ITAT Rules: EDC Payments to HUDA are Contractual and Subject to TDS
The Income Tax Appellate Tribunal (ITAT) in Delhi has ruled that External Development Charges (EDC) payments made to the Haryana Urban Development Authority (HUDA) are contractual in nature and are subject to Tax Deducted at Source (TDS) under Section 194C of the Income Tax Act, 1961. This decision affects real estate companies like M/s Ireo Grace Realtech Private Limited, which had previously made such payments without deducting TDS.
TdsEdcHudaReal EstateItatReal EstateAug 27, 2025
The appellant in this case was the Revenue Authority, challenging the orders of the Commissioner of Income Tax (Appeals)-31, New Delhi (CIT(A)), for Assessment Years 2014-15 and 2015-16. The assessee, M/s Ireo Grace Realtech Private Limited, a real estate company based in West Delhi, had made EDC payments to HUDA without deducting TDS. The Assessing Officer (AO) treated the company as an assessee in default under Sections 201(1) and 201(1A) of the Income Tax Act.
However, the CIT(A) deleted the demand, holding that the company was not liable to deduct TDS on such payments. This decision led to the Revenue’s appeal to the ITAT.
Shri Jitender Singh, Commissioner of Income Tax (Departmental Representative), representing the Revenue Authority, argued that EDC payments made to HUDA were squarely covered under Section 194C of the Act as contractual payments. He contended that the CIT(A) erred in ignoring the binding judgment of the Delhi High Court in M/s Puri Construction Private Limited v. Addl. CIT & Ors. (2024) 462 ITR 326 (Delhi), which held that such payments attract TDS under Section 194C.
Advocates Shri Ruchesh Sinha and Ms. Monalisa Maity, representing the assessee, supported the order of the CIT(A). They argued that EDC payments made to HUDA were in the nature of statutory charges and not contractual payments, and therefore, the assessee was not liable to deduct TDS on these payments.
The Bench, comprising Judicial Member Satbeer Singh Godara and Accountant Member Naveen Chandra, held that the issue was already settled by the jurisdictional Delhi High Court in the Puri Construction Pvt. Ltd. case. The Tribunal observed that the High Court had categorically ruled that EDC payments are contractual in nature and are therefore subject to deduction of tax under Section 194C.
The bench, therefore, set aside the findings of the CIT(A) and held that the assessee had defaulted by not deducting TDS on the payments. Accordingly, both appeals were allowed in favor of the Revenue.
This ruling has significant implications for real estate companies and other entities that make EDC payments to HUDA. It clarifies the legal requirement to deduct TDS on such payments, ensuring compliance with the Income Tax Act and avoiding penalties for non-compliance.
Frequently Asked Questions
What is the nature of EDC payments to HUDA according to the ITAT ruling?
The ITAT ruled that EDC payments to HUDA are contractual in nature and are subject to TDS under Section 194C of the Income Tax Act, 1961.
Who was the appellant in this case?
The appellant in this case was the Revenue Authority, challenging the orders of the Commissioner of Income Tax (Appeals)-31, New Delhi (CIT(A)).
What was the argument of the Revenue Authority?
The Revenue Authority argued that EDC payments made to HUDA were contractual in nature and therefore covered under Section 194C of the Income Tax Act, 1961.
What was the stance of the assessee’s advocates?
The assessee’s advocates argued that EDC payments made to HUDA were in the nature of statutory charges and not contractual payments, and therefore, the assessee was not liable to deduct TDS on these payments.
What was the final decision of the ITAT?
The ITAT set aside the findings of the CIT(A) and held that the assessee had defaulted by not deducting TDS on the EDC payments, allowing both appeals in favor of the Revenue.
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