No TDS u/s 194C on Payment towards External Development Charges paid to HUDA: ITAT
The assessee was imposed with a penalty under Section 271C of the Income Tax Act for non-deduction of tax at source towards amount paid as External Development Charges (EDC) to Directorate of Town and Country Planning, Haryana (Haryana Government) (DGTCP) through banking channel favoring No TDS u/s 194C on Payment towards External Development Charges paid to HUDA: ITAT (HUDA). Appeals were filed by the Assessee against the common order of CIT(A) arising from the common assessment order passed by the Assessing Officer (AO) under Section 271C of the Income Tax Act, 1961 (the Act) concerning AYs 2013-14 & 2017-18.
The issue is not res integra. The identical issue had come up in the case of Spaze Tower Pvt. Ltd. vs. JCIT, New Delhi,
“That HSVP is only an executing agency for and on behalf of State Govt. for carrying out EDW for which funds are given to HSVP by the Govt. through TCP Dept. Since, payment for EDC has been made to TCP Dept. of State Govt., no TDS was/is to be deducted out of payment made to Govt. for EDW. 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.”
It was observed that the provisions of Section 194C are not applicable on payments to agencies like HUDA on behalf of the State Government. The imposition of penalty under Section 271C was consequently found unsustainable in the absence of default of Section 194C of the Act.
The facts and issue being identical, in the light of the clarification noted above the tribunal sees no reason to depart from it. Therefore, it found merit in the plea raised on behalf of the assessee for cancellation of penalty imposed under Section 271C of the Act.
Therefore, the imposition of a penalty of Rs. 4,56,440 and Rs. 5,34,000 under Section 271C of the Act for the Assessment Years 2014-15 and 2017-18 respectively, was found to be not justified in view of the finding of the Co-ordinate Bench. Hence, both appeals of the assessee were allowed.
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