M/S RAMPRASTHA ESTATES PVT. LTD vs UNION OF INDIA & ORS.
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 15 January 2024
Judgment pronounced on: 13 February 2024
+ W.P.(C) 9483/2019 & CM APPL 39041/2019
PURI CONSTRUCTIONS PRIVATE LIMITED ….. Petitioner
Through: Mr. Puneet Agarwal, Mr. Yuvraj Singh & Mr. Chetan Kumar, Advs.
versus
ADDITIONAL COMMISSIONER OF INCOME
TAX & ORS. …. Respondents
Through: Mr. Aseem Chawla, SSC with Ms. Pratishtha Chaudhary, Mr. Aditya Gupta & Mr. Navin Rohila, Advs.
+ W.P.(C) 11232/2019 & CM APPL. 46219/2019
NATUREVILLE PROMOTERS
PRIVATE LIMITED ….. Petitioner
Through: Mr. Puneet Agarwal, Mr. Yuvraj Singh, Mr. Chetan Kumar, Advs.
versus
UNION OF INDIA & ORS. ….. Respondents
Through: Mr. Zoheb Hossain, SSC with Mr. Sanjeev Menon, JSC.
+ W.P.(C) 3850/2021
RPS INFRASTRUCTURE LIMITED ….. Petitioner
Through: Mr. Ved Jain, Mr. Nischay Kantoor & Mr. Soniya Dodeja, Advs.
versus
ASSISTANT COMMISSIONER OF INCOME TAX,
CIRCLE-78, TDS-02 ….. Respondent
Through: Mr. Sanjay Kumar, Ms. Easha & Ms. Hemlata Rawat, Advs.
+ W.P.(C) 4909/2023
M/S RAMPRASTHA ESTATES PVT. LTD ….. Petitioner
Through: Mr. Puneet Agarwal, Mr. Yuvraj Singh, Mr. Chetan Kumar, Advs.
versus
UNION OF INDIA & ORS. ….. Respondents
Through: Ms. Bakshi Vinita, SPC for R-1/ UOI.
+ W.P.(C) 4097/2021 & CM APPLs. 21620/2021, 21621/2021
NOVA REALTORS PVT LTD ….. Petitioner
Through: Mr. Satyen Sethi & Mr. Arta Trana Panda, Advs.
versus
INCOME TAX OFFICER ….. Respondent
Through: Mr. Sanjay Kumar, Ms. Easha & Ms. Hemlata Rawat, Advs.
+ W.P.(C) 4281/2021 & CM APPL. 47286/2021
M/S ALPHA CORP DEVELOPMENT
PVT LTD ….. Petitioner
Through: Mr. Debesh Panda & Mr. Kanishk Aggrawal, Advs.
versus
ASSISTANT COMMISISONER OF
INCOME TAX & ANR. ….. Respondents
Through: Mr. Puneet Rai, Mr. Ashvini Kumar, Mr. Rishabh Nangia, Advs. for Income Tax.
Mr. Hemant Gupta, Ms. Shivang Jain & Ms. Swati Tiwari, Advs. for R-2.
+ W.P.(C) 11552/2021 & CM APPL. 35649/2021
M/S VIPUL SEZ DEVELOPERS PVT. LTD. ….. Petitioner
Through: Mr. Sumit K. Batra, Mr. Manish Khurana, Ms. Priyanka Jindal, Advs.
versus
UNION OF INDIA & ORS. ….. Respondents
Through: Mr. Asheesh Jain, CGSC with Mr. Gaurav Jain, Adv. for R-1.
Mr. Zoheb Hossain, SSC with Mr. Sanjeev Menon, JSC.
+ W.P.(C) 4778/2021 & CM APPLs. 14735/2021, 22303/2021
M/S ALPHA CORP DEVELOPMENT
PVT. LTD. ….. Petitioner
Through: Mr. Debesh Panda & Mr. Kanishk Aggrawal, Advs.
versus
INCOME TAX OFFICER & ANR. ….. Respondent
Through: Mr. Puneet Rai, Mr. Ashvini Kumar, Mr. Rishabh Nangia, Advs. for Income Tax.
Mr. Hemant Gupta, Ms. Shivang Jain & Ms. Swati Tiwari, Advs. for R-2.
+ W.P.(C) 5319/2021 & CM APPL. 16386/2021
COUNTRYWIDE PROMOTERS PVT. LTD. ….. Petitioner
Through: Mr. Piyush Kaushik, Adv.
versus
COMMISSIONER OF INCOME TAX (TDS)-1, DELHI & ANR. ….. Respondents
Through: Mr. Puneet Rai, Mr. Ashvini Kumar, Mr. Rishabh Nangia, Advs. for Income Tax.
+ W.P.(C) 5683/2021 & CM APPL. 17766/2021
M/S RAMPRASTHA ESTATES PVT. LTD. ….. Petitioner
Through: Mr. Puneet Agarwal, Mr. Yuvraj Singh, Mr. Chetan Kumar, Advs.
versus
UNION OF INDIA & ORS. ….. Respondents
Through: Mr. Ravi Prakash, CGSC with Ms. Usha Jamnal, Adv. for Resp./UOI.
Mr. Sunil Agarwal, Sr. SC with Mr. Shivansh Pandya, Mr. Utkarsh Tiwari, Advs.
+ W.P.(C) 5715/2021 & CM APPL. 17894/2021
M/S FLORENTINE ESTATES OF INDIA LTD. ….. Petitioner
Through: Mr. Puneet Agarwal, Mr. Yuvraj Singh, Mr. Chetan Kumar, Advs.
versus
UNION OF INDIA & ORS. ….. Respondents
Through: Mr. Ravi Prakash, CGSC with Ms. Usha Jamnal, Adv. for Resp./UOI.
Mr. Sunil Agarwal, Sr. SC with Mr. Shivansh Pandya, Mr. Utkarsh Tiwari, Advs.
+ W.P.(C) 11531/2021 & CM APPL. 35542/2021
M/S VIPUL SEZ DEVELOPERS PVT. LTD. ….. Petitioner
Through: Mr. Sumit Batra, Mr. Manish Khurana, Ms. Priyanka Jindal, Advs.
versus
UNION OF INDIA & ORS. ….. Respondents
Through: Mr. Asheesh Jain, CGSC with Mr. Gaurav Jain, Adv. for R-1.
Mr. Zoheb Hossain, SSC with Mr. Sanjeev Menon, JSC.
+ W.P.(C) 299/2022 & CM APPL. 848/2022
RAHEJA DEVELOPERS LIMITED ….. Petitioner
Through: Mr. Pratyush Raj & Ms. Riddhi Jain, Advs.
versus
ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 78(1) DELHI AND ORS. ….. Respondents
Through: Ms. Akanksha Kaul, Ms. Versha Singh, Advs. for UOI.
Mr. Zoheb Hossain, SSC with Mr. Sanjeev Menon, JSC.
+ W.P.(C) 4033/2022 & CM APPL. 12047/2022
RAHEJA DEVELOPERS LIMITED ….. Petitioner
Through: Mr. Pratyush Raj & Ms. Riddhi Jain, Advs.
versus
ASSISTANT COMMISSIONER OF
INCOME TAX & ORS. ….. Respondents
Through: Ms. Akanksha Kaul, Ms. Versha Singh, Advs. for UOI.
Mr. Zoheb Hossain, SSC with Mr. Sanjeev Menon, JSC.
