X X X X Extracts X X X X X X X X Extracts X X X X ..... undisputed fact that the income was placed in the hands and at the disposal of HSVP. We note that undisputedly at least till 31 March 2017 all EDC payments even as per the DTCP were being made out in favour of HSVP. It is only thereafter that EDC was deposited with the DTCP. This too leads us to the irresistible conclusion that the payments made to HSVP would not fall within Section 196. We also bear in mind the unambiguous legislative command of Section 194C which places the payer under the unshirkable obligation of deducting tax from all payments being made to a contractor. We have already noticed in the preceding parts of this decision that Section 194C of the Act vests no discretion in the payer to examine or contemplate chargeability of that payment to tax. We negative the challenge raised in these writ petitions insofar as the invocation of Section 194C of the Act is concerned and hold that EDC payments would be covered thereunder. For reasons recorded in the body of this judgment, we also turn down the challenge to the Clarification issued by the Central Board of Direct Taxes dated 23 December 2017. We dispose of those writ petitions where final orders under Section 201 may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AINDRA KUMAR KAURAV For the Appellant : Puneet Agarwal, Yuvraj Singh, Chetan Kumar, Ved Jain, Nischay Kantoor, Soniya Dodeja, Satyen Sethi, Arta Trana Panda, Debesh Panda, Kanishk Aggrawal, Sumit K. Batra, Manish Khurana, Priyanka Jindal, Piyush Kaushik, Sumit Batra, Pratyush Raj, Riddhi Jain, Salil Kapoor, Ananya Kapoor, Utkarsh Kumar Gupta, Tarun Chanana, Sumit Lalchandani, Tapas Ram Mishra, Kapil Goel and Sandeep Goel, Advs. For the Respondent : Aseem Chawla, SSC, Pratishtha Chaudhary, Aditya Gupta, Navin Rohila, Advs., Zoheb Hossain, SSC, Sanjeev Menon, JSC, Sanjay Kumar, Easha, Hemlata Rawat, Advs., Bakshi Vinita, SPC, Puneet Rai, Ashvini Kumar, Rishabh Nangia, Hemant Gupta, Shivang Jain, Swati Tiwari, Advs., Asheesh Jain, CGSC, Gaurav Jain, Adv., Ravi Prakash, CGSC, Usha Jamnal, Adv., Sunil Agarwal, Sr. SC, Shivansh Pandya, Utkarsh Tiwari, Akanksha Kaul, Versha Singh, Advs., Kamal Kant Jha, Sr. PC, Avinash Singh, Adv., Vipul Agrawal, SSC, Gibran Naushad, Sakshi Shairwal, Gigi C. George, Dheeraj Singh, Advs., Bhagwan Swaroop Shukla, CGSC, Vinay Shukla, Sharvan Kumar Shukla, Advs., Kunal Sharma, Zehra Khan, SSCs and Shubhendu Bhattacharyya, Adv. JUDGMENT YASHWANT VARMA, J. 1. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 2(31)(vi) being violative of the Article 289 of the Constitution of India imposing tax on income of State; (d) Declare that the EDC is not leviable to Income tax, and there is no liability to deduct TDS on the same under the Income Tax Act, 1961; (e) Prohibit and restrain the respondents from proceeding further with the matter; Pass such other order(s) or further orders as this Hon'ble Court deems fit and proper in the facts and circumstances of the case, for which act of kindness the Petitioner as is duty bound shall ever pray. 5. It must at the outset be noted that although a challenge to the validity of Sections 4(1), Section 2(31)(vi) of the Act also appears to form part of the writ petition, no arguments on that score were addressed before us. RPS Infrastructure Limited RPS Infrastructure raises a similar challenge as would be evident from the reliefs which are sought in the petition: A. Issuance of writ in the nature of Certiorari, Mandamus, Prohibition or any other appropriate writ, order or direction for quashing the impugned show cause notice dated 12.03.2021 issued by the Respondent being illegal, arbitrary and not legally sustainable in the eyes of law; B. Is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid communication was followed by a further letter addressed by the petitioner to DTCP dated 31 July 2017 asking the concerned authority to clarify whether developers are required to deduct TDS on EDC payments that have been made. In the meanwhile, the Income Tax authorities issued yet another notice dated 10 August 2017 calling for further information from the writ petitioner. The DTCP on 06 October 2017 replied to the collaborator of Natureville Promoters, Puri Constructions, stating that EDC is a charge levied by the Government for carrying out external development works and that the same is deposited in the receipt head of the DTCP and would thus constitute Government receipt. It was further stated that no tax is being deducted thereon since it was Government receipt. 8. In the meanwhile, the Central Board of Direct Taxes CBDT appears to have been approached by the Finance Secretary of the Government of Haryana and called upon to clarify the position. In terms of an Office Memorandum OM dated 23 December 2017, the CBDT took the following position:- F. No. 370133/372017-TPL Government of India Ministry of Finance Department of Revenue (Central Board of Direct Taxes) TPL Division ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt works like water supply, sewerage, drains, provisions of treatment and disposal of sewage, sullage and storm water, roads, electrical works, solid complex, fire stations, grid sub-stations etc and/or any other work which the Director may specify to be executed in the periphery of or outside colony/area for the benefit of the colony/area. 2. As per Section 3(3)(ii), license holder has to pay proportionate development charges if the external development works as defined in clause (g) of section 2 are to be carried out by the Government or any other local authority. The proportion in which and the time within which, such payment is to be made, shall be determined by the Director. 3. Presently, external development works in the periphery of or outside colony/area for the benefit of the colony/area are being executed by Haryana Shahri Vikas Pradhikaran (hereafter HSVP) which is the Development Authority of State govt. Earlier upto 31.03.2017, Department of Town Country Planning used to collect the external development charges from the colonizer to whom licences have been granted under Act No. 8 of 1975 and the persons to whom permission for change of Land use have been granted under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble by the petitioner under the Haryana Development and Regulation of Urban Areas Act, 1975 to the Government of Haryana or to any other party. If it is to the Government of Haryana, it is possible that the exemption under Section 196 of the Income Tax Act, 1961 would apply. The petitioner states it entered into the agreements in Forms IV and LC-IV A. Prima facie, the agreements are with the Governor of Haryana. In these circumstances, petitioner shall pursuant to the impugned notice dated 22.01.2018 appear before the officer. Till further orders, the order, if any, however, shall not be given effect to. 11. Writ petitions thereafter came to be filed before this Court including W.P. (C) 9483/2019 by the collaborator of Natureville Promoters and where upon taking note of the orders passed by the Punjab and Haryana High Court in DLF Utilities Limited, interim orders were passed providing that while proceedings may go on, any orders adverse to the petitioner, if passed, would not be given effect to. Similar orders operate on the various writ petitions forming part of this batch. It is this interim order which has continued on all the writ petitions forming part of this batch. 12. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, the apparent reason for reopening seems to be erroneous, irrational and fallacious. The subsequent observation in paragraph 2 as per the provisions of section 40(a)(ia) of the Income-tax Act, any sum payable on which tax is deductible at source under Chapter XVII-B but the same has not been deducted appears to be based on the understanding that the provisions of section 194 are attracted to external development charges and, therefore, it is subject to withholding tax and consequently the provisions of section 40(a)(ia) of the Act would be attracted. Even if one were to ignore the provision of law quoted and relied upon by the Assessing Officer, and we were to agree with the contention of Revenue that while exercising the power, the source may not be specifically referred to or if wrongly mentioned to, it would not render the exercise of such power to be invalid, yet, we are unable to fathom as to how the Assessing Officer has arrived at the conclusion that the external development charges payment was subject to tax deduction at source. The Revenue in its counter-affidavit has sought to elaborate on the aforesaid reasons by contending that the external development charges p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r judgment relied upon by the Revenue in the case of New Okhla Industrial Development Authority (supra) is also distinct on facts. In the said case, the court was examining as to whether Greater Noida and Noida Authorities were local authorities within the meaning of section 10(20) of the Income-tax Act and whether their income was exempt from Income-tax. Deciding this question, the court held that the Noida and Greater Noida are not local authorities for the purpose of the Act. Therefore, the aforesaid decision has no relevance to the facts of the present case. 28. We would also like to reflect on section 194-I and its Explanation which deals with rent and has been relied upon by the Revenue to contend that the definition of rent is broad and would also envisage the payment of external development charges and is subject to withholding tax. In support of this provision, the Revenue has relied upon the observations of the Supreme Court in New Okhla Industrial Development Authority (No. 2) v. CIT (Appeals) (2018) 406 ITR 209 (SC), the relevant portion whereof is reproduced herein below (page 218 of 406 ITR): The definition of rent as contained in the Explanation is a very wide defini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what is apparent and not what is explained later. The Revenue cannot be permitted to improve the same by offering better explanation during the course of the proceedings. On this issue we would like to refer the view of the Supreme Court in Mohinder Singh Gill v. Chief Election Commissioner (1978) 1 SCC 405 where it has been held The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. 15. Yet another challenge thereafter came to be laid before this Court in DLF Homes Panchkula Pvt. Ltd. vs. Joint Commissioner of Income Tax 2023:DHC:2401-DB with the respondents this time taking the position that TDS on EDC was liable to be deducted by virtue of Section 194I. This stand came to be negatived with our Court holding that EDC could not be termed as 'rent' so as to fall within the ambit of Section 194I. 16. The writ petitioners have also referred to the views expressed by different benches of the Income Tax Appellate Tribunal ITAT while dealing with penalty proceedings. However, insofar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at award, he make the agreement with concerned state officers HUDA for said land. Sample copy at Government approval and bank authorization is submitted to. After making payment HUDA start process for development at land and thereafter start the process for development at land And thereafter start the process at floatation. After inviting applications from the applicants. Copy of scheme branches and allotment letter is submitted as Annexure-C and D. B) LAO requests its superior authority, Director General Urban Estate Department Haryana for administrative approval for acquiring the land. C) The urban Estate Department. Haryana conveys administrative approval for acquisition of land to Director General Urban Estate Department, Haryana. It asks LAO to acquire land in question as per law. A copy of this approval is marked to HUDA. D) HUDA authorizes its bank to disburse payment for award for land to the LAO. E) LAO transfers the ownership and possession of land to HUDA. 4.2 Basis/Rationale for charging of EDC by HUDA- 4.2. 