TDI Realcon Pvt Ltd vs. Addl. CIT Spl. Range-76: Penalty Levy Under Section 271C

TDI Realcon Pvt Ltd vs. Addl. CIT Spl. Range-76: Penalty Levy Under Section 271C

Case Number: ITA 5769/DEL/2019

Appellant: TDI Realcon Pvt Ltd, New Delhi

Respondent: Addl. CIT Spl. Range-76, New Delhi

Assessment Year: 2017-18

Case Filed On: 2019-07-02

Order Type: Final Tribunal Order

Date of Order: 2022-09-05

Pronounced On: 2022-09-05

Conclusion: The ITAT Delhi ruled in favor of TDI Realcon Pvt Ltd, deleting the penalty levied under Section 271C for non-deduction of tax on External Development Charges (EDC) paid to HUDA.

Background

The Income Tax Appellate Tribunal (ITAT) Delhi Bench “H”, comprising Judicial Member Shri Challa Nagendra Prasad and Accountant Member Dr. B.R.R. Kumar, heard the case on 5th September 2022 and pronounced the order on the same day.

The appellant, TDI Realcon Pvt Ltd, located at Upper Ground Floor, Vandana Building, 11-Tolstoy Marg, Connaught Place, New Delhi – 110 001, filed an appeal against the Additional Commissioner of Income Tax (Addl. CIT), Spl. Range-76, New Delhi, for the assessment year 2017-18. The appellant’s PAN is AAACI5799P.

Contentions

The appeal was directed against the order of the learned Commissioner of Income Tax (Appeals)-31, New Delhi, dated 16th May 2019. The issue at hand was the penalty levied under Section 271C of the Income Tax Act, 1961, for non-deduction of tax on payments made for External Development Charges (EDC) to the Haryana Urban Development Authority (HUDA).

The assessee, represented by Shri Shailesh Gupta, Advocate, contended that the payments made to HUDA were not subject to Tax Deducted at Source (TDS) under Section 194C of the Act. The payments were made to the state government for urban development and infrastructure creation, and hence, no TDS was required under Section 196 of the Act.

The learned Senior Departmental Representative (DR), Shri M. Baranwal, argued against the assessee’s claims.

Tribunal’s Analysis

The Tribunal analyzed the following key points raised by the assessee:

• The payments for EDC to HUDA were directed by the Department of Town and Country Planning (DTCP), Haryana, which is a government department.
• There was no contractual obligation between the assessee and HUDA that necessitated the deduction of TDS.
• The receipts from EDC were deposited in the Consolidated Fund of the State, as clarified by DTCP.
• Prior Tribunal decisions in similar cases (e.g., TDI Infrastructure Ltd. vs. Addl. CIT for AY 2014-15) concluded that TDS was not required on EDC payments, and penalties under Section 271C were not sustainable.

The Tribunal found merit in the assessee’s arguments and noted that similar cases had ruled in favor of not requiring TDS on EDC payments. Specifically, the Tribunal referenced its earlier decision in TDI Infrastructure Ltd. vs. Addl. CIT for AY 2014-15, where it was held that payments made to HUDA for EDC were not subject to TDS and penalties under Section 271C were not applicable.

Conclusion

Based on the findings and in alignment with previous Tribunal decisions, the ITAT Delhi ruled in favor of TDI Realcon Pvt Ltd. The Tribunal ordered the deletion of the penalty levied under Section 271C for non-deduction of tax on EDC payments to HUDA, as the payments were not subject to TDS under the applicable legal provisions.

Order pronounced in the open court on 5th September 2022.

Sd/- Sd/-
(B.R.R. KUMAR) (C. N. PRASAD)
ACCOUNTANT MEMBER JUDICIAL MEMBER

Date:-05.09.2022

Copy forwarded to:
1. Appellant: M/s TDI Realcon Pvt. Ltd., Upper Ground Floor, Vandana Building, 11-Tolstoy Marg, Connaught Place, New Delhi – 110 001.
2. Respondent: Addl. CIT, Range: 76, New Delhi.
3. CIT
4. CIT(A)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI

Date of dictation 05.09.2022
Date on which the typed draft is placed before the dictating member 05.09.2022
Date on which the typed draft is placed before the other member 05.09.2022
Date on which the approved draft comes to the Sr. PS/ PS 05.09.2022
Date on which the fair order is placed before the dictating member for pronouncement 05.09.2022
Date on which the fair order comes back to the Sr. PS/ PS 05.09.2022
Date on which the final order is uploaded on the website of ITAT 05.09.2022
Date on which the file goes to the Bench Clerk 05.09.2022
Date on which the file goes to the Head Clerk.
The date on which the file goes to the Assistant Registrar for signature on the order
Date of dispatch of the Order

TDI Realcon Pvt Ltd vs. Addl. CIT Spl. Range-76: Penalty Levy Under Section 271C