+ W.P.(C) 4498/2022 & CM APPL. 13457-13458/2022
BENCHMARK INFOTECH PVT LTD ….. Petitioner
Through: Mr. Satyen Sethi & Mr. Arta Trana Panda, Advs.
versus
INCOME TAX OFFICER TDS WARD73(3) ….. Respondent
Through: Mr. Puneet Rai, Mr. Ashvini Kumar, Mr. Rishabh Nangia, Advs. for Income Tax.
+ W.P.(C) 4554/2022 & CM APPL. 13664-13665/2022
RPS INFRASTRUCTURE LIMITED ….. Petitioner
Through: Mr. Ved Jain, Mr. Nischay Kantoor & Mr. Soniya Dodeja, Advs.
versus
ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE- 78-1 & ANR. ….. Respondents
Through: Mr. Sanjay Kumar, Ms. Easha & Ms. Hemlata Rawat, Advs.
+ W.P.(C) 4647/2022 & CM APPL. 13960/2022
RPS INFRASTRUCTURE LIMITED ….. Petitioner
Through: Mr. Ved Jain, Mr. Nischay Kantoor & Mr. Soniya Dodeja, Advs.
versus
ASSISTANT COMMISSIONER OF INCOME TAX,
CIRCLE- 78-1 & ANR. ….. Respondents
Through: Mr. Sanjay Kumar, Ms. Easha & Ms. Hemlata Rawat, Advs.
+ W.P.(C) 5365/2022 & CM APPL. 16059/2022
ONE POINT REALITY PVT LTD ….. Petitioner
Through: Mr. Salil Kapoor, Ms. Ananya Kapoor, Mr. Utkarsh Kumar Gupta, Mr. Tarun Chanana & Mr. Sumit Lalchandani, Advs.
versus
INCOME TAX OFFICER, WARD
76(2) & ANR. ….. Respondents
Through: Mr. Kamal Kant Jha, Sr. PC with Mr. Avinash Singh, Adv. for UOI.
Mr. Zoheb Hossain, SSC with Mr. Sanjeev Menon, JSC.
+ W.P.(C) 5367/2022 & CM APPL. 16062/2022
ONE HEIGHT COLONIZERS PVT. LTD. ….. Petitioner
Through: Mr. Ved Jain, Mr. Nischay Kantoor & Ms. Soniya Dodeja, Advs.
versus
INCOME TAX OFFICER, WARD
76(2) & ANR. ….. Respondents
Through: Mr. Sanjay Kumar, Ms. Easha & Ms. Hemlata Rawat, Advs.
+ W.P.(C) 6552/2022 & CM APPL. 19907-19908/2022
JAGRAN DEVELOPERS PVT. LTD. ….. Petitioner
Through: Ms. Ananya Kapoor & Mr. Utkarsh Kumar Gupta, Advs.
versus
NATIONAL FACELESS ASSESSMENT
CENTRE ….. Respondent
Through: None
+ W.P.(C) 6558/2022 & CM APPL. 19924-19925/2022
JAGRAN DEVELOPERS PVT. LTD. ….. Petitioner
Through: Ms. Ananya Kapoor & Mr. Utkarsh Kumar Gupta, Advs.
versus
NATIONAL FACELESS ASSESSMENT
CENTRE ….. Respondent
Through: None
+ W.P.(C) 6631/2022 & CM APPL. 20143-20144/2022
ANSAL PROPERTIES AND
INFRASTRUCTURE LTD ….. Petitioner
Through: Mr. Tapas Ram Mishra, Adv.
versus
DY COMMISSIONER OF INCOME
TAX CIRCLE 73(1) ….. Respondent
Through: Mr. Aseem Chawla, Sr. SC with Ms. Pratishtha Chaudhary, Mr. Aditya Gupta, Mr. Navin Rohila, Advs. for Revenue.
+ W.P.(C) 6694/2022 & CM APPL. 20332-20333/2022
M/S FLORENTINE ESTATES OF INDIA LTD. ….. Petitioner
Through: Mr. Puneet Agarwal, Mr. Yuvraj Singh, Mr. Chetan Kumar, Advs.
versus
UNION OF INDIA & ORS. ….. Respondents
Through: Mr. Ravi Prakash, CGSC with Ms. Usha Jamnal, Adv. for Resp./UOI.
Mr. Sunil Agarwal, Sr. SC with Mr. Shivansh Pandya, Mr. Utkarsh Tiwari, Advs.
+ W.P.(C) 6737/2022 & CM APPL. 20450-20451/2022
ACTIVE PROMOTERS PRIVATE LIMITED ….. Petitioner
Through: Mr. Salil Kapoor, Ms. Ananya Kapoor, Mr. Utkarsh Kumar Gupta, Mr. Tarun Chanana & Mr. Sumit Lalchandani, Advs.
versus
INCOME TAX OFFICER WARD
73(1), DELHI ….. Respondent
Through: Mr. Aseem Chawla, Sr. SC with Ms. Pratishtha Chaudhary, Mr. Aditya Gupta, Mr. Navin Rohila, Advs. for Revenue.
+ W.P.(C) 6893/2022 & CM APPL. 21015/2022
M/S OMAXE LTD ….. Petitioner
Through: Mr. Puneet Agarwal, Mr. Yuvraj Singh, Mr. Chetan Kumar, Advs.
versus
DEPUTY COMMISSIONER OF
INCOME TAX & ORS. ….. Respondents
Through: Mr. Vipul Agrawal, SSC with Mr. Gibran Naushad & Ms. Sakshi Shairwal, Adv. for R- 1 & R-3.
+ W.P.(C) 7978/2022 & CM APPLs. 24381/2022, 36849/2022
RAHEJA DEVELOPERS LIMITED ….. Petitioner
Through: Mr. Pratyush Raj & Ms. Riddhi Jain, Advs.
versus
ASSISTANT COMMISSIONER OF
INCOME TAX & ORS. ….. Respondents
Through: Ms. Akanksha Kaul, Ms. Versha Singh, Advs. for UOI.
Mr. Zoheb Hossain, SSC with Mr. Sanjeev Menon, JSC.
+ W.P.(C) 9236/2022 & CM APPL. 27686/2022
M/S TS REALTECH PVT. LTD ….. Petitioner
Through: Mr. Puneet Agarwal, Mr. Yuvraj Singh, Mr. Chetan Kumar, Advs.
versus
UNION OF INDIA & ORS. ….. Respondents
Through: Mr. Gigi C. George & Mr. Dheeraj Singh, Advs. for Resp./UOI.
Mr. Aseem Chawla, Sr. SC with Ms. Pratishtha Chaudhary, Mr. Aditya Gupta, Mr. Navin Rohila, Advs. for Revenue.
+ W.P.(C) 11184/2022 & CM APPL. 32877/2022
M/S ONE POINT REALITY PRIVATE LIMITED
….. Petitioner
Through: Mr. Salil Kapoor, Ms. Ananya Kapoor, Mr. Utkarsh Kumar Gupta, Mr. Tarun Chanana & Mr. Sumit Lalchandani, Advs.
versus
INCOME TAX OFFICER WARD 76(2), DELHI .. Respondent
Through: Mr. Zoheb Hossain, SSC with Mr. Sanjeev Menon, JSC.
+ W.P.(C) 11220/2022 & CM APPL. 32975/2022
M/S ONE POINT REALITY
PRIVATE LIMITED ….. Petitioner
Through: Mr. Salil Kapoor, Ms. Ananya Kapoor, Mr. Utkarsh Kumar Gupta, Mr. Tarun Chanana & Mr. Sumit Lalchandani, Advs.
versus
INCOME TAX OFFICER WARD
76(2), DELHI ….. Respondent
Through: Mr. Zoheb Hossain, SSC with Mr. Sanjeev Menon, JSC.
