The Delhi Income Tax Appellate Tribunal (ITAT) has ruled that TDS is not applicable to payments made to the Haryana Urban Development Authority (HUDA) on behalf of the State Government and the tribunal argued that HUDA is an executing agency, and funds for development works are released after Finance Department sanction, so TDS is not required.
The assessee, Santur Builders Pvt.Ltd, a real estate developer made payments to the Haryana Urban Development Authority (HUDA) for External Development Charges, which were deemed liable to Tax Deductions (TDS) under Section 194C of the Income Tax Act, 1961. The assessee appealed to the Commissioner of Income Tax (Appeals), which upheld the AO’s order, The assessee then appealed to the Income Tax Appellate Tribunal (ITAT).
The assessee argued that the payments made to HUDA were not liable to TDS under Section 194C of the Act because HUDA is an executing agency for and on behalf of the State Government. The assessee also argued that the Directorate of Town and Country Planning, Haryana had issued a clarification stating that no TDS is required to be deducted on payments made to HSVP (Haryana Shahari Vikas Pradhikaran), which is the same entity as HUDA.
The Revenue argued that the payments made to HUDA were liable to TDS under Section 194C of the Act because HUDA is a statutory body and not a government department. The Revenue also argued that the Directorate of Town and Country Planning, Haryana’s clarification was not binding on the ITAT.
The Tribunal observed that HUDA is an executing agency for the State Government, released funds for development works after the Finance Department sanction. Payments made to HUDA are considered payments to the State Government, and TDS is not required. The Directorate of Town and Country Planning, Haryana’s clarification is binding on the ITAT, issued by a competent authority in line with the Act’s provisions.
The Two Bench Members comprising Kul Bharat (Judicial Member) and Pradip Kumar Kedia (Accountant Member) have ruled that TDS is not applicable to payments made to HUDA on behalf of the State Government, in line with the Directorate of Town and Country Planning, Haryana’s clarification that HSVP is an executing agency for the State Government for carrying out External Development Works (EDW), and therefore, no TDS is required.
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