1 External Development Work (hereafter EDW) is defined in the Haryana Development and Regulation of Urban Area Act. 1975 (hereafter HDRUA). Definition of EDW is gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er liabilities also include external developmental charges received through DGTCP department Haryana for execution of various EDC works. The expenditure against which have been booked Development Work in Progress, Enhancement compensation and Land cost.' 4.3 Determination of EDC to be paid by participating private persons/builders, colonizers etc.- 4.3.1 A participating private builder is required to pay EDC as provided in the license for setting up a commercial colony on urbanisable land held by it in vicinity of land owned and developed (EDWs) by HUDA The license is issued by the Directorate of Town and Country Planning, Haryana, subject to the undertaking as per the relevant conditions mention below: To submit an undertaking to the effect that you shall make arrangement for water supply, sewerage, drainage ere to the satisfaction of DGTCP till these services are made available from external infrastructure to be laid by HUDA 4.3.2 Computation of External Development Charges (EDC) is made as under: A) Charges for Commercial area =Rs. X Lakhs (@ Rs. Y lakhs/Acre) B) Total cost of Development = Rs. X Lakhs C) 25% bank guarantee required = Rs. 0.25 X Lakhs iv) The demand drafts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urrent liability by HUDA is incorrect for the reasons narrated in the foregoing paras, based on specific nature and flow of transactions, supported by specific evidences in form of sample letters/documents, Therefore. EDC is a revenue receipt having character of income of HUOA. This is also a finding of assessing officer of HUDA which stands confirmed by CIT(A) too. Therefore, ought to have been subjected to TDS by payer of EDC. 4.4 Reasons for Applicability of TDS provisions on EDC paid to HUDA: i) HUDA is a taxable entity carrying out business activities to acquire, develop and dispose off land for residential, industrial, commercial and institutional purposes in urban estates so developed in state of Haryana its business income is taxed by Income tax department which includes EDC. ii) In the Circular No. 681 dated 8.3.94 issued by the CBDT it has been stated that a work done by one person is service rendered to another. One of the dictionary meanings of the word 'service is work {Associate Cement Co. Ltd. Vs. CIT, 120 ITR 444 (Patna)]. The Circular at para (v) states that the service contract would be covered by the provisions of this section since service means doing any wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would apply to all types of contracts including transport contacts, labour contracts, service contracts, etc. In the light of these judgments, the Board have decided to withdraw their above mentioned Circulars Nos. 86 and 93 and para 11 of Circular No 108 and issue the following guidelines in regard to the applicability of the provisions of section 194C:- (i) The provisions of section 194C shall apply to all types of contracts for carrying out any work including transport contracts, service contracts, advertisement contracts, broadcasting contracts. Telecasting contracts, labour contracts, materials contracts and works contracts 4.5 Payments received as EDC are for EDWs like water supply, sewerage, drains, necessary provisions of treatment and disposal of sewage, sullage and storm water, roads, electrical works, solid waste management and disposal slaughter houses colleges. Hospitals, stadium/sports complex, fire stations, grid sub-stations etc. and any other work which the Director may specify to the executed in the periphery of or outside colony/area for the benefit of the colony/area. 4.6 EDC is worked out for a particular urban estate on the basis of the cost of external develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eges, hospitals, stadium/sports complex, fire stations, grid sub-stations etc. and/or any other work which the Director may specify to be executed in the periphery of or outside colony/area for the benefit of the colony/area;] (h) Government means the government of the State of Haryana; (hha) infrastructure development charges include the cost of development of major infrastructure projects;} (i) internal development works means-(i) metalling of roads and paving of footpaths; (ii) turfing and plantation with trees of open spaces; (iii) street lighting; (iv) adequate and wholesome water supply; (v) sewers and drains both for storm and sullage water and necessary provision for their treatment and disposal; and (vi) any other work that the Director may think necessary in the interest of proper development of a colony; (j) local authority means a Municipal Committee or Municipal Council or municipal Corporation; 19. Our attention was also drawn to Sections 3, 3A and 3AC of the HDRUA which are reproduced hereinbelow:- 3. Application for licence- [(1) Any owner desiring to convert his land into a colony shall, unless exempted under section 9, make an application to the Director, for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under sub section (1), the Director shall, among other things, enquire into the following matters, namely :- (a) title to the land; (b) extent and situation of the land; (c) capacity to develop a colony; (d) the layout of a colony; (e) plan regarding the development works to be executed in a colony; and (f) conformity of the development schemes of the colony land to those of the neighboring areas (3) After the enquiry under sub section (2), the Director, by an order in writing, shall - (a) grant a licence in the prescribed form, after the applicant has furnished to the Director a bank guarantee equal to twenty five per centum of the [estimated cost of development works in case of area of land divided or proposed to be divided into plots or flats for residential, commercial or industrial purposes and a bank guarantee equal to thirty-seven and a half per centum of the estimated cost of development works in case of cyber city or cyber park purposes] as certified by the director and has undertaken- (i) to enter into an agreement in the prescribed form for carrying out and completion of development works in accordance with licence granted; (ii) to pay proportionate development charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the provisions of this clause where compliance of clause (iv-b) is sought by the Director.} [(iv-a) to pay proportionate cost of construction of such percentage of sites of such school, hospital, community centre and other community buildings and at such rates as specified by the Director;] [(iv-b) to hand-over the possession and transfer the ownership of such land, as demarcated and identified in the approved layout plan, in such form and manner, as may be specified by the Director and such land shall vest with the Government to achieve the objective of creation of community buildings, housing, commercial and other physical and social urban infrastructure, in such colonies where a condition to this effect is imposed by the Director, before grant of licence;] (v) to permit the Director or any other officer authorised by him to inspect the execution of the layout and the development works in the colony and to carry out all directions issued by him for ensuring due compliance of the execution of the layout and development works in accordance with the licence granted; [(vi) to fulfill such terms and conditions as may be specified by the Director at the time of grant of licence th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount as per terms of the agreement. 3A. Establishment of Fund- (1) Any colonizer to whom a license has been given under this Act shall deposit as 50{infrastructure development charges} a sum, 51{at such rate as may be prescribed by the Government from time to time, per square metres of the gross area and of the covered area of all the floors in case of flats proposed to be developed by him into a colony} in two equal installments. The first installment shall be deposited within 60 days from the date of grant of the license and the second installment to be deposited within six months from the date of grant of license. (2) The Haryana Urban Development Authority {local authorities, firms, undertakings of Government and other authorities involved in land development} shall also be liable to deposit the {infrastructure development charges} and shall be deemed to be {colonizers}for this purpose only. The date of first inviting applications for sale of plots in any colony by it shall be deemed to be the date of granting of license under this Act for the purpose of deposit of {infrastructure development charges}. (3) The {infrastructure development charges} shall be deposited by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entify bottlenecks in the infrastructure sectors and recommend to the Government policy initiatives to rectify the same; (e) select, prioritise and determine sequencing of infrastructure projects; (f) formulate clear and transparent policies related to the infrastructure sectors so as to ensure that project risks are clearly identified and allocated between the stakeholders; and (g) identify the sectoral concessions to be offered to concessionaires to attract private participation and secure availability of viable infrastructure facilities to the consumers; Provided that where participation is sought by any person by participating in disinvestment process, the provisions of this Act shall not apply: Provided further that any authority or body, constituted to implement such disinvestment, may seek assistance from the Board; (ii) prepare internally or through external consultants or service providers engaged for the purpose, all necessary documents including the bid or tender documents, draft contracts including the various contractual arrangements and incentives to be offered by the Government; (iii) assist public infrastructure agencies and concessionaires in obtaining statutory an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its functions; (vi) enter into and perform all such contracts as it may think necessary or expedient for performing any of its functions; and (vii) do such other things and perform such other acts as it may think necessary or expedient for the proper conduct of its functions and for carrying into effect the purposes of creation of the Board, as contained in this Act. 20. The principal submission of Mr. Jain was that there exists no privity of contract between the petitioners and HSVP. According to learned counsel, a reading of the aforesaid provisions would clearly establish that the application for permission and for development is examined and evaluated only by the DTCP and that the HDRUA does not contemplate any intervention or involvement of the HSVP. According to learned counsel even the power to cancel a license for development which may have been granted vests solely with the Director as would be evident from Section 8 of the Act. That provision reads thus:- 8. Cancellation of license.