INCOME TAX ACT, 1961

Section 271C

Penalty under section 271C - Payment of external development charges to Urban Development Authority without deducting tax - Assessee being under bona fide belief as to no requirement of TDS -

Assessee company engaged in the business of Real Estate. Required to obtain license for developing group housing colony from Director, Town & Country Planning (DTCP), Government of Haryana. In terms of the condition for granting license, assessee paid external development charges (EDC) to Haryana Urban Development Authority (HUDA) as per the direction of the DTCP, however, without deducting tax. AO held assessee liable for penalty under section 271C.Held: HUDA was an authority of Haryana Government created by enactment of Legislature for carrying out developmental activities in the State of Haryana. Such Authorities admittedly were neither in the category of local authority nor Govt. Payment in question were made during the year 2013-2016 and during this period, i.e., prior to issue of CBDT Circular, dated 23-12-2017, there was no clarity as regard deduction of tax on such payments. Thus, assessee was under a bona fide belief that no tax was required to be deducted from the subject payments and accordingly, no penalty was leviable under section 271C.

Supported:CIT v. Bank of Nova Scotia (2016) 380 ITR 550 (SC) : 2016 TaxPub(DT) 811 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15 & 2015-16

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