Real Estate Firm’s EDC Payments to HUDA is of Contractual Nature, Liable to TDS u/194(c): ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi Bench allowed the Revenue’s appeals in a case concerning non-deduction of tax at source on External Development Charges (EDC) paid to the Haryana Urban Development Authority (HUDA).

The Tribunal held that such payments are contractual in nature and therefore attract deduction of tax under Section 194C of the Income Tax Act, 1961.

The appellant in this case was the Revenue Authority, challenging the orders of the Commissioner of Income Tax (Appeals)-31, New Delhi [CIT(A)], for Assessment Years 2014-15 and 2015-16.

The assessee, M/s Ireo Grace Realtech Private Limited, a real estate company based in West Delhi, had made EDC payments to HUDA without deducting tax at source. The Assessing Officer (AO) treated the company as an assessee in default under Sections 201(1) and 201(1A).

However, the CIT(A) deleted the demand, holding that the company was not liable to deduct TDS on such payments, leading to the Revenue’s appeal.

Shri Jitender Singh, Commissioner of Income Tax (Departmental Representative), representing the Revenue Authority argued that EDC payments made to HUDA were squarely covered under Section 194C of the Act as contractual payments.

It was contended that the CIT(A) erred in ignoring the binding judgment of the Delhi High Court in M/s Puri Construction Private Limited v. Addl. CIT & Ors. (2024) 462 ITR 326 (Delhi), which held that such payments attract deduction of TDS under Section 194C.

Advocates Shri Ruchesh Sinha and Ms. Monalisa Maity, representing the assessee, supported the order of the CIT(A). It was argued that EDC payments made to HUDA were in the nature of statutory charges and not contractual payments, and therefore, the assessee was not liable to deduct TDS on these payments.

The Bench comprising Judicial Member Satbeer Singh Godara and Accountant Member Naveen Chandra held that the issue was already settled by the jurisdictional Delhi High Court in Puri Construction Pvt. Ltd.

The Tribunal observed that the High Court had categorically ruled that EDC payments are contractual in nature and are therefore subject to deduction of tax under Section 194C.

The bench, therefore, set aside the findings of the CIT(A) and held that the assessee had defaulted by not deducting TDS on the payments.

Accordingly, both appeals were allowed in favour of the Revenue.

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