- (1) A license granted under this Act, shall be liable to be cancelled by the Director if the colonizer contravenes any of the conditions of the license or the provisions of the Act or the rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted under section 3 shall be punishable with imprisonment of either description for a term which may extend to three years and shall also be liable to fine: Provided that where only of the provisions of section 9 are contravened the punishment of imprisonment shall not exceed six months. 84[(2) Without prejudice to the provisions of sub-section (1), the Director or any other officer authorized in writing by him in this behalf may, by notice, served by post and if a person avoids service, or is not available for service of notice, or refuses to accept service, then by affixing a copy of it on the outer door or some other conspicuous part of such premises, or in such other manner as may be prescribed, call upon any person who has committed a breach of the provisions referred to in the said sub-section to stop further construction and to appear and show cause why he should not be ordered to restore to its original state or to bring it in conformity with the provisions of this Act or the rules framed thereunder, as the case may be, any building or land in respect of which a contravention such as is described in the said subsection has been committed and if such person fails to show ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicant in the land under the colony, along with a list of such deeds and documents; (ii) a copy of the Shajra Plan showing the location of the colony along with the names of revenue estate, Khasra number and area of each field; (iii) a guide map on a scale of not less than 10 centimetre to 1 Kilometre showing the location of the colony in relation to surrounding geographical features to enable the identification of the land; (iv) a survey plan of the land under the proposed colony on a scale of 1 centimetre to 10 metres showing the spot levels at a distance of 30 metres and where necessary, contour plans. The survey will also show the boundaries, and dimensions of the said land, the location of streets, buildings, and premises within a distance of at least 30 metres of the said land and existing means of access to it from existing roads; (v) layout plan of the colony on a scale of 1 centimetre to 10 metres showing the existing and proposed means of access to the colony the width of streets, sizes and types of plots, sites reserved for open spaces, community buildings and schools with area under each and proposed building lines on the front and sides of plots; (vi) an explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per square meter, calculated for the gross area of the land, under low-density eco-friendly colony] {ten rupees per square metre}, calculated for the gross area of the land under low-density eco-friendly, {ten rupees per square metre}, calculated for the gross area of the land under the plotted colony, and 3{ten rupees per square metre} calculated on the covered area of all the floors in a group housing colony, in the form of a demand draft in favor of the Director, Town and Country Planning, Haryana and drawn on any scheduled bank {:}] [Provided that the scrutiny fee for the projects under Transit Oriented Development shall be charged on pro-rata basis for increased FAR from 1.5/1.75 to 2.5/3.5: Provided further that the scrutiny fee under the New Integrated Licensing Policy, 2016 shall be applicable on per square metre basis for the permissible covered area.] (3) If the applicant fails to furnish the requisite fee as provided in sub-rule (2) above, the Director shall reject the application. 9. Rejection of application [Section 3].- The Director may after making inquiry as mentioned in sub-rule(1) of rule 8 and after giving reasonable opportunity of being heard to the applicant b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siting bank guarantee equal to twenty-five percent of the estimated cost of development works.] (b) undertake to deposit thirty percent of the amount to be realized by him from the plot-holders, from time to time, within ten days of its realization in a separate account to be maintained in a scheduled bank and this amount shall only be utilized towards meeting the cost of internal development works in the colony; (c) undertake to pay proportionate development charges if the main lines of roads, drainage, sewerage, water supply and electricity are to be laid out and constructed by the Government or any other local authority. The proportion in which and the time within which such payment is to be made shall be determined by the Director; (d) undertake responsibility for the maintenance and upkeep of all roads, open spaces, public parks and public health services for a period of five years from the date of issue of the completion certificate under rule 16 unless earlier relieved of this responsibility and there upon to transfer all such roads, open spaces, public parks and public health services free of cost to the Government or the local authority, as the case may be; (e) undertake t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernal source of water supply, minimum ground water extraction and zero run-off. Independent distribution system for separately fulfilling the farming, flushing and domestic water requirements shall also be provided; (c) install a bio-gas plant aimed at fulfilling requirements for cooking gas and a compost plant for utilizing and recycling of all bio-degradable waste, in accordance with the technical parameters specified by the Director; and, (d) restrict the residential density of the colony to a maximum of twenty five persons per acre.] 23. The submission essentially was that the application for development is examined and regulated solely by the office of the DTCP and nowhere contemplates the involvement of HSVP. It was submitted that the bilateral agreements, templates of which are embodied in Forms LC IV-A and LC IV-B, would also indicate that the agreement is essentially between the owner/developer on the one hand and the Director, DTCP on the other. It was his submission that this supports the contention of the writ petitioner that the contractual arrangement is only between the owner/developer and DTCP. Our attention was also drawn to Form LC IV-D as appended to the Rules an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest at the rate of 15% per annum which shall be charged on unpaid portion of the amount worked out at the tentative rate of Rs. lacs per gross acre. (c) The owner shall furnish bank guarantee equal to 25% of the amount worked out at the tentative rate of Rs. lacs per gross acre. (iii) The external development charges rates are under finalization. In the event of increase tentative external development charges rates, the owner shall pay the enhanced amount of external development charges and the interest on installment, if any, from the date of grant of licence. (iv) For grant of completion certificate, the payment of external development charges shall be pre-requisite along with valid licence and bank guarantee. (v) The unpaid amount of external development charges would carry an interest at a rate of 15% per annum and in case of any delay in the payment of installments on the due date an additional penal interest of 3% per annum (making the total payable interest 18% simple per annum) would be chargeable upto a period of three months and an additional three months with the permission of Director. (vi) That the owner shall derive maximum net profit @ 15% of the total project cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for a period of five years from the date of issue of completion certificate under rule16 of the Rules, unless earlier relieved of this responsibility. (e) That the owner shall be individually as well as jointly be responsible for the development of commercial colony. (f) That the owner shall complete the internal development works within one year of the grant of the licence. (g) That the owner shall deposit service charges @ Rs. 10/- square meters of the total covered area of the colony in two equal installments. The first instalment of the service charges would be deposited by the owner within sixty days from the date of grant of licence and the second instilment within six months from the date of grant of the licence. The unpaid amount of service charges shall carry an interest @ 18% (simple) per annum for the delay in the payment of installments. (h) That the owner shall carry out at his own expenses any other works which the Director may think necessary and reasonable in the interest of proper development of the colony. (i) That the owner shall permit the Director or any other officer authorized by him in his behalf to inspect the execution of the development works and the ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a payment which is liable to be routed through the DTCP. According to learned counsel, this aspect reinforces the stand of the petitioners of a contractual relationship existing only between the owner/developer and DTCP. According to learned counsel, since all aspects relating to the proposed development and the carrying out of external development under the HDRUA and the HDRUA Rules is regulated by the DTCP and the payment to HSVP is merely routed through that department of the Government of Haryana, the invocation of Section 194C is clearly misconceived. 25. It was then submitted that EDC is liable to be acknowledged as being a statutory levy since in case of a default in payment thereof, it is open to the DTCP to recover the same as areas of land revenue. Our attention in this respect was drawn to Section 10A of the HDRUA which reads as follows:- 10A. Recovery of dues.- All dues payable under the Act, which have not been deposited within the time specified, shall be recovered as arrears of land revenue. 26. According to learned counsel since EDC is a payment which is imbued with statutory character, no tax is liable to be deducted thereon. Mr. Jain relied upon the following obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability the court has discussed at page 470. The relevant observations read as under: It was argued by learned counsel for the petitioner that section 82 does not create a new liability and that is only provides for a procedure for enforcing a liability and that in the absence of any contract in the manner provided in article 299(1) there could be no liability to pay the deficiency. In our opinion, this argument cannot be accepted. Section 82 properly construed creates a statutory liability for recovery of the amount payable to the Government under the terms of a notice relating to the sale of forest produce by auction. This statutory liability can be enforced even though there is no contract as envisaged under article 299 of the Constitution. This construction of section 82 is strongly supported by the decision of the Supreme Court in A. Damodaran v. State of Kerala, (1976) 3 SCC 61 : AIR 1976 SC 1533. 