+ W.P.(C) 11706/2022 & CM APPL. 34819/2022 (Ex.)
M/S PURI CONSTRUCTION LIMITED ….. Petitioner
Through: Mr. Puneet Agarwal, Mr. Yuvraj Singh, Mr. Chetan Kumar, Advs.
versus
UNION OF INDIA & ORS. ….. Respondents
Through: Mr. Bhagwan Swaroop Shukla, CGSC with Mr. Vinay Shukla & Mr. Sharvan Kumar Shukla, Advs. for Resp./UOI.
Mr. Kunal Sharma, Ms. Zehra Khan, SSCs with Mr. Shubhendu Bhattacharyya, Adv.
+ W.P.(C) 4920/2023 & CM APPL. 19028-19029/2023
BRAHMA CITY PRIVATE LIMITED ….. Petitioner
Through: Mr. Salil Kapoor, Ms. Ananya Kapoor, Mr. Utkarsh Kumar Gupta, Mr. Tarun Chanana & Mr. Sumit Lalchandani, Advs.
versus
INCOME TAX OFFICER WARD 73 3
DELHI & ANR. ….. Respondents
Through: Mr. Puneet Rai, Mr. Ashvini Kumar, Mr. Rishabh Nangia, Advs. for Income Tax
Mr. Bhagwan Swaroop Shukla, CGSC with Mr. Vinay Shukla & Mr. Sharvan Kumar Shukla, Advs. for Resp./UOI.
+ W.P.(C) 5313/2023 & CM APPL 20713/2023
CHINTELS INDIA PVT LTD. ….. Petitioner
Through: Mr. Kapil Goel & Mr. Sandeep Goel, Advs.
versus
DEPUTY COMMISSIONER OF INCOME
TAX CIRCLE 73(1), DELHI ….. Respondent
Through: Mr. Aseem Chawla, SSC with Ms. Pratishtha Chaudhary, Mr. Aditya Gupta & Mr. Navin Rohila, Advs.
CORAM:
HON’BLE MR. JUSTICE YASHWANT VARMA
HON’BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV
J U D G M E N T
YASHWANT VARMA, J.
1. This batch of writ petitions assail the action initiated by the respondents predicated upon a purported failure on the part of the writ petitioners to deduct tax on payments made to the Haryana Shahari Vikas Pradhikaran1 (earlier known as the Haryana Urban Development Authority, for short HUDA) under Section 194C of the Income Tax Act, 19612. The respondents assert that the External Development Charges3 which were paid by the writ petitioners to HSVP albeit on the directions of the Director General, Department of Town and Country Planning4, Haryana, a department functioning under the Government of Haryana, would clearly fall within the ambit of Section 194C of the Act and as a consequence of default, the petitioners are liable to be proceeded under Section 201 as also to answer why penalty be not levied in terms of Section 271C of the Act.
2. We at the outset deem it appropriate to note and observe that we have heard learned counsels for respective sides solely on the question of whether the payment of EDC would fall within the ambit of Section 194C of the Act and whether the writ petitioners can be held liable to have deducted tax at source in terms of that provision. We thus propose to principally answer the primary question and consequentially leave it open for the writ petitioners as well as the respondents to proceed further in respect of notices that may have been issued referable to Sections 201 and Section 271C of the Act in accordance with the present judgment.
3. Since the questions raised were found to be common, we propose to briefly notice the salient facts as they obtain in W.P.(C) 11232/2019 and W.P.(C) 3850/2021. It may also be noted that the facts of each writ petition forming part of this batch and the status of individual cases has been gleaned from a detailed chart which was placed by the respondents and forms part of the record.
4. Natureville Promoters Private Limited5 has preferred the aforenoted writ petition seeking the following reliefs:-
(a) Quash and set aside the CIRCULAR F. NO. 370133/37/2017 – TPL Dated 23.12.2017 (Annexure -12);
(b) Quash and set aside the Notices issued under Section 201(1)/ Section 201(1A) of the Income Tax Act dated 22.03.2017, 31.03.2017, 10.08.2017 and 19.07.2019 [(Annexure 3, 4, 8 ( colly) and 16 ( colly)].
(c) Quash and set aside the provisions of Section 4(1), and Section 2(31)(vi) being violative of the Article 289 of the Constitution of India imposing tax on income of State;
(d) Declare that the EDC is not leviable to Income tax, and there is no liability to deduct TDS on the same under the Income Tax Act, 1961;
(e) Prohibit and restrain the respondents from proceeding further with the matter;
Pass such other order(s) or further orders as this Hon’ble Court deems fit and proper in the facts and circumstances of the case, for which act of kindness the Petitioner as is duty bound shall ever pray.
5. It must at the outset be noted that although a challenge to the validity of Sections 4(1), Section 2(31)(vi) of the Act also appears to form part of the writ petition, no arguments on that score were addressed before us. RPS Infrastructure Limited6 raises a similar challenge as would be evident from the reliefs which are sought in the petition:
A. Issuance of writ in the nature of Certiorari, Mandamus, Prohibition or any other appropriate writ, order or direction for quashing the impugned show cause notice dated 12.03.2021 issued by the Respondent being illegal, arbitrary and not legally sustainable in the eyes of law;
B. Issuance of a writ, order and/or directions in the nature of certiorari, prohibition, mandamus or any other appropriate writ, order or direction staying the operation of the impugned show cause notice dated 12.03.2021 issued by the Respondent.
C. Issuance of a writ, order and/or directions in the nature of certiorari, prohibition, mandamus or any other appropriate writ, order or direction staying all consequential proceedings, that may be initiated pursuant to the impugned notice under challenge issued under section 201(1)/201(1A) by the Respondent in the case of Petitioner for FY 2013-14.
D. Grant an ad-interim ex parte stay in terms of prayers (a), (b) and (c) above;
E. Issuance of a writ in the nature of mandamus or any other writ, order or direction, as deemed fit and proper in the facts and circumstances of the present case.
It is further prayed that during the pendency of the present writ petition, the further proceeding before the Respondent may kindly be stayed in the interest of justice and equity.
6. Natureville Promoters is stated to be engaged in the business of construction, promotion and development of land and real estate. It was granted license no. 99 of 2010 in Form LC-V dated 30 November 2010 under the provisions of the Haryana Development and Regulation of Urban Areas Act, 19757 for carrying out a development project in collaboration with Puri Constructions Pvt. Ltd. It also appears to have entered into a bilateral agreement in Form LC-IV with the DTCP in connection with the aforesaid project. On 22 March 2017, a notice came to be issued by the Income Tax authorities calling upon Natureville Promoters to explain why TDS had not been deducted on EDC payments made to HSVP. That EDC payments were made directly to HSVP is not questioned by the writ petitioners. Their challenge essentially stems from the fact that the said payment was made on the directions of the DTCP. Whether this aspect would have any material bearing on their alleged liability to deduct tax is one which we propose to deal with in the subsequent parts of this decision.
