The Delhi bench of the Income Tax Appellate Tribunal (ITAT), Delhi bench has held that TDS under section 194C of the Income Tax Act, 1961 is not leviable on payment of External Development Charges to Haryana Urban Development Authority (HUDA).
According to the Section 194C of the Income Tax Act, any individual making a fee to a residential individual, who carries out ‘work’ as a contract between the ‘specified individual’ and the ‘resident contractor,’ is obliged and required to deduct TDS
During the assessment proceedings, 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).
After analysing the clarification on TDS deduction on EDC payments issued by the Directorate of Town and Country Planning, Haryana (Haryana Government) vide letter dated 19.06.2018, the division bench of the Tribunal comprising Shri Kul Bharat, Judicial Member & Shri Pradip Kumar Kedia, Accountant Member has held that no TDS is applicable on such payments.
Noting that the letter is self-explanatory, the bench held that “We also notice that identical issue has been examined by the Co-ordinate Bench in the case of Perfect Constech Pvt. Ltd. vs. Additional Commissioner of Income Tax in ITA No.6907/Del/2019 order dated 29.12.2020 wherein Co-ordinate Bench found 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 to be unsustainable in the absence of default of Section 194C of the Act.”
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