18. Now the question is when the Madhya Pradesh High Court has taken a view that section 82 of the Forest Act creates a statutory liability and their Lordships of the Supreme Court have taken the view in the case of Gorelal, [2001] 248 ITR 3 that royalty is a tax, how it can be sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial plots, in favour of the Director, in lieu of depositing bank guarantee equal to twenty-five percent of the estimated cost of development works.] (b) undertake to deposit thirty percent of the amount to be realized by him from the plot-holders, from time to time, within ten days of its realization in a separate account to be maintained in a scheduled bank and this amount shall only be utilized towards meeting the cost of internal development works in the colony; (c) undertake to pay proportionate development charges if the main lines of roads, drainage, sewerage, water supply and electricity are to be laid out and constructed by the Government or any other local authority. The proportion in which and the time within which such payment is to be made shall be determined by the Director; (d) undertake responsibility for the maintenance and upkeep of all roads, open spaces, public parks and public health services for a period of five years from the date of issue of the completion certificate under rule 16 unless earlier relieved of this responsibility and there upon to transfer all such roads, open spaces, public parks and public health services free of cost to the Government or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tribution and recycling of storm-water aiming for no external source of water supply, minimum ground water extraction and zero run-off. Independent distribution system for separately fulfilling the farming, flushing and domestic water requirements shall also be provided; (c) install a bio-gas plant aimed at fulfilling requirements for cooking gas and a compost plant for utilizing and recycling of all bio-degradable waste, in accordance with the technical parameters specified by the Director; and, (d) restrict the residential density of the colony to a maximum of twenty five persons per acre. 28. Mr. Agarwal laid emphasis on the fact that even this provision does not obligate the owner to make any payments to HSVP. Learned counsel submitted that a reading of the bilateral agreement which ultimately comes to be executed in Form LC IV-D clearly places the onus of paying EDC upon the owner. It was pointed out that the payment of an EDC is envisaged to be made to HSVP through the DTCP. Taking us through the various clauses of the bilateral agreement, Mr. Agarwal highlighted the clauses which, according to him, establish that the rate of EDC, schedule of payment, and all other terms and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is income of the State and thus not taxable. 32. According to Mr. Agarwal, factors such as the foundational agreement being between the owner and the developer, the licence having been issued by the Government, fixation and enhancement of EDC rates by the Government, the furnishing of a Bank Guarantee in the name of the Government of Haryana, powers of its invocation and release vesting in that Government, all clearly evidence the fulcrum of the contract being between the owner and the Government of Haryana. It was in that backdrop that Mr. Agarwal contended that EDC is liable to be viewed as an amount which was payable to the Government and consequently the case squarely falling within the scope of Section 196. 33. Proceeding to deconstruct Section 194C, Mr. Agarwal submitted that the said provision would be attracted only if there be a person responsible for paying a sum to any resident for carrying out work in pursuance of a contract between the contractor and a specified person. According to learned counsel, the petitioner is not responsible to pay any sums to HSVP who would be liable to be viewed as the contractor in terms of Section 194C. Emphasis was laid on the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese cases, the question on the point of limitation formulated by the Income Tax Appellate Tribunal in the present cases need not be gone into for the simple reason that, at the relevant time, there was a debate on the question as to whether TDS was deductible under the Income Tax Act, 1961, on foreign salary payment as a component of the total salary paid to an expatriate working in India. This controversy came to an end vide judgment of this Court in CIT v. Eli Lilly Co. (India) (P) Ltd. [(2009) 15 SCC 1 : (2009) 312 ITR 225] The question on limitation has become academic in these cases because, even assuming that the Department is right on the issue of limitation still the question would arise whether on such debatable points, the assessee(s) could be declared as assessee(s) in default under Section 192 read with Section 201 of the Income Tax Act, 1961. (II) Chennai Port Trust Rajaji Salai Chennai v. The Income Tax Officer 2012 SCC OnLine Mad 2272 12. The Supreme Court observed that till the decision of the Apex Court reported in (2009) 312 ITR 225 (CIT v. Eli Lilly Company (India) (P) Ltd.), there was a debate on the question as to whether TDS was deductible on foreign salary p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of EDC were issued in the name of Chief Administrator, HUDA for an amount of Rs. 10,11,00,000/- for the year under assessment. It is also not in dispute that HUDA has shown EDC as current liability in the balance sheet but, in the notice of accounts forming part of the balance sheet, it has shown that the EDC has been received for execution of various external development works, as and when the development works are carried out the EDC liabilities are reduced accordingly. It is also not in dispute that HUDA is engaged in acquiring land, developing it and finally handing over to the customers for a price. It is also not in dispute that EDC are fixed by HUDA from time to time by issuing letters/circulars. It is also not in dispute that the assessee has not credited the amount of EDC paid to Shri Vardhman Infra Heights Pvt. Ltd. in its P L account. It is also not in dispute that Agreement between the land owners intended to set up a Group Housing Society dated 30.11.2010 was entered into between M/s. Dial Softech Pvt. Ltd., Shri Tek Ram, Smt. Saroj Singhal, Smt. Luxmi Devi and Smt. Sunehra Devi c/o M/s. Santur Infrastructure Pvt. Ltd. and the Governor of Haryana acting through the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44 ITAT Delhi. 6. We have carefully considered the rival submissions. The Assessing Officer/JCIT levied penalty of Rs. 6,14,460/- under Section 271C for short deduction/non deduction of tax at source alleging default committed by the assessee under Section 194C on payment of External Development Charges (EDC) to Haryana Urban Development Authority (HUDA). With the assistance of the ld. counsel, we find that the Directorate of Town and Country Planning, Haryana (Haryana Government) has issued clarification on TDS deduction on EDC payments vide letter dated 19.06.2018 which is self explanatory and thus reproduced herein for ready reference: To The Chief Administrator, Haryana Shahari Vikas Pradhikaran, Panchkula, Memo No. DTCP/ACCTTS/Assessing Officer (HQ)/CAO/ 2894/2018 Date: 19.6.2018 Subject: Clarification on TDS Deductions on EDC Payments. Please refer to the matter cited as subject above. 1. Section 2(g) of the Haryana Development and Regulation of Urban Areas Act, 1975 defines that external development works (hereinafter referred as EDW) shall includes any or all infrastructure development works like water supply, sewerage, drains, provisions of treatment and disposal of sewage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Govt. For carrying out EDW for which funds are given to HSVP by the Govt. through TCP Deptt. Since, payment for EDC has been made to TCP Deptt. of State Govt., no TDS was/is to be deducted out of payment made to Govt. for EDW. Accounts officer (HO) For: Director Town Country Planning Haryana, Chandigarh 7. On the basis of the aforesaid clarification, the assessee contends that the payment to HUDA is, in effect, payment to State Government and therefore such payment is exempt from obligations to deduct TDS in view of Section 196 of the Act. (IV) M/S Perfect Constech Pvt. Ltd. Versus Addl. CIT 2020 (12) TMI 1158 ITAT Delhi 5.0 We have heard the rival submissions and have also perused the material on record. It is seen that in Para 4.3.2, subparagraph (iv) of the order passed u/s 271C of the Act, the AO has himself noted that the demand draft of the EDC amounts are drawn in favour of the Chief Administrator, HUDA though routed through the Director General, Town and Country Planning, Sector-18, Chandigarh. He has also referred to the notes to accounts to the financial statements of HUDA wherein it has been stated that other liabilities also include external development charges received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed to be deleted. 6.0 In the final result, the appeal of the assessee stands allowed. 38. Leading submissions on behalf of the respondents, Mr. Zoheb Hossain firstly submitted that payments made to HSVP cannot be equated with payments made to the Government. Mr. Hossain pointed out that HSVP has come to be constituted by virtue of the provisions of the Haryana Urban Development Authority Act, 1977 1977 Act , a State legislation, and thus clearly placing that authority outside the ambit of Section 196 of the Act. It was his submission that authorities constituted under State legislations cannot claim coverage under Section 196, since the same is confined to sums payable to either the Government, the Reserve Bank or a corporation established by or under a Central Act. Mr. Hossain cited for our consideration the decision of the Supreme Court in Adityapur Industrial Area Development Authority v. Union of India (2006) SCC OnLine SC 530 where a contention that an authority constituted under a State Legislation would be exempt from taxation by virtue of Article 289 of the Constitution, came to be negatived in unequivocal terms. Mr. Hossain laid emphasis on the following passages fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption, namely, that income derived by a State from trade or business will be taxable, provided a law is made by Parliament in that behalf. Clause (3) of Article 289 is an exception of the exception prescribed by clause (2) of Article 289 and it provides that income derived from particular trade or business may be made immune from Union taxation if Parliament declares such trade or business as incidental to the ordinary functions of the Government (emphasis supplied) The reason is obvious. Under the Constitution, the State has no power to tax any income other than agricultural income. Under the Constitution, power to tax income is vested only in the Union. Therefore, while any property of the Union is immune from State taxation under Article 285(1), income derived by the State from business, as distinguished from governmental purposes, shall not have exemption from Union taxation unless Parliament declares such trade or business as incidental to the ordinary functions of the Government of the State [see Article 289(3)] (emphasis supplied) xxxx xxxx xxxx 14. In A.P. SRTC v. ITO [(1964) 7 SCR 17 : AIR 1964 SC 1486] the question arose as to whether the income derived from trading activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Union taxation. That, broadly stated, appears to be the result of the scheme adopted by the three clauses of Article 289. 