7. Reverting to the narration of facts, we note that the petitioner upon receiving the aforesaid notice appears to have approached the office of the DTCP seeking clarifications. The DTCP was asked by Natureville Promoters to clarify whether TDS provisions were applicable to payments made to HSVP. The aforesaid communication was followed by a further letter addressed by the petitioner to DTCP dated 31 July 2017 asking the concerned authority to clarify whether developers are required to deduct TDS on EDC payments that have been made. In the meanwhile, the Income Tax authorities issued yet another notice dated 10 August 2017 calling for further information from the writ petitioner. The DTCP on 06 October 2017 replied to the collaborator of Natureville Promoters, Puri Constructions, stating that EDC is a charge levied by the Government for carrying out external development works and that the same is deposited in the receipt head of the DTCP and would thus constitute Government receipt. It was further stated that no tax is being deducted thereon since it was Government receipt.
8. In the meanwhile, the Central Board of Direct Taxes8 appears to have been approached by the Finance Secretary of the Government of Haryana and called upon to clarify the position. In terms of an Office Memorandum9 dated 23 December 2017, the CBDT took the following position:-
F. No.370133/372017-TPL
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Direct Taxes)
TPL Division
*******
New Delhi, 23rd December, 2017
OFFICE MEMORANDUM
Sub: Recommendations for relief from applicability of TDS provisions on External Development Charges (EDC) payable to Directorate of Town & Country Planning (DTCP) State Government of Haryana-regarding.
Kindly refer to your letter dated 21st November, 2017 addressed to the Finance Secretary, along with the enclosures on the captioned subject.
2. In this regard it is submitted that provisions of non-deduction of tax under Section 196 of the Income-tax Act, 1961, is applicable to the Government and to the other authorities as mentioned under the Section. Accordingly, External Development Charges (EDC) if paid to Government of Haryana would be exempt from TDS provisions. However, in the instant case, it appears that the developer has made the payment in the nature of External Development Charges (EDC) not to the Government but to HUDA [Haryana Urban Development Authority) which is a development authority of State Government of Haryana and is a taxable entity under the income-tax Act, 1961. Hence, TDS provisions would be applicable on EDC payable by the developer to HUDA
3. It may be mentioned here that section 194 of the Income as Act, 1961 provides for non- deduction of tax in suitable cases. The HUDA may resort to aforesaid provision for exemption of TDS with regard to payment of EDC
4. This issues with the approval of Finance Secretary.
(Dr. Rishi Kumar)
DCIT (OSD) (TPL-III)
Shri Praveen Jain
Vice Chairman
National Real Estate Development Council
First Floor, 8, Community Centre,
East of Kailash, New Delhi-110065
Tele:01126225795, 01141608570
Fax:01126225796
9. Insofar as the DTCP is concerned, it vide its communication of 19 June 2018 while clarifying the position with respect to HSVP took the following stand:-
DIRECTORATE OF TOWN & COUNTRY PLANNING HARYANA
SCO No. 71-75, Sector-17 /C, Chandigarh, Website
www.topharyana. gov .in
0172-2549347, E-mail: aohq.tep@gmail.com
To
The Chief Administrator,
Haryana Shahri Vikas Pradhikaran,
Panchkula,
Memo No. DTCP /ACCTTS/AO(HQ)/CA0/2894/2018 Dated: 19.06.2018
Subject: Clarification on TDS Deductions on EDC Payments. Please refer to the matter cited as subject above.
1. Section 2(g) of the Haryana Development and Regulation of Urban Areas Act, 1975 defines that external development works (hereinafter referred as EDW) shall includes any or all infrastructure development works like water supply, sewerage, drains, provisions of treatment and disposal of sewage, sullage and storm water, roads, electrical works, solid complex, fire stations, grid sub-stations etc and/or any other work which the Director may specify to be executed in the periphery of or outside colony/area for the benefit of the colony/area.
2. As per Section 3(3)(ii), license holder has to pay proportionate
development charges if the external development works as defined in clause (g) of section 2 are to be carried out by the Government or any other local authority. The proportion in which and the time within which, such payment is to be made, shall be determined by the Director.
3. Presently, external development works in the periphery of or outside colony/area for the benefit of the colony/area are being executed by Haryana Shahri Vikas Pradhikaran (hereafter HSVP) which is the Development Authority of State govt. Earlier upto 31.03.2017, Department of Town & Country Planning used to collect the external development charges from the colonizer to whom licences have been granted under Act No.8 of 1975 and the persons to whom permission for change of Land use have been granted under Act No. 41 of 1963, in the shape of bank draft drawn in favour of CA, HSVP and sent the same to CA, HSVP.
4. As the receipt on account of EDC was not sufficient to carry out
the all development works under EDC for the urban estate as per approved development plans, therefore, to meet out the shortfall, a new scheme Swaran Jayanti Haryana Urban Infrastructure Development Scheme (renamed as Mangal Nagar Vikas Yojana was approved by the State Govt. and appropriate budget provision for execution of development works has been made in the said scheme. From Financial Year 2017-18, the receipts on account of EDC is being deposited in the consolidated fund of the State under Major Receipt Head 0217 receipts and all license / CLU holders have also been directed vide order dated 12.05.2017 that payment of EDC in respect of license/ CLU granted by TCP Deptt. May be made online through e-payment gateway or in shape of demand drafts favouring Director, Town & Country Planning, Haryana. Required funds for execution of development works are released to HSVP after granting the sanction from the Finance Department.
It is, therefore, clarified that HSVP is only an executing agency working for and on behalf of State Govt. for carrying out EDW for which funds are given to HSVP by the Govt. through TCP Deptt. Since, payment for EDC has been made to TCP Deptt. Of State Govt., no TDS was/is to be deducted out of payment made to Govt. for EDW.
Endst No. DTCP/ ACCTTS/ AO(HQ)/CA0/2903-04/20 18
Dated: 19.06.2018
A copy with reference to representation on the subject cited
matter is forwarded to CREDAI, Haryana, 12A, First Floor, Omaxe
Square Building, District Center jasola, New Delhi-110044 & Satya Developers Pvt. Ltd., 34, Babar Lane, Bengali Market, New Delhi- 110004 for information please.
Accounts Officer (HQ)
For: Director, Town & Country Planning
Haryana, Chandigarh
10. In the meanwhile and taking note of the controversy which had arisen, DLF Utilities Limited, is stated to have approached the Punjab and Haryana High Court by way of CWP No. 1866/2018. While entertaining that writ petition, the High Court on 29 January 2018 passed the following interim order:-
Issue notice of motion returnable on 27.03.2017.
One of the questions that arises is whether the petitioner is at all liable to deduct tax at source. This in turn raises a question as to whether the external development charges are payable by the petitioner under the Haryana Development and Regulation of Urban Areas Act, 1975 to the Government of Haryana or to any other party. If it is to the Government of Haryana, it is possible that the exemption under Section 196 of the Income Tax Act, 1961 would apply.
The petitioner states it entered into the agreements in Forms IV and LC-IV A.
Prima facie, the agreements are with the Governor of Haryana.
In these circumstances, petitioner shall pursuant to the impugned notice dated 22.01.2018 appear before the officer. Till further orders, the order, if any, however, shall not be given effect to.
11. Writ petitions thereafter came to be filed before this Court including W.P. (C) 9483/2019 by the collaborator of Natureville Promoters and where upon taking note of the orders passed by the Punjab and Haryana High Court in DLF Utilities Limited, interim orders were passed providing that while proceedings may go on, any orders adverse to the petitioner, if passed, would not be given effect to. Similar orders operate on the various writ petitions forming part of this batch. It is this interim order which has continued on all the writ petitions forming part of this batch.
