This article provides a detailed analysis of the ITA 1957/DEL/2020, wherein Shree Vardhman Developers Pvt. Ltd. faced penalties for non-deduction of TDS on payments made to the Department of Town & Country Planning, Haryana.
The case revolves around the penalties imposed under section 271C of the Income Tax Act, 1961 for the non-deduction of tax at source on Infrastructure Development Charges (IDC) paid by Shree Vardhman Developers to the Director General Town and Country Planning, Haryana. The primary contention was whether the IDC payments, amounting to Rs. 4,10,85,000, required TDS.
The appellant argued that the payments were made to a government department, and thus, did not require TDS under section 194C of the Act. The Assessing Officer, however, deemed these payments as having an income element, warranting TDS. The initial penalty order was upheld by the CIT(A), but was contested on the grounds of procedural flaws and jurisdictional errors in appeal processing.
The Tribunal noted the administrative oversight and emphasized the need for adjudication on merits rather than procedural technicalities. Citing similar cases and decisions, the Tribunal sided with the appellant, establishing that payments to government entities for statutory charges do not typically require TDS.
This case sets a significant precedent for real estate developers and entities dealing with government departments regarding TDS applicability on statutory payments. The detailed review of judicial reasoning in this tribunal order underscores the importance of understanding nuanced tax obligations under the Income Tax Act.
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