15. Reading these three clauses together this Court held that the property as well as the income in respect of which exemption is claimed under clause (1) must be the property and income of the State, and thus the crucial question to be answered is: Is the income derived by the State from its transport activities the income of the State? It was observed that if a trade or business is carried on by a State departmentally or through its agents appointed exclusively for that purpose, there would be no difficulty in holding that the income made from such trade or business is the income of the State. Difficulties arise when one is dealing with trade or business carried on by a corporation established by a State by issuing a notification under the relevant provisions of the Act. In this context, the Court observed: (SCR p. 26) The corporation, though statutory, has a personality of its own and this personality is distinct from that of the State or other shareholders. It cannot be said that a shareholder owns the property of the corporation or carries on the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il under the relevant Act constituted Union taxation within the meaning of clause (1) of Article 289 of the Constitution. The levy of property taxes under the aforesaid enactments on lands or buildings belonging to the State Government was invalid and incompetent by virtue of the mandate contained in clause (1) of Article 289. However, if any land or building is used or occupied for the purpose of any trade or business, meaning thereby a trade or business carried on with profit motive, by or on behalf of the State Government, such land or building shall be subject to the levy of the property taxes levied by the said enactments. In other words, State property exempted under clause (1) means such property as is used for the purpose of the Government and not for the purpose of trade or business. That was a case where the question arose in relation to the levy of property tax on lands and buildings owned by the State Governments which was property of the State Government . In the instant case, we are concerned with the income of the appellant Authority and the same principles apply. The exemption can be claimed only if the income can be said to be the income of the State Government. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anchayat as referred to in clause (d) of Article 243 of the Constitution; or (ii) Municipality as referred to in clause (e) of Article 243-P of the Constitution; or (iii) Municipal Committee and District Board, legally entitled to, or entrusted by the Government with, the control or management of a Municipal or local fund; or (iv) Cantonment Board as defined in Section 3 of the Cantonments Act, 1924;] 42. According to learned counsel, a plain reading of Section 10(20) of the Act would establish that HSVP cannot be treated to be a local authority. In any case according to Mr. Hossain this aspect stands conclusively settled and answered against the writ petitioners by the Supreme Court in terms of its decision rendered in New Okhla Industrial Development Authority v. CIT (2018) 9 SCC 351. Mr. Hossain relied upon the following observations as rendered in that judgment: 27. The Kishansing Tomar v. Municipal Corpn., Ahmedabad [Kishansing Tomar v. Municipal Corpn., Ahmedabad, (2006) 8 SCC 352] , noticing the object and purpose of the Constitution (74th Amendment) Act, 1992, stated the following: (SCC p. 358, para 12) 12. It may be noted that Part IX-A was inserted in the Constitution by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se and object of the industrial township referred to therein whether industrial township mentioned therein can be equated with Municipality as defined under Article 243-P(e). Article 243-P(e) provides that the Municipality means an institution of self-government constituted under Article 243-Q. Whether the appellant is an institution of self-government constituted under Article 243-Q is the main question to be answered? Clause (1) of Article 243-Q provides that there shall be constituted in every State, a Nagar Panchayat, a Municipal Council and a Municipal Corporation, in accordance with the provisions of this Part. The proviso to clause (1) provides that: Provided that a Municipality under this clause may not be constituted in such urban area or part thereof as the Governor may, having regard to the size of the area and the municipal services being provided or proposed to be provided by an industrial establishment in that area and such other factors as he may deem fit, by public notification, specify to be an industrial township. 29. Thus, the proviso does not contemplate constitution of an industrial establishment as a Municipality rather clarifies an exception where Municipalit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SCC pp. 136-37, paras 16 18) '16. There is some validity in this submission but if, on a fair construction, the principal provision is clear, a proviso cannot expand or limit it. Sometimes a proviso is engrafted by an apprehensive draftsman to remove possible doubts, to make matters plain, to light up ambiguous edges. Here, such is the case. *** 18. ... If the rule of construction is that prima facie a proviso should be limited in its operation to the subject-matter of the enacting clause, the stand we have taken is sound. To expand the enacting clause, inflated by the proviso, sins against the fundamental rule of construction that a proviso must be considered in relation to the principal matter to which it stands as a proviso. A proviso ordinarily is but a proviso, although the golden rule is to read the whole section, inclusive of the proviso, in such manner that they mutually throw light on each other and result in a harmonious construction.' 42. In Hiralal Rattanlal v. State of U.P. [Hiralal Rattanlal v. State of U.P., (1973) 1 SCC 216 : 1973 SCC (Tax) 307 : AIR 1973 SC 1034] , this Court made the following observations: [SCC p. 224, para 22: SCC (Tax) p. 315] '22. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Article 243-Q, the word constituted used under Article 243-P(e) read with Article 243-Q clearly refers to the constitution in every State of a Nagar Panchayat, a Municipal Council or a Municipal Corporation. Further, the words in the proviso a Municipality under this clause may not be constituted clearly means that the words may not be constituted used in the proviso are clearly in contradistinction with the word constituted as used in Article 243-P(e) and Article 243-Q. Thus, notification under the proviso to Article 243-Q(1) is not akin to constitution of Municipality. We, thus, are clear in our mind that industrial township as specified under the Notification dated 24-12-2001 is not akin to Municipality as contemplated under Article 243-Q. 32. At this juncture, we may also notice the two judgments as relied on by the High Court and three more judgments where Article 243-Q came for consideration. The first judgment which needs to be noticed is Adityapur Industrial Area Development Authority [Adityapur Industrial Area Development Authority v. Union of India, (2006) 5 SCC 100] . The Adityapur Industrial Development Authority was constituted under the Bihar Industrial Area Develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions after 1-4-2003. In paras 6 and 7, the following was held: (Adityapur Industrial Area Development Authority case [Adityapur Industrial Area Development Authority v. Union of India, (2006) 5 SCC 100] , SCC pp. 104-05) 6. It would thus be seen that the income of a local authority chargeable under the head Income from house property , Capital gains or Income from other sources or from a trade or business carried on by it was earlier excluded in computing the total income of the Authority of a previous year. However, in view of the amendment, with effect from 1-4-2003 the Explanation local authority was defined to include only the authorities enumerated in the Explanation, which does not include an authority such as the appellant. At the same time Section 10(20-A) which related to income of an authority constituted in India by or under any law enacted for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, which before the amendment was not included in computing the total income, was omitted. Consequently, the benefit conferred by clause (20-A) on such an author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. R.C. Jain, (1981) 2 SCC 308 : 1981 SCC (L S) 323] is no more applicable to the Explanation to Section 10(20) of the 1961 Act. Therefore, in our view the judgment of this Court in R.C. Jain [Union of India v. R.C. Jain, (1981) 2 SCC 308 : 1981 SCC (L S) 323] followed by judgments of various High Courts on the status and character of AMC(s) is no more applicable to the provisions of Section 10(20) after the insertion of the Explanation/definition clause to that sub-section vide the Finance Act, 2002. B. Section 10(20) as amended by the Finance Act, 2002 44. We have already noticed that by the Finance Act, 2002 an Explanation has been added to Section 10(20) of the 1961 IT Act and Section 10(20-A) has been omitted. Prior to the Finance Act, 2002 there being no definition of local authority under the IT Act, the provisions of Section 3(31) of the General Clauses Act, 1897 were pressed into service while interpreting the extent and meaning of local authority. The Explanation having now contained the exhaustive definition of local authority, the definition of local authority as contained in Section 3(31) of the General Clauses Act, 1897 is no more applicable. Section 3 of the General ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o interpret the taxation statute strictly. Simply because one class of legal entities are given some benefit which is specifically stated in the Act does not mean that the legal entities not referred to in the Act would also get the same benefit. As stated by this Court on several occasions, there is no equity in matters of taxation. One cannot read into a section which has not been specifically provided for and therefore, we do not agree with the submissions of the learned counsel appearing for the appellant and we are not prepared to read something in the section which has not been provided for. The judgments referred to hereinabove support the view which we have expressed here. 47. It shall be useful to refer to the Explanatory Notes on the Finance Act, 2002. Explanatory Notes both on Section 10(20) and Section 10(20-A) are relevant and contained in paras 12.2 to 12.4 and 13.1 to 13.4. Paras 12.2. to 12.4 under the heading: Income of certain local authorities to become taxable are to the following effect: 12.2. Through the Finance Act, 2002, this exemption has been restricted to the Panchayats and Municipalities as referred to in Articles 243(d) and 243-P(e) of the Constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the total income of such assessee. 13.4. These amendments will take effect from 1-4-2003 and will, accordingly, apply in relation to Assessment Year 2003-2004 and subsequent assessment years. 49. The Explanatory Note clearly indicates that by the Finance Act, 2002 the exemption under Section 10(20) has been restricted to the Panchayats and Municipalities as referred to in Articles 243-P(d) and 243-P(e). Further by deletion of clause (20-A), the income of the Housing Boards of the States and of Development Authorities became taxable. 50. On a writ petition filed by the appellant before the Allahabad High Court where the notices issued in the year 1998 under Section 142 of the Income Tax Act were challenged vide its judgment dated 14-2-2000, the High Court held that the appellant's case comes squarely under Section 10(20-A) of the Income Tax Act, hence, the appellant was liable to be exempted under the said Act, although, the High Court did not express any opinion on the question whether the appellant was exempted under Section 10(20) in that judgment. 