12. The sequence of events insofar as RPS Infrastructure is concerned follow a similar chronology. A notice under Section 201 and Section 201(1A) of the Act came to be issued against that writ petitioner on 16 December 2020. The charge in that notice was identical to that laid against Natureville Promoters, namely, the liability to deduct tax on EDC payments made to HSVP.
13. Responding to the aforesaid notice, RSP Infrastructure took the position that TDS was not liable to be deducted and prayed for the proceedings being dropped. Ultimately and by an order dated 12 March 2021, the Income Tax Department issued a final notice holding that HSVP was a taxable entity and consequently there was an evident failure on the part of RSP Infrastructure to deduct tax in accordance with the provisions made in Chapter XVII-B of the Act.
14. It becomes pertinent to note that the present litigation stems from the stand taken by the Income Tax Department that tax was liable to be deducted by virtue of the provisions made in Section 194C. It would further appear from the record that earlier also notices under Section 148 of the Act and based on a failure to deduct tax in respect of EDC payments had been issued against various entities and at which stage the respondents had taken the position that tax was liable to be deducted under Section 194 of the Act. One of those notices came to be challenged in BPTP Limited v. Principal Commissioner of Income Tax (Central) III & Anr.10 The Court in BPTP upheld that challenge holding that no liability to deduct tax under Section 194 or 194I would arise. We deem it apposite to extract the following passages from BPTP:-
26. The Assessing Officer in paragraph 2 of the recorded reasons quotes that “External development charges is covered by the provisions of section 194 of the Income-tax Act, 1961. The assessee has failed to deduct tax at source on the payments made to the Haryana Urban Development Authority”. There is no explanation or rationale for the aforesaid observation made by the Assessing Officer. We, therefore, cannot understand as to how the payment of external development charges being in the nature of statutory fees, could be subject to withholding tax under section 194 of the Act, a provision that is applicable to dividends. The nature of dividend payment is intrinsically different from external development charges and, therefore, the apparent reason for reopening seems to be erroneous, irrational and fallacious. The subsequent observation in paragraph 2 “as per the provisions of section 40(a)(ia) of the Income-tax Act, any sum payable on which tax is deductible at source under Chapter XVII-B but the same has not been deducted” appears to be based on the understanding that the provisions of section 194 are attracted to external development charges and, therefore, it is subject to withholding tax and consequently the provisions of section 40(a)(ia) of the Act would be attracted. Even if one were to ignore the provision of law quoted and relied upon by the Assessing Officer, and we were to agree with the contention of Revenue that while exercising the power, the source may not be specifically referred to or if wrongly mentioned to, it would not render the exercise of such power to be invalid, yet, we are unable to fathom as to how the Assessing Officer has arrived at the conclusion that the external development charges payment was subject to tax deduction at source. The Revenue in its counter-affidavit has sought to elaborate on the aforesaid reasons by contending that the external development charges payment is akin to rent. However, we are not impressed with this submission. Firstly, such an understanding is not borne out from the recorded reasons and, secondly, the Department cannot by way of a counter-affidavit supplement the recorded reasons by introducing such legal submissions. The source of the power in this case, as sought to be argued, is not discernible.
27. If the Assessing Officer harboured a reason to believe that the payment of external development charges requires deduction of tax at source under the provisions of the Income-tax Act, it ought to have disclosed the basis for such a view. The entire reasoning disclosed in the recorded reasons, for initiating the proceedings is completely silent on this aspect. It merely states that “Since, external development charges has income character, therefore it should have been subjected to tax deducted at source by assessee”. The Assessing Officer has further proceeded to observe since the assessee is a development authority of State Government of Haryana and is a taxable entity, deduction of tax at source provisions could be applicable on external development charges payable by the assessee through Haryana Urban Development Authority. Apart from making aforenoted observations and referring to section 194 and section 40(a)(ia), there is no apparent rationale for assumption of jurisdiction by the Assessing Officer. The judgment in Greater Mohali Area (supra) is of no assistance to the Revenue as the same is distinguishable on facts. In the said case, the petitioner who was recipient of external development charges had approached the court seeking quashing of the order disposing of its objections to the reasons recorded for reopening the assessment under sections 147 and 148 of the Act. In the assessment under section 143 (3) of the Act, the effect of external development charges upon petitioner’s income was not referred to, the Assessing Officer sought to reopen the assessment on the basis of reason to believe that income on account of external development charges had escaped assessment. In these circumstances, since, the assessment order, did not deal with the character of the income of external development charges or its effect on petitioner’s income, the court upheld the action of reopening on the ground that the issue had not been considered at the time of the assessment. Likewise, the other judgment relied upon by the Revenue in the case of New Okhla Industrial Development Authority (supra) is also distinct on facts. In the said case, the court was examining as to whether Greater Noida and Noida Authorities were local authorities within the meaning of section 10(20) of the Income-tax Act and whether their income was exempt from Income-tax. Deciding this question, the court held that the Noida and Greater Noida are not local authorities for the purpose of the Act. Therefore, the aforesaid decision has no relevance to the facts of the present case.
28. We would also like to reflect on section 194-1 and its Explanation which deals with rent and has been relied upon by the Revenue to contend that the definition of “rent” is broad and would also envisage the payment of external development charges and is subject to withholding tax. In support of this provision, the Revenue has relied upon the observations of the Supreme Court in New Okhla Industrial Development Authority (No. 2) v. CIT (Appeals) (2018) 406 ITR 209 (SC), the relevant portion whereof is reproduced herein below (page 218 of 406 ITR):
“The definition of rent as contained in the Explanation is a very wide definition. The Explanation states that ‘rent’ means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land. The High Court has read the relevant clauses of the lease deed and has rightly come to the conclusion that payment which is to be made as annual rent is rent within the meaning of section 194-1, we do not find any infirmity in the aforesaid conclusion of the High Court. The High Court has rightly held that tax deducted at source shall be deducted on the payment of the lease rent to the Greater Noida as per section 194-1. Reliance on circular dated January 30, 1995 has been placed by the Noida/Greater Noida. A perusal of the circular dated January 30, 1995 indicate that the query which has been answered in the above circular is ‘Whether requirement of deduction of Income-tax at source under section 194-1 applies in case of payment by way of rent to the Government, statutory authorities referred to in section 10(20A) and local authorities whose income under the head ‘Income from house property or ‘Income from other sources’ is exempt from Income-tax.”
29. We are unable to see as to how the above provision and decision is of any assistance to the Revenue. It can be seen from the quoted portion of the said judgment that in the said case, the payment of annual rent was considered to be falling within the ambit of section 194 -I , a conclusion drawn by the court on a reading of the relevant clauses of the lease deed. In the present case, the external development charges, on the aforesaid rationality, cannot be subjected to section 194-1 of the Act. Moreover, if such was the understanding of the Revenue, it should have been well founded and disclosed in the reasons recorded by the Assessing Officer. Deduction of tax at source is dealt with under Chapter XVII of the Income- tax Act. The provisions enumerated thereunder, stipulate requirement of deduction of tax at source. The Revenue is unable to point out any specific provision which deals with external development charges payment except for alluding to section 194-1. We need not delve into this question any further as we do not find this to be a ground spelt out in the reasons for reopening the assessment under section 147 of the Act. The statutory orders containing reasons have to be judged on the basis of what is apparent and not what is explained later. The Revenue cannot be permitted to improve the same by offering better explanation during the course of the proceedings. On this issue we would like to refer the view of the Supreme Court in Mohinder Singh Gill v. Chief Election Commissioner (1978) 1 SCC 405 where it has been held “The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise.
