Delhi High Court Rules: EDC Payments to Haryana Development Authority Not Subject to TDS
The Delhi High Court recently dismissed an appeal by the Revenue, clarifying that External Development Charges (EDC) paid to the Haryana Urban Development Authority (HUDA) by real estate developers are not considered rent and do not require Tax Deducted at Source (TDS).
Real EstateEdcTdsHudaDelhi High CourtReal Estate NewsSep 26, 2025
The case arose from an assessment order passed by the Assessing Officer (AO) under Section 201(1) of the Income Tax Act, 1961. The AO treated EDC payments by builders as rent under Section 194I, creating a demand of ₹1,13,50,000 and ₹1,08,96,000 under Sections 201(1) and 201(1A) respectively, resulting in a cumulative demand of ₹2,22,46,000.
The survey conducted by the AO revealed that HUDA had received EDC payments without TDS deduction. The assessee, SS Group Pvt. Ltd., challenged this order before the Commissioner of Income-tax (Appeals) (CIT(A)), which allowed the appeal. The CIT(A) relied on the Delhi High Court’s decision in DLF Homes Panchkula Pvt. Ltd. v. Joint Commissioner of Income Tax (Osd) (2023). The Income Tax Appellate Tribunal (ITAT) upheld the order of the CIT(A) and dismissed the Revenue’s challenge.
Before the High Court, Vipul Agrawal, Sakashi Shairwal, Akshat Singh, Gaoraang Ranjan, and Harshita Kotru appeared for the Revenue. They argued that Chapter XVII-B of the Income Tax Act imposes an express obligation to deduct tax at source on taxable payments and that the matter warranted remand so the AO could determine whether provisions such as Section 194C or Section 194I were applicable. They cited the Delhi High Court ruling in Puri Constructions Pvt. Ltd. vs. Addl. CIT & Ors. (2024) to argue that EDC payments could attract TDS under contractor provisions in certain circumstances.
Meanwhile, the respondent’s counsel, Puneet Agarwal, Yuvraj Singh, Mansi Khurana, Shruti Garg, and Chetan Kumar Shukla, relied on the earlier ruling in DLF Homes Panchkula and pointed to the Supreme Court’s dismissal of the Special Leave Petition (SLP) in Union of India v. M/s SS Group Pvt. Ltd. (2024) to submit that the position had attained finality between the parties.
The Division Bench of Justice V. Kameswar Rao and Justice Vinod Kumar noted that the Assessing Officer had characterized the payment as rent under Section 194I. However, the question of characterisation had been considered by the High Court in the batch of petitions, including that of the present assessee. The Court accepted the contentions raised by the respondent’s position in DLF Homes Panchkula (supra) and found no merit in remanding the matter to the AO for a fresh adjudication.
Since no substantial question of law arose for consideration, the Delhi High Court dismissed the Revenue’s appeal and affirmed that EDC payments to the Haryana development body do not require real estate developers to deduct TDS.
Frequently Asked Questions
What are External Development Charges (EDC)?
External Development Charges (EDC) are fees paid by real estate developers to development authorities like HUDA for the infrastructure and amenities provided in the development area.
Why did the Revenue appeal the case?
The Revenue appealed the case because they believed that EDC payments should be treated as rent under Section 194I, requiring the deduction of Tax Deducted at Source (TDS).
What did the Delhi High Court decide?
The Delhi High Court dismissed the Revenue’s appeal, ruling that EDC payments to HUDA are not considered rent and do not require TDS deduction.
What is the significance of the DLF Homes Panchkula case?
The DLF Homes Panchkula case was a precedent set by the Delhi High Court, which held that EDC payments are not rent and do not attract TDS. This decision was crucial in the present case.
How does this ruling affect real estate developers?
This ruling clarifies that real estate developers do not need to deduct TDS on EDC payments to HUDA, providing relief and clarity in their financial obligations.
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