51. After omission of Section 10(20-A), the only provision under which a body or authority can claim exemption is Section 10(20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsistent with the dominant object which it seems to subserve, (c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful, (d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the court in interpreting the true purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming a hindrance in the interpretation of the same.' 53. This Court in Adityapur Industrial Area Development Authority [Adityapur Industrial Area Development Authority v. Union of India, (2006) 5 SCC 100] after considering Section 10(20) as amended by the Finance Act, 2002 and consequences of deletion of Section 10(20-A) has laid down the following in para 13: (SCC p. 107) 13. Applying the above test to the facts of the present case, it is clear that the benefit, conferred by Section 10(20-A) of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts ordinary, natural and grammatical sense. As observed by the Supreme Court of India: '22. ... In construing a statutory provision, the first and the foremost rule of construction is the literary construction. All that [the Court has] to see at the very outset is what does the provision say? If the provision is unambiguous and if from that provision, the legislative intent is clear, [the Court] need not call into aid the other rules of construction of statutes. The other rules of construction of statutes are called into aid only when the legislative intent is not clear.' Vide Hiralal Rattanlal v. State of U.P. [Hiralal Rattanlal v. State of U.P., (1973) 1 SCC 216 : 1973 SCC (Tax) 307 : AIR 1973 SC 1034] , SCC p. 224, para 22. 55. A Division Bench of the Delhi High Court also in Agricultural Produce Market Committee v. CIT [Agricultural Produce Market Committee v. CIT, (2007) 294 ITR 549] had occasion to consider Section 10(20) as amended w.e.f. 1-4-2003 where the High Court in para 5 has stated the following: (SCC OnLine Del) 5. The most striking feature of the Explanation is that the same provides an exhaustive meaning to the expression local authority . The word means us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation to Section 10(20), these are entities which mean the local authority. The submission of the appellant is that the appellant is covered by clause (ii) of the Explanation i.e. Municipality as referred to in clause (e) of Article 243-P of the Constitution . We, while discussing the above provisions, have already held that the appellant is not covered by the word/expression of Municipality in clause (e) of Article 243-P. Thus, the appellant is not clearly included in clause (ii) of the Explanation. It is not even the case of the appellant that the appellant is covered by Section 10(20) except clause (ii). 43. Proceeding to the facts of the case, Mr. Hossain pointed out that Form LC IV-D in unambiguous terms provides for the EDC being paid to HSVP. The aforesaid clause as contained in the bilateral agreement, according to Mr. Hossain, is incontrovertible proof of the obligation of the petitioner to pay EDC to HSVP, albeit through the DTCP. In any event, according to learned counsel, the payment of EDC is not to the DTCP. It was submitted that the petitioners have at no stage questioned HSVP as being the ultimate recipient of the EDC. 44. Learned counsel also questioned the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract of the appellant with the truck operators/owners, whose vehicles were engaged to execute the work of transportation of the goods only on freelance and need basis. The submission has been that the question of TDS under Section 194-C(2) would have arisen only if the payment was made to a sub-contractor and that too, in pursuance of a contract for the purpose of carrying whole or any part of work undertaken by the contractor . In our view, the submissions so made remain entirely baseless. 15.1. The nature of contract entered into by the appellant with the consignor company makes it clear that the appellant was to transport the goods (cement) of the consignor company; and in order to execute this contract, the appellant hired the transport vehicles, namely, the trucks from different operators/owners. The appellant received freight charges from the consignor company, who indeed deducted tax at source while making such payment to the appellant. Thereafter, the appellant paid the charges to the persons whose vehicles were hired for the purpose of the said work of transportation of goods. Thus, the goods in question were transported through the trucks employed by the appellant but, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rting goods, had four trucks of his own and was also acting as a commission agent by arranging for transportation through other transporters. As regards the income of assessee relatable to transportation through other transporters, it was found that the assessee had merely acted as a facilitator or as an intermediary between the two parties (i.e. the consignor company and the transporter) and had no privity of contract with either of such parties inasmuch as he only collected freight charges from the clients who intended to transport their goods through other transporters; and the amount thus collected from the clients was paid to those transporters by the assessee while deducting his commission. Looking to the nature of such dealings, the said assessee was held to be not the person responsible for making payments in terms of Section 194-C of the Act and hence, having no obligation to deduct tax at source. In contradistinction to the said case of Hardarshan Singh [CIT v. Hardarshan Singh, (2013) 350 ITR 427] , the appellant of the present case was not acting as a facilitator or intermediary between the consignor company and the truck operators/owners because those two parties had n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by it (i.e. transportation of the goods of the company), the operator/owner of that truck became the sub-contractor and all the requirements of Section 194-C came into operation. 15.5. Thus, we have no hesitation in affirming the concurrent findings in regard to the applicability of Section 194-C to the present case. Question 1 is, therefore, answered in the negative; against the appellant assessee and in favour of the Revenue. 47. We at the outset note that Mr. Hossain apart from addressing submissions noticed hereinbefore had also raised an objection to the maintainability of the writ petitions asserting that orders passed under Section 201 are appealable under the provisions of the Act. It was his submission, therefore, that these writ petitions should be dismissed on this score. We, however, find ourselves unable to sustain that objection bearing in mind the undisputed fact that most of these writ petitions were entertained as far back as in 2019 and 2021 and on which, and after hearing counsels for respective sides, the Court had entertained the writ petitions and passed interim orders. It would thus be wholly inequitable to relegate parties to pursue an alternative remedy. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rerequisite for Section 194C being attracted. For the purposes of Section 194C, all that is required is a payment being effected to a contractor who has a contractual relationship with a specified person. 50. HSVP, according to the respondents, has an arrangement with the Government of Haryana to undertake external development work. Undisputedly the Government of Haryana, by virtue of being the State Government, would fall within the meaning of the expression 'specified person' as per the Explanation appended to Section 194C. The critical question which thus arises is whether the arrangement between HSVP and the Government of Haryana could be said to fall within the meaning of the phrase in pursuance of a contract as occurring in that provision. 51. The HDRUA Act in Section 2(g) defines EDC to include all infrastructure development work, such as water supply, sewerage, drains, treatment and disposal of sewage, storm water, roads, electrical works and other activities including those which may be additionally specified by the Director, to be executed in the periphery or outside a colony or an area for the benefit thereof. A 'colony' has been defined in Section 2(c) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st others, would be credited all monies received by it from the State Government or the Central Government by way of grants, loans, advances or otherwise . The aforesaid fund is liable to be applied towards meeting expenditure for development of land and for such other purposes as the State Government might direct or permit. Section 21 of the 1977 Act reads as follows: (21). Fund of authority (1) the authority shall have and maintain its own fund to which shall be credited- (a) all moneys received by the authority from the State Government and the Central Government by way of grants, loans, advances or otherwise; (b) all moneys borrowed by the authority from source other than the Government, by way of loans or debentures; (c) all fees received by the authority under this Act; (d) all moneys received by the authority from the disposal of lands, building and other properties, movable and immovable; and (e) all moneys received by the authority by way of rents and profits or in any other manner or from any other source. (2) The fund shall be applied towards meeting- (a) expenditure incurred in the administration of this Act; (b) cost of acquisition of land for purposes of this Act; (c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at since receipts on account of EDC were found to be insufficient to bear the cost of development work, it had formulated a new scheme and for which appropriate budgetary provisions were made for execution of all external development works by it. It was on the promulgation of the aforesaid scheme titled as the Swarn Jyanti Haryana Urban Infrastructure Development Scheme that EDC w.e.f. FY 2017-18 was deposited directly with the State Government and constituted a part of the Consolidated Fund of that State. It is further admitted that it was post the promulgation of that scheme and the issuance of an order dated 12 May 2017 that all payments towards EDC were made online through the State Government's e-payment gateway or in the shape of demand drafts favouring the DTCP. It is further averred that the required funds for execution of development works were thereafter released to HSVP upon sanction being granted by the Finance Department of the Government of Haryana. This communication is thus evidence of all EDC charges being made over to the HSVP at least prior to 31 March 2017 pursuant to an understanding that those funds would be utilised towards external development. Undispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract were to be gleaned from the arrangement which existed between HSVP and the Government of Haryana and is also duly acknowledged by the DTCP itself, the absence of a written or codified agreement would not be relevant for the purposes of Section 194C being applicable. 61. We further note that not only the provisions of the HDRUA but also the forms and bilateral agreements executed by the applicants, mandated that all payments of EDC were to be drawn in favour of HSVP. Although they were routed through the DTCP, those payments undoubtedly were to the account of HSVP. The statute as well as the licence conditions thus placed the petitioners under a binding obligation to advance all EDC payments in favour of HSVP. The aforesaid clearly qualifies the responsibility which Section 194C places upon a payer who is contemplating making payments to a contractor. 