Krrish Shalimar Projects Private Limited vs Deputy Commissioner Of Income Tax

PER VIKAS AWASTHY, JUDICIAL MEMBER:

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-30, New Delhi [in short ‘the CIT(A)’] dated 14.02.2026, for Assessment Year 2015-16.

The solitary issue raised by the assessee in appeal is against the Assessing Officer (AO) holding assessee as ‘the assessee in default’ u/s.201(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for not deducting tax at source under section 194C of the Act on payment of External Development Charges (EDC) to Haryana Urban Development Authority [now Haryana Shehri Vikas Pradhikaran (HSVP)].

Shri Manoj Kumar, representing the Department at the outset submits that the issue that the assessee was liable to deduct tax at source u/s.194C of the Act on payment of EDC has been now decided by the Hon’ble Delhi High Court in favour of the Revenue in the case of Puri Construction P. Ltd. vs. Additional CIT, 159 taxmann.com 444 (Delhi).

Per contra, Shri Subash Agarwal, appearing on behalf of the assessee/appellant placed reliance on the following decision of the Tribunal to contend that on payment of EDC there is no liability to deduct tax at source. Accordingly, the assessee cannot be treated as assessee in default in terms of section 201(1) of the Act: ACIT vs. Shree Vardhaman Developers (P) Ltd. in ITA No.2366-2367/Del/2023 for AY 2019-2020 & 2020-21 decided on 21.12.2023; M/s. Santur Infrastructure P. Ltd., vs. ACIT, in ITA No.6488/Del/2019 for AY 2015-16) decided on 18.12.2019; & M/s. Perfect Constech P. Ltd. vs. Addl. CIT, in ITA No.6907/Del/2019 for AY 2014-15 decided on 29.12.2020.

Both sides heard, limited issue for adjudication in the present appeal is: Whether the assessee is liable to deduct tax at source on payment of EDC u/s.194(C) of the Act. We find that this issue has been considered and decided by the Hon’ble Jurisdictional High Court in the case of Puri Construction P. Ltd. vs. Additional CIT (supra). The Hon’ble High Court after considering the office memorandum dated 23.12.2017 from CBDT, communication dated 19.06.2018 from Directorate of Town and Country Planning, Haryana and various decisions concluded that where EDC are paid to Haryana Shehri Vikas Pradhikaran (HSVP), the assessee is liable to deduct tax at source u/s.194C of the Act. HSVP neither falls within the ambit of clause (i) or clause (iii) of section 196 of the Act. The mere fact that HSVP has been constituted under statutory enactment does not make it the ‘Government’. Even, if, it is discharging functions akin to Governmental obligations or performing activities closely connected with State functions, the same would not result in reorganizing HSVP as the ‘Government’.

Thus, in light of the judgement rendered by Hon’ble Jurisdictional High Court holding that the EDC paid to HSVP are liable to provisions of withholding tax. We find no infirmity in the impugned order in holding the assessee as ‘assessee in default’ under provisions of section 201(1) of the Act.

In the result, impugned order is upheld and appeal of the assessee is dismissed.