15. Yet another challenge thereafter came to be laid before this Court in DLF Homes Panchkula Pvt. Ltd. vs. Joint Commissioner of Income Tax11 with the respondents this time taking the position that TDS on EDC was liable to be deducted by virtue of Section 194I. This stand came to be negatived with our Court holding that EDC could not be termed as rent so as to fall within the ambit of Section 194I.
16. The writ petitioners have also referred to the views expressed by different benches of the Income Tax Appellate Tribunal12 while dealing with penalty proceedings. However, insofar as RPS Infrastructure is concerned, it appears to have been placed on notice with respect to a levy of penalty under Section 271C for Financial Years13 2013-14, 2014-15 and 2015-16. While dealing with the aforesaid issue the Additional Commissioner of Income Tax in terms of an order made on 15 January 2018 took the following stand:-
4.1. HUDA was constituted under Haryana Urban Development Authority Act, 1977. The functions of HUDA are:
a. To promote and secure development of urban areas with the power to acquire. sell and dispose off property, both movable and immovable.
b To acquire develop and dispose off land for residential. Industrial. commercial and institutional purposes.
c To make available developed land to Haryana Housing board and other bodies for providing houses to Economically Weaker Sections of the society, and
d To undertake building works and other engineering works.
4.1 1 HUDA is developer of urban areas. It develops urban infrastructure. It is doing business of development of large real estate projects. During survey of HUDA, statement of Sh. Ram Kumar. Sr. AO. HUDA. and relevant representative documents showing entire gamut of business activities of HUDA were found and taken on record. HUDA is the entity which is acquiring land, developing and finally handing it over to consumers for a price. Lands developed by HUDA is though identified and acquired by the Urban Estate Department, Haryana Government yet the ownership and possession of land is transferred to HUDA for consideration paid by HUDA.
A) land to be developed is identified and surveyed by the Director General Town & Country Planning Haryana the land so identified and surveyed is ready for acquisition by LAO (Land Acquisition Officer) of the Urban Estate Department Haryana The relevant portion of the statement of Sh. Ram Kumar was is as under:
“Q. Please explain the process by land ultimately comes to HUDA for development starting from the point at identification at land?
Ans In the first phase, Town & Country Planning survey of the land which is required to be acquired. After survey concerned land acquisition start, acquisition process as per land Acquisition Act, and send the case file to the Government of Haryana for its approval. After approval, HUDA authorized the bank in the name at concerned LAO, who make the payment to land owners on behalf of HUDA. At the time of announcement at award, he make the agreement with concerned state officers HUDA for said land. Sample copy at Government approval and bank authorization is submitted to. After making payment HUDA start process for development at land and thereafter start the process for development at land And thereafter start the process at floatation. After inviting applications from the applicants. Copy of scheme branches and allotment letter is submitted as Annexure-C and D.
B) LAO requests its superior authority, Director General Urban Estate Department Haryana for administrative approval for acquiring the land.
C) The urban Estate Department. Haryana conveys administrative approval for acquisition of land to Director General Urban Estate Department, Haryana. It asks LAO to acquire land in question as per law. A copy of this approval is marked to HUDA.
D) HUDA authorizes its bank to disburse payment for award for land to the LAO.
E) LAO transfers the ownership and possession of land to HUDA.
4.2 Basis/Rationale for charging of EDC by HUDA-
4.2. 1 External Development Work (hereafter EDW) is defined in the Haryana Development and Regulation of Urban Area Act. 1975 (hereafter HDRUA). Definition of EDW is given in section 2(g) of this Act It is as follows:
‘External Development works include water supply. sewerage, drains. necessary provisions of treatment and disposal of sewage, sullage and storm water, roads, electrical works. solid waste management and disposal slaughter houses, colleges, hospitals, stadium/sports complex. fire stations grid sub-stations etc and any other work which the directory may specify to the executed in the periphery of or outside colony/area for the benefit of the colony/area
4.2.2 HUDA charges EDC as per section 3(3)(a)(ii) of HDRUA, which reads as under:
To pay proportionate development charges if the external development works as defined in clause (g) of Section 2 are to be carried out by the Government or any other local authority The proportion in which and the time within which such payment is to be made, shall be determined by the Director’
4.2.3 HUDA charges EDC for EDWs by issuing letters/circulars which are documented from time to time:
Sr. No.
Subject/
Description
Dispatch No.
Date of Issue
a
Fixation of development charges of released land and cases of change of land use in the Urban Estate/ Controlled area of the state
22860-72
14.08.2002
b
Fixation of EDC in cases of released/change of land use
851-76
15.01.2022
c
Fixation of External Development Charges in cases of released/change of land use
16493-16518
08.07.2002
d
Fixation of External Development Charges in cases of released land
33580-608
25.09.2009
4.2.4 The gist of these letters/circulars is that EDC are levied as per Section 2(g) for EDW on the beneficiaries to whom the change of land use permission is granted for various purposes in the Agricultural/Rural Zone and who are also availing the benefits of the EDW like the town level facilities of major circulation roads, stadiums, hospitals colleges, crematoriums town parks etc. being provided by HUDA in the nearby urbanisable areas. Since the change of land use holders avail the parts of the EDW, they should also proportionately contribute towards the expenditure incurred on EDW by HUDA This proportionate contribution is called EDC.
4.2.5 The rationale for EDC received/charged by HUDA is further strengthened by a noteworthy point Mentioned in the ‘Notes to The Accounts Forming Part of The Balance Sheet As on 31. 03 2016′ having significant bearing on the nature EDC is as under:
2 (ii) other liabilities also include external developmental charges received through DGTCP department Haryana for execution of various EDC works. The expenditure against which have been booked Development Work in Progress, Enhancement compensation and Land cost.’
4.3 Determination of EDC to be paid by participating private persons/builders, colonizers etc.-
4.3.1 A participating private builder is required to pay EDC as provided in the license for setting up a commercial colony on urbanisable land held by it in vicinity of land owned and developed (EDWs) by HUDA The license is issued by the Directorate of Town and Country Planning, Haryana, subject to the undertaking as per the relevant conditions mention below:
To submit an undertaking to the effect that you shall make arrangement for water supply, sewerage, drainage ere to the satisfaction of DGTCP till these services are made available from external infrastructure to be laid by HUDA ”
4.3.2 Computation of External Development Charges (EDC) is made as under:
A) Charges for Commercial area =Rs. X Lakhs
(@ Rs. Y lakhs/Acre)
B) Total cost of Development = Rs. X Lakhs
C) 25% bank guarantee required = Rs. 0.25 X Lakhs
iv) The demand drafts of EDC amounts are drawn in favour of the Chief Administrator, HUDA though routed through the Director General Town and Country Planning, Sector 18, Chandigarh. This state of affairs as for as the EDC is concerned is stated by HUDA in the ‘Notes to The Accounts Forming Part of The Balance Sheet As on 31.03.2016’ filed with the return of income. It reads as under:
2(i) Other liabilities also include external developmental charges received through DGTCP Department Haryana for execution of various EDC works. The expenditure against whtch have been booked in Development Work in Progress. Enhancement compensation and Land cost.
(iv) This establish the fact that the land is owned and developed by HUDA which receives EDC as return/income on the money invested in the EDWs. There is specific quid pro quo for EDC. EDC would never be returnable and would never be returned because it is a consideration paid by EDW users.