62. The submission of a lack of privity between the writ petitioners and HSVP is noticed only to be rejected since Section 194C does not contemplate the existence of a contractual relationship between a person who is responsible for paying a sum and the contractor as defined in that provision. The existence of a contract is on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income tax thereon at the rates in force: Provided that in the case of interest payable by the Government or a public sector bank within the meaning of clause (23-D) of Section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode: [* * *] [Explanation-1].-For the purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called Interest payable account or 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. [Explanation 2.-For the removal of doubts, it is hereby clarified that the obligation to comply with sub-section (1) and to make deduction thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , by notification in the Official Gazette, specify a class of persons or cases, where the person responsible for paying to a non-resident, not being a company, or to a foreign company, any sum, whether or not chargeable under the provisions of this Act, shall make an application 3636[in such form and manner to the Assessing Officer, to determine in such manner, as may be prescribed], the appropriate proportion of sum chargeable, and upon such determination, tax shall be deducted under sub-section (1) on that proportion of the sum which is so chargeable. 65. The special character of that section and others similar thereto and which speak of income chargeable was noticed by the Supreme Court in Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income Tax and Anr. (2022) 3 SCC 321. We deem it apposite to extract paras 27 to 31 of that decision hereunder: 27. The learned Additional Solicitor General further pointed out that the Indian Government had expressed its reservations on the OECD Commentary, especially on the parts of the OECD Commentary dealing with the parting of copyright and royalty. He also relied upon the Report of the High-Powered Committee on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax under Section 194-LBA or Section 194-LBB or Section 194-LBC or Section 195, the rate or rates of income tax specified in this behalf in the Finance Act of the relevant year or the rate or rates of income tax specified in an agreement entered into by the Central Government under Section 90, or an agreement notified by the Central Government under Section 90-A, whichever is applicable by virtue of the provisions of Section 90, or Section 90-A, as the case may be; *** 4. Charge of income tax.-(1) Where any Central Act enacts that income tax shall be charged for any assessment year at any rate or rates, income tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions (including provisions for the levy of additional income tax) of, this Act in respect of the total income of the previous year of every person: Provided that where by virtue of any provision of this Act income tax is to be charged in respect of the income of a period other than the previous year, income tax shall be charged accordingly. (2) In respect of income chargeable under sub-section (1), income tax shall be deducted at the source or paid in advance, where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t excluding any consideration which would be the income of the recipient chargeable under the head Capital gains ) for- (i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property; (ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property; (iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property; (iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill; [Inserted by the Finance Act, 2001 (14 of 2001), Section 4(i)(w.e.f. 1-4-2002).] (iv-a) the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in Section 44-BB; (v) the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oidance of double taxation of income under this Act and under the corresponding law in force in that country or specified territory, as the case may be, without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including through treaty-shopping arrangements aimed at obtaining reliefs provided in the said agreement for the indirect benefit to residents of any other country or territory), or (c) for exchange of information for the prevention of evasion or avoidance of income tax chargeable under this Act or under the corresponding law in force in that country or specified territory, as the case may be, or investigation of cases of such evasion or avoidance, or (d) for recovery of income tax under this Act and under the corresponding law in force in that country or specified territory, as the case may be, and may, by notification in the Official Gazette, make such provisions as may be necessary for implementing the agreement. (2) Where the Central Government has entered into an agreement with the Government of any country outside India or specified territory outside India, as the case may be, under sub-section (1) for granting relief of tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has- (i) a residence or place of business or business connection in India; or (ii) any other presence in any manner whatsoever in India. (2) Where the person responsible for paying any such sum chargeable under this Act [Substituted by the Finance Act, 2003 (32 of 2003), Section 80(b) (w.e.f. 1-6-2003).] (other than salary) to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application in such form and manner to the assessing officer, to determine in such manner, as may be prescribed, the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable. *** 201. Consequences of failure to deduct or pay.-(1) Where any person, including the principal officer of a company- (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1-A) of Section 192, being an employer, does not deduct, or does not pay, or after so deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l or any rights, including the granting of a licence, in respect of any copyright in a literary work. 31. That such transaction may be governed by a DTAA is then recognised by Section 5(2) read with Section 90 of the Income Tax Act, making it clear that the Central Government may enter into any such agreement with the Government of another country so as to grant relief in respect of income tax chargeable under the Income Tax Act or under any corresponding law in force in that foreign country, or for the avoidance of double taxation of income under the Income Tax Act and under the corresponding law in force in that country. What is of importance is that once a DTAA applies, the provisions of the Income Tax Act can only apply to the extent that they are more beneficial to the assessee and not otherwise. Further, by Explanation 4 to Section 90 of the Income Tax Act, it has been clarified by Parliament that where any term is defined in a DTAA, the definition contained in the DTAA is to be looked at. It is only where there is no such definition that the definition in the Income Tax Act can then be applied. This position has been recognised by this Court in Azadi Bachao Andolan [Union of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of payment at the rates in force under the provisions of Sections 192, 193, 194, 194-A, 194-C 194-D, 194-G, 194-H,194-I, 194-J, 194-K, 194-LA , 194-LBA, 194-LBB, 194-LBC, 194-M, 194-O [* * *] and 195, the Assessing Officer is satisfied], that the total income of the recipient justifies the deduction of income tax at any lower rates or no deduction of income tax, as the case may be, the Assessing Officer shall, on an application made by the assessee in this behalf, give to him such certificate as may be appropriate. (2) Where any such certificate is given, the person responsible for paying the income shall, until such certificate is cancelled by the Assessing Officer, deduct income tax at the rates specified in such certificate or deduct no tax, as the case may be. (2-A) The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under sub-section (1) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith. 197- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 192-A or Section 193 or Section 194or Section 194-A [or Section 194-D] or Section 194-DA] or Section 194-EE [or Section 194-I] or Section 194-K, as the case may be, a declaration in writing in duplicate in the prescribed form and verified in the prescribed manner to the effect that the tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil.] (1-D) Notwithstanding anything contained in this section, no deduction of tax shall be made by the Offshore Banking Unit from the interest paid- (a) on deposit made on or after the 1st day of April, 2005, by a non-resident or a person not ordinarily resident in India; or (b) on borrowing, on or after the 1st day of April, 2005, from a non-resident or a person not ordinarily resident in India. Explanation.-For the purposes of this sub-section Offshore Banking Unit shall have the same meaning as assigned to it in clause (u) of Section 2 of the Special Economic Zones Act, 2005.] (1-E) Notwithstanding anything contained in this chapter, no deduction of tax shall be made from any payment to any person for, or on behalf of, the New Pension System Trust referred to in cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing within Section 196. We find ourselves unable to sustain that submission bearing in mind the indubitable position which emerges from the discussion which ensues. 69. Section 196 frees sums payable to the Government, RBI or a corporation established by or under a Central Act from the obligation of tax being collected at source. Undisputedly, HSVP would neither fall within the ambit of clause (1) or clause (3) of Section 196. The mere fact that HSVP has been constituted under a statutory enactment does not make it the Government . Even if it were discharging functions akin to or similar to governmental obligations or performing activities closely connected with State functions, the same would not result in us recognising HSVP as the Government. 70. This issue, in our considered opinion, stands conclusively answered against the writ petitioners by Adityapur Industrial Area. The said decision eloquently explains the distinction which is liable to be borne in mind between a sovereign government and a statutory authority. Quoting from Basu's Commentary on the Constitution of India, the Supreme Court noted that it is the property of the State which alone is immune from taxation und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness is incidental to the ordinary functions of the Government. In other words, clause (3) is an exception to the exception prescribed by clause (2). Whatever trade or business is declared to be incidental to the ordinary functions of the Government, would cease to be governed by clause (2) and would then be exempt from Union taxation. That, broadly stated, appears to be the result of the scheme adopted by the three clauses of Article 289. 