Dispute Over External Development Charges Between Tulip Infratech Pvt. Ltd. and ACIT for AY 2017-18 – ITA No. 6736/DEL/2019

Introduction

This case involves a dispute regarding the deduction of tax at source on payments made for External Development Charges (EDC) by Tulip Infratech Pvt. Ltd. to the Haryana Urban Development Authority (HUDA), adjudicated by the Income Tax Appellate Tribunal, Delhi Bench ‘H’.

Background

Tulip Infratech Pvt. Ltd., a real estate development company, was involved in various projects requiring the payment of External Development Charges to HUDA. These charges, collected by the government, are intended for infrastructure development. The issue arose when the Assessing Officer (AO) claimed that these payments should have TDS deductions under section 194C, which the appellant contested, stating the payments were made directly to the government, hence exempt.

Assessment Order and Appeals

The Assessing Officer, referencing several CBDT circulars and previous assessments, imposed penalties for non-deduction of TDS. The penalties were contested up to the Income Tax Appellate Tribunal, which noted the payments were for government-imposed charges, not contractual payments to HUDA, and thus should not attract TDS.

Judgment

The tribunal, after reviewing submissions from both the appellant and the respondent and previous similar cases, ruled that no TDS was required on the EDC payments. They noted the payments were part of statutory obligations to the government, not payments for services rendered by HUDA.

Conclusion

The Tribunal’s decision highlighted the importance of understanding the nature of payments and their implications for TDS under the Income Tax Act. It provided clarity on the treatment of government charges collected by statutory bodies in real estate transactions.

Dispute Over External Development Charges Between Tulip Infratech Pvt. Ltd. and ACIT for AY 2017-18 – ITA No. 6736/DEL/2019