ITAT Rules EDC Payments to HUDA Subject to TDS under Section 194C
The Income Tax Appellate Tribunal (ITAT), Delhi, has ruled that External Development Charges (EDC) paid to the Haryana Urban Development Authority (HUDA) are contractual in nature and subject to tax deduction at source (TDS) under Section 194C of the Income Tax Act, 1961.
Income Tax ActEdc PaymentsTdsItatHudaReal Estate NewsAug 27, 2025
The Tribunal held that EDC payments are contractual in nature and therefore attract deduction of tax under Section 194C of the Income Tax Act, 1961. This ruling is based on the binding judgment of the Delhi High Court in the case of M/s Puri Construction Private Limited v. Addl. CIT & Ors. (2024) 462 ITR 326 (Delhi), which categorically ruled that such payments are subject to TDS.
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 tax at source. The Assessing Officer (AO) treated the company as an assessee in default under Sections 201(1) and 201(1A).
However, the CIT(A) deleted the demand, holding that the company was not liable to deduct TDS on such payments, leading to the Revenue’s appeal. 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. It was 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.
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 M/s Puri Construction Pvt. Ltd. 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 favour of the Revenue. This decision reinforces the legal requirement for real estate companies and other entities to deduct TDS on EDC payments to HUDA, ensuring compliance with the Income Tax Act, 1961.
Frequently Asked Questions
What is the significance of the ITAT's ruling on EDC payments?
The ITAT's ruling is significant because it clarifies that EDC payments to HUDA are contractual in nature and are subject to TDS under Section 194C of the Income Tax Act, 1961. This decision affects real estate companies and other entities that make such payments.
What is the basis of the ITAT's decision?
The ITAT's decision is based on the binding judgment of the Delhi High Court in the case of M/s Puri Construction Private Limited v. Addl. CIT & Ors., which ruled that EDC payments are contractual and subject to TDS under Section 194C.
What was the initial position of the CIT(A) in this case?
The CIT(A) initially held that the assessee, M/s Ireo Grace Realtech Private Limited, was not liable to deduct TDS on EDC payments to HUDA, as these payments were considered statutory charges and not contractual.
What are the implications of this ruling for real estate companies?
This ruling reinforces the legal requirement for real estate companies to deduct TDS on EDC payments to HUDA, ensuring compliance with the Income Tax Act, 1961. Failure to do so may result in penalties and legal consequences.
Who were the parties involved in the appeal?
The parties involved in the appeal were the Revenue Authority (represented by Shri Jitender Singh, Commissioner of Income Tax) and the assessee, M/s Ireo Grace Realtech Private Limited (represented by Advocates Shri Ruchesh Sinha and Ms. Monalisa Maity).
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