71. In A.P. SRTC, the Supreme Court had held that a statutory corporation has a personality distinct and separate from that of the State or its shareholders. This would thus appear to lend credence to the stand of the respondents who had argued that even if HSVP be funded by the State Government, it would continue to remain a legal entity separate from the State Government. We are also unimpressed by the argument that since the payment was made on the directives of the DTCP, it should be treated as falling within the scope of Section 196of the Act. It becomes pertinent to note that Section 196 is not dependent upon a directive to pay. It is concerned solely with whether the payment is made to a Government or an authority specified therein. Simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to two per cent of such sum as income tax, by use of the words 'on income comprised therein' makes it obvious that the amount equal to two per cent of the sum required to be deducted is a deduction at source. Indeed, it is neither possible nor permissible to the payer to determine what part of the amount paid by him to the contractor constitutes the income of the latter. It is not also possible to think that the Parliament could have intended to cast such impossible burden upon the payer nor could it be attributed with the intention of enacting such an impractical and unworkable provision. Hence, on the express language employed in the sub-section, it is impossible to hold that the amount of two per cent required to be deducted by the payer out of the sum credited to the account of or paid to the contractor has to be confined to his income component out of that sum. There is also nothing in the language of the sub-section which permits exclusion of an amount paid on behalf of the organisation to the contractor according to Clause 13 of the terms and conditions of the contract in reimbursement of the amount paid by him to workers, from the sum envisaged We thus find ourselv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inged. In the absence of requisite particulars, the Show Cause Notice would be liable to be quashed on the ground of being wholly vague. As far back as in State of Orissa v. Binapani Dei 1967 SCC OnLine SC 15, the Supreme Court had pertinently observed:- 9. The first respondent held office in the Medical Department of the Orissa Government. She, as holder of that office, had a right to continue in service according to the Rules framed under Article 309 and she could not be removed from office before superannuation except for good and sufficient reasons . The State was undoubtedly not precluded, merely because of the acceptance of the date of birth of the first respondent in the service register, from holding an enquiry if there existed sufficient grounds for holding such enquiry and for re-fixing her date of birth. But the decision of the State could be based upon the result of an enquiry in manner consonant with the basic concept of justice. An order by the State to the prejudice of a person in derogation of his vested rights may be made only in accordance with the basic rules of justice and fair play. The deciding authority, it is true, is not in the position of a Judge called up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ches complained of are not satisfactorily explained. When it comes to blacklisting, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action. 78. Similar observations find place in UMC Technologies (P) Ltd. v. Food Corpn. of India (2021) 2 SCC 551: 13. At the outset, it must be noted that it is the first principle of civilised jurisprudence that a person against whom any action is sought to be taken or whose right or interests are being affected should be given a reasonable opportunity to defend himself. The basic principle of natural justice is that before adjudication starts, the authority concerned should give to the affected party a notice of the case against him so that he can defend himself. Such notice should be adequate and the grounds necessitating action and the penalty/action proposed should be mentioned specifically and unambiguously. An order travelling beyond the bounds of notice is impermissible and without jurisdiction to that extent. This Court in Nasir Ahmad v. Custodian General, Evacuee Property-has held that it is essential for the notice to specify the particular grounds on the basis of which an action is p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax, Nellore, (66, I.T.R. 55) (11)]. The point to be considered is whether assessment can be defeated or rendered invalid if it can be sustained under any other provision of the Act. However, this aspect of the matter need not further detain us as in view of our discussion above we are of the opinion that the assessment can be sustained under section 153(3)(ii) of the 1961 Act. It is a well settled principle of law that the exercise of a power would be referable to a jurisdiction which confers validity upon it and merely because the Income-tax Officer while proceeding to assess the assessee, has quoted a wrong section, the assessment cannot be rendered invalid if it can be supported under section 153(3)(ii) of the 1961 Act. We note that in Rajinder Nath, Section 153(3) came to be invoked while the Appellate Assistant Commissioner was already in seisen of proceedings relating to assessment and is thus clearly distinguishable. 81. The principle of a power otherwise inhering or existing and not being impacted by the mere mention of a wrong provision is one which we apply to ratify, save and uphold a decision which is otherwise found to be valid and sustainable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 009) 15 SCC 1. in the following terms:- 91. A bare reading of Section 201(1) shows that interest under Section 201(1-A) read with Section 201(1) can only be levied when a person is declared as an assessee-in-default. For computation of interest under Section 201(1-A), there are three elements. One is the quantum on which interest has to be levied. Second is the rate at which interest has to be charged. Third is the period for which interest has to be charged. The rate of interest is provided in the 1961 Act. The quantum on which interest has to be paid is indicated by Section 201(1-A) itself. Sub-section (1-A) specifies on the amount of such tax which is mentioned in sub-section (1) wherein, it is the amount of tax in respect of which the assessee has been declared in default. 92. The object underlying Section 201(1) is to recover the tax. In the case of short deduction, the object is to recover the shortfall. As far as the period of default is concerned, the period starts from the date of deductibility till the date of actual payment of tax. Therefore, the levy of interest has to be restricted for the abovestated period only. It may be clarified that the date of payment by the emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to note that the department conceded before the Tribunal that the recovery could not once again be made from the tax deductor where the payee included the income on which tax was alleged to have been short deducted in its taxable income and paid taxes thereon. There is no dispute whatsoever that Pradeep Oil Corporation had already paid the taxes due on its income received from the appellant and had received refund from the Tax Department. The Tribunal came to the right conclusion that the tax once again could not be recovered from the appellant (the deductor assessee) since the tax has already been paid by the recipient of income. *** 9. Be that as it may, Circular No. 275/201/95-IT(B) dated 29-1-1997 issued by the Central Board of Direct Taxes, in our considered opinion, should put an end to the controversy. The circular declares no demand visualised under Section 201(1) of the Income Tax Act should be enforced after the tax deductor has satisfied the officer in charge of TDS, that taxes due have been paid by the deducted assessee. However, this will not alter the liability to charge interest under Section 201(1-A) of the Act till the date of payment of taxes by the deducted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y them. The Revenue had contended that the default in payment of TDS could not be excused purely on this ground. However, the decisions in Hindustan Coca Cola [Hindustan Coca Cola Beverage (P) Ltd. v. CIT, (2007) 8 SCC 463] and Eli Lilly Co. [CIT v. Eli Lilly Co. (India) (P) Ltd., (2009) 15 SCC 1] clearly bar their ability to pursue the assessee airlines for recovery of the shortfall in TDS and restricts them to imposing interest for the default. xxxx xxxx xxxx 65. The ambit of reasonable cause under Section 273-B requires our scrutiny before we reach the conclusion that the assessing officer is required to also calculate potential penalties to be levied against the assessees. This Court in Eli Lilly Co. [CIT v. Eli Lilly Co. (India) (P) Ltd., (2009) 15 SCC 1] had elaborated, in the passage extracted below, on the context in which Section 273-B may be utilised : (SCC p. 29, paras 94-96) 94. Section 273-B states that notwithstanding anything contained in Section 271-C, no penalty shall be imposed 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. Therefore, the liability to l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd nascent legal issue that required resolution by this Court and, hence, there was reasonable cause for the air carriers to have not deducted TDS at the relevant period. The logical deduction from this reasoning is that penalty proceedings against the airlines under Section 271-C of the IT Act stand quashed. 86. We find a succinct enunciation of the legal position in this regard in a judgment of this Court in Commissioner of Income Tax (TDS) Vs. M/S American Express Bank Ltd. 2011 SCC OnLine Del 5517 where it was observed as follows:- 8. From the above conclusions of the Income Tax Appellate Tribunal, it is apparent that as a finding of fact, the Tribunal came to the conclusion that the assessee had acted honestly and fairly in short deducting the tax at source under a bona fide belief that the reimbursement of certain expenses on account of salary of gardeners/sweepers etc., actual conveyance expenditure and the expenditure on newspapers and periodicals were not taxable in the hands of the employees. After having returned such a finding, the Income Tax Appellate Tribunal concluded that the assessee cannot be held to be an 'assessee in default' under Section 201 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the assessee. 11. We would like to reiterate that although the questions have been decided in favour of the Revenue, it must be remembered that the finding of the Tribunal that the assessee acted in a bona fide manner, has to be kept in mind and, therefore, no penalty can be imposed on the assessee under Section 221 because of the specific stipulation in the proviso to Section 201(1) of the said Act. We also note that the exact quantum of the default needs to be computed. It would, therefore, be necessary to remand the matter to the assessing officer for the limited purpose of computing the exact quantum of default and the interest payable under Section 201(1A) of the said Act. We make it clear that in case the employees of the assessee have paid the taxes as per their individual returns/assessments, then no amount towards tax would be payable to that extent by the assessee, however, the assessee would continue to be liable for interest under Section 201(1A) but only for the period commencing 'from the date on which such tax was deductible to the date on which the tax is actually paid' [see: CIT v. Adidas India Marketing P. Ltd (2007) 288 ITR 379 (Del) and CIT v. Trans ..... X X X X Extracts X X X X X X X X Extracts X X X X
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