4. 3.3 EDC is worked out for a particular urban estate on the basis of the cost of external development services such as master water supply. Master Sewage, Master Roaos, Master Storm Water Drainage, Master Horticulture. Master Community building and other services is determined on the basis of a price index of a particular year in respect of a particular urban estate. The cost is determined by the Engineering Wing of HUDA keeping in view the requirement of development plan of an urban estate. EDC is charged from sectors floated by HUDA or the license granted by the Town & Country Planning Department to the developers. To say that there is no element of profit in EDC because EDC varies depending upon requirement of development in each urban estate. Therefore it is in the nature of liabilities is incorrect because the payers of EDC are allowed to use EDWs for payment of fees worked out On the basis of investments in EDWs. EDC is charged from colonizers for using the developed urban infrastructure in urban estates wherein they are allowed to establish their commercial set ups The EDC IS a usar fee charged by HUDA from colonizers.
4.3.4 The 1ncome nature of EDC would not change even though it is received through DGTCP department Haryana The method of accounting of payment EDC by private colonizer like M/s. XYZ Pvt. Ltd. in its books of accounts as Current assets would also not change the income nature of EDC in the hands of HUDA.
4.3.5 Showng EDC as current liability by HUDA is incorrect for the reasons narrated in the foregoing paras, based on specific nature and flow of transactions, supported by specific evidences in form of sample letters/documents, Therefore. EDC is a revenue receipt having character of income of HUOA. This is also a finding of assessing officer of HUDA which stands confirmed by CIT(A) too. Therefore, ought to have been subjected to TDS by payer of EDC.
4.4 Reasons for Applicability of TDS provisions on EDC paid to HUDA:
i) HUDA is a taxable entity carrying out business activities to acquire, develop and dispose off land for residential, industrial, commercial and institutional purposes in urban estates so developed in state of Haryana its business income is taxed by 1ncome tax department which includes EDC.
ii) In the Circular No. 681 dated 8.3.94 issued by the CBDT it has been stated that a work done by one person is service rendered to another. One of the dictionary meanings of the word ‘service· is work {Associate Cement Co. Ltd. Vs. CIT, 120 ITR 444 (Patna)]. The Circular at para (v) states that the ·service contract would be covered by the provisions of this section since service means doing any work. It further states at para (i) that ‘the provisions of section 194C shall apply to all types of contracts for carrying out any work including transport contracts, service contracts. ”
The relevant port1on of Circular No. 681 of CBDT dated 8/3/94 is as under:
” ….. ……. 3. Section 194C was introduced with effect from 1st April, 1972. Shortly after its introduction, the Board Issued Circulars No. 86, dated 29th May, 1972 (F.No. 275/9/72-ITJ), No. 93, dated 26 September, 1972 (F.No. 275/100/72-ITJ), and No. 108, dated 20 March, 1973 (F.No. 131(9)/73- TPL), in this regard.
4. Some of the issues raised in the above-mentioned circulars need to be reviewed in the light of the judgment dated March 23, 1993, delivered by the Supreme Court of India in Civil Appeal No. 2860(NT) of 1979· Associated Cement Co. Ltd. Vs. CIT1993] 201 ITR 435.
5. The Supreme Court has held that ” … there is nothing in the sub-.section which could make us hold that the contract to carry out a work or the contract to supply labour to carry out a work should be confined to ‘works contract’…. Their Lordships have further held that ‘Any work’ means; any work and not a ‘work contract’, which has a special connotation in the tax law … ‘Work’ envisaged in the sub-section, therefore, has a wide import and covers ‘any work’ which one or the other of the organizations specified ln the sub-section can get carried out through a contractor under a contract and further it includes obtaining by any of such organizations supply of labour under a contact with a contractor for carrying out its work which would have fallen outside the ‘work’ but for its specific inclusion in the sub-section.”
6. It may be pointed out that this appeal before the Supreme Court was by virtue of a special leave petition against the judgment in Writ Petition No. 2909 of 1978 of the Patna High Court in the case of Associated Cement Co. Ltd. Vs. CIT [1979} 120 ITR 444. The Patna High Court, while dismissing the writ petition of the aforesaid company, observed that “In a very broad sense, a work done by one person is service rendered to another and indeed one of the dictionary meanings of the word ‘service’ is work”.
7. The conclusion flowing from the aforesaid judgments of the supreme Court and the Patna High Court is that the provisions of section 194C would apply to all types of contracts including transport contacts, labour contracts, service contracts, etc. In the light of these judgments, the Board have decided to withdraw their above mentioned Circulars Nos. 86 and 93 and para 11 of Circular No 108 and issue the following guidelines in regard to the applicability of the provisions of section 194C:-
(i) The provisions of section 194C shall apply to all types of contracts for carrying out any work including transport contracts, service contracts, advertisement contracts, broadcasting contracts. Telecasting contracts, labour contracts, materials contracts and works contracts …… ”
4.5 Payments received as EDC are for EDWs like water supply, sewerage, drains, necessary provisions of treatment and disposal of sewage, sullage and storm water, roads, electrical works, solid waste management and disposal slaughter houses colleges. Hospitals, stadium/sports complex, fire stations, grid sub-stations etc. and any other work which the Director may specify to the executed in the periphery of or outside colony/area for the benefit of the colony/area.
4.6 EDC is worked out for a particular urban estate on the basis of the cost of external development services such as Master Water Supply, Master Sewage, Master Roads. Master Storm Water Drainage Master Horticulture. Master Community building and other services is determined on the basis of a price index of a particular year in respect of a particular urban estate. The cost is determined by the Engineering Wing of HUDA keeping in view the requirement of development plan of an urban estate. EDC is charged from the sectors floated by HUDA or the license granted by the Town & Country Planning Department to the developers. EDC is charged from colonizers for using the developed urban infrastructure in urban estates wherein they are allowed to establish their commercial set ups. The EDC is arising out of an agreement which is in the nature of service contract wherein colonizers pay EDC to HUDA is rendering a service to colonizers for which EDC is paid EDC is charged for development work received by HUOA from private builders and the work carried out is civil work in nature for providing amenities. The work is for creating/maintaining and strengthening of infrastructure created for urban areas in order to make it suitable for urban habitations. EOWs enhance value of property and the value additions fetch higher price from prospective customers. Thus EDC payments made by the builders to HUDA are covered under service contract Therefore, a private builder is liable to deduct tax at source on such payments under the provisions of Section 194C of Income tax Act Hence EDC ought be subjected to TDS by payers @ 2 % u/s 194C of the Income tax Act.
17. RPS Infrastructure challenged the aforesaid order before the Tribunal and which by its order of 23 July 2019 ultimately allowed the appeals holding that there was reasonable cause underlying failure on the part of RPS Infrastructure to deduct TDS and in the absence of any contumacious conduct, the penalty was liable to be deleted.
