Delhi HC upholds TDS on external development charges
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The Delhi High Court on Tuesday upheld Tax Deducted at Source (TDS) on External Development Charges (EDC) in a real estate project. This means that home buyers will have to bear the burden of TDS.
A division Bench of Delhi High Court Comprising Justices Yashwant Varma and Purushaindra Kumar Kaurav upheld that Section 194C is applicable to EDC paid by real estate developers to Haryana Urban Development Authority. “We negative the challenge raised in these writ petitions in so far as the invocation of Section 194C of the Act is concerned and hold that EDC payments would be covered thereunder,” the bench said . Further, it also turned down the challenge to the Clarification issued by the Central Board of Direct Taxes dated December 23, 2017.
The said office memorandum clarified that EDC if paid to the government of Haryana would be exempt from TDS provisions. However, in case the developer has made the payment like EDC not to the government but to HUDA [Haryana Urban Development Authority) which is a development authority of the State government of Haryana and is a taxable entity under the income-tax Act, 1961, it would attract TDS.
Section 194C of the Income Tax Act mandates that deductions can be made under TDS if the total payment credited to a contractor or sub-contractor in a financial year exceeds ?30,000 in a single payment or amounts to ?1 lakh in the aggregate. The TDS rate varies between 1-2 per cent, if the contractor has PAN. In case of no PAN, the rate would be 20 per cent.
A division Bench of Delhi High Court Comprising Justices Yashwant Varma and Purushaindra Kumar Kaurav upheld that Section 194C is applicable to EDC paid by real estate developers to Haryana Urban Development Authority. “We negative the challenge raised in these writ petitions in so far as the invocation of Section 194C of the Act is concerned and hold that EDC payments would be covered thereunder,” the bench said . Further, it also turned down the challenge to the Clarification issued by the Central Board of Direct Taxes dated December 23, 2017.
The said office memorandum clarified that EDC if paid to the government of Haryana would be exempt from TDS provisions. However, in case the developer has made the payment like EDC not to the government but to HUDA [Haryana Urban Development Authority) which is a development authority of the State government of Haryana and is a taxable entity under the income-tax Act, 1961, it would attract TDS.
Section 194C of the Income Tax Act mandates that deductions can be made under TDS if the total payment credited to a contractor or sub-contractor in a financial year exceeds ?30,000 in a single payment or amounts to ?1 lakh in the aggregate. The TDS rate varies between 1-2 per cent, if