18. Mr. Jain, who led submissions on behalf of RPS Infrastructure Ltd. took us in great detail through the relevant provisions of the HDRUA. He referred firstly to the following definitions as set out in Section 2:-
(g) external development works shall include any or all infrastructure development works like water supply, sewerage, drains, provisions of treatment and disposal of sewage, sullage and storm water, roads, electrical works, solid waste management and disposal, slaughter houses, colleges, hospitals, stadium/sports complex, fire stations, grid sub-stations etc. and/or any other work which the Director may specify to be executed in the periphery of or outside colony/area for the benefit of the colony/area;]
(h) Government means the government of the State of Haryana;
(hha) infrastructure development charges include the cost of development of major infrastructure projects;}
(i) internal development works means-
(i) metalling of roads and paving of footpaths;
(ii) turfing and plantation with trees of open spaces;
(iii) street lighting;
(iv) adequate and wholesome water supply;
(v) sewers and drains both for storm and sullage water and necessary provision for their treatment and disposal; and
(vi) any other work that the Director may think necessary in the interest of proper development of a colony;
(j) local authority means a Municipal Committee or Municipal Council or municipal Corporation;”
19. Our attention was also drawn to Sections 3, 3A and 3AC of the HDRUA which are reproduced hereinbelow:-
3. Application for licence [(1) Any owner desiring to convert his land into a colony shall, unless exempted under section 9, make an application to the Director, for the grant of license to develop a colony in the prescribed form and pay for it such fee and conversion charges as may be prescribed: [xxx];
Provided that if the conversion charges have already been paid under the provisions of the Punjab Scheduled Roads and Controlled Areas Restriction of Unregulated Development Act, 1963 (41 of 1963), no such charges shall be payable under this section [Provided further that owner may enter into an agreement jointly or severally with a developer for pooling of land for grant of licence [Provided further that in case of migration of licence, the colonizer shall pay the outstanding renewal fee with interest accrued upto the date of payment. However, the external development charges including interest paid thereon for the area under migration shall be adjusted in the licence and the colonizer shall not be liable to deposit the unpaid interest amount on external development charges and infrastructure development charges of the existing project.
The conversion charges, licence fee, infrastructure development charges already paid shall be adjusted in case the amount to be paid for migration at the current rate is more than the earlier paid in case of existing project [Provided further that for such colonies located in such land use zones of various notified development plans, where in the opinion of the Government, the licences are to be issued after invitation of bids or following an auction procedure in pursuance of the policy framed by the Government in this regard from time to time, such application shall be considered to be valid only if it is filed in response to a notice of the Director and fulfils the prescribed terms and conditions] [(1A) All such applications received in response to the notice issued by the Director against policy for auction of licences that are considered to be in order by the Director shall, in addition to the prescribed requirements, also be liable for payment of location premium, as determined through the bidding/auction process, in such manner and in such time frame as conveyed by the Director. The amount received against location premium shall be utilised for provision, maintenance and augmentation of external development works and shall be recovered in addition to the prescribed rates of development charges received against external development works from a colonizer]
(2) On receipt of the application under sub section (1), the Director shall, among other things, enquire into the following matters, namely :-
(a) title to the land;
(b) extent and situation of the land;
(c) capacity to develop a colony;
(d) the layout of a colony;
(e) plan regarding the development works to be executed in a colony; and
(f) conformity of the development schemes of the colony land to those of the neighboring areas
(3) After the enquiry under sub section (2), the Director, by an order in writing, shall
(a) grant a licence in the prescribed form, after the applicant has furnished to the Director a bank guarantee equal to twenty five per centum of the [estimated cost of development works in case of area of land divided or proposed to be divided into plots or flats for residential, commercial or industrial purposes and a bank guarantee equal to thirty-seven and a half per centum of the estimated cost of development works in case of cyber city or cyber park purposes] as certified by the director and has undertaken
(i) to enter into an agreement in the prescribed form for carrying out and completion of development works in accordance with licence granted;
(ii) to pay proportionate development charges if the external development works as defined in clause (g) of section 2 are to be carried out by the Government or any other local authority. The proportion in which and the time within which, such payment is to be made, shall be determined by the Director.
(iii) the responsibility for the maintenance and upkeep of all roads, open spaces, public park and public health services for a period of five years from the date of issue of the completion certificate unless earlier relieved of this responsibility and thereupon to transfer all such roads, open spaces, public parks and public health services free of cost to the Government or the local authority, as the case may be;
(iv) to construct at his own cost, or get constructed by any other institution or individual at its cost, schools, hospitals, community centres and other community buildings on the lands set apart for this purpose, in a period as may be specified, and failing which the land shall vest with the Government after such specified period, free of cost, in which case the Government shall be at liberty to transfer such land to any person or institution including a local authority, for the said purposes, on such terms and conditions, as it may deem fit:
Provided that in case of licenses issued prior to the notification of the Haryana Development and Regulation of Urban Areas (Amendment and Validation) Act, 2012, the licensee, the purchaser or the person claiming through him shall construct the school, hospital, community centres and other community buildings on the land set apart for this purpose, within a period of four years, extendable by the Director by another period of two years, for reasons to be recorded in writing, from the notification of the Haryana Development and Regulation of Urban Area (Amendment and Validation) Act, 2012:
Provided further that at the end of the period as specified under the proviso, if the site is not utilised for the purpose, it was meant for, the land shall vest with the Government and in which case, the Government shall be at liberty to transfer such land to any person or institution including a local authority, for the said purposes, on such terms and conditions, as it may deem fit:
Provided further that a show cause notice and an opportunity of hearing shall be issued before vesting the land in the Government
{Provided further that the applicant shall be exempted from the provisions of this clause where compliance of clause (iv-b) is sought by the Director.}
[(iv-a) to pay proportionate cost of construction of such percentage of sites of such school, hospital, community centre and other community buildings and at such rates as specified by the Director;]
[(iv-b) to hand-over the possession and transfer the ownership of such land, as demarcated and identified in the approved layout plan, in such form and manner, as may be specified by the Director and such land shall vest with the Government to achieve the objective of creation of community buildings, housing, commercial and other physical and social urban infrastructure, in such colonies where a condition to this effect is imposed by the Director, before grant of licence;]
(v) to permit the Director or any other officer authorised by him to inspect the execution of the layout and the development works in the colony and to carry out all directions issued by him for ensuring due compliance of the execution of the layout and development works in accordance with the licence granted;
[(vi) to fulfill such terms and conditions as may be specified by the Director at the time of grant of licence through bilateral agreement as may be prescribed:]
Provided that the Director, having regard to the amenities which exist or are proposed to be provided in the locality, is of the opinion that it is not necessary or possible to provide one or more such amenities, may exempt the licensee from providing such amenities either wholly or in part [Provided further that the applicant shall have an option to mortgage a part of the land for which licence has been granted or being granted in lieu of submission of bank guarantee against cost of internal development works and external development works.]
(b) refuse to grant a licence, by means of speaking order, after affording the applicant an opportunity of being heard.
(4) The license so granted shall be valid for a period of 44 [five years], and will be renewable from time to time for a period of [two years], on payment of prescribed fee:
[Provided that in the licensed colony permitted as a special project by the Government, the license shall be valid for a maximum period of five years and shall be renewable for a period of as decided by the Government.]
(5) Each colony may comprise of one or more licences with contiguous land pockets.
(6) After the coloniser has laid out the colony in accordance with the approved layout plan and executed the internal development works in accordance with the approved design and specifications, he may apply to the Director for grant of completion or part-completion certificate. The Director may enquire into such matters, as he deems necessary before granting such certificate.
(7) After enquiry under sub-section (6), the Director may, by an order in writing, grant completion or part-completion certificate on such terms and conditions and after recovery of infrastructure augmentation charges, as may be prescribed:
Provided that where in the agreement executed to set up a colony, a condition was incorporated for deposit of surplus amount beyond maximum net profit @ 15% of the total project cost and the coloniser has not taken the completion certificate of the said project, then notwithstanding the said condition in the agreement, the coloniser shall have the option either to deposit the infrastructure augmentation charges as applicable from time to time at any stage before the grant of such completion certificate and get the exemption of the restriction of net profit beyond 15% or deposit the amount as per terms of the agreement.
3A. Establishment of Fund (1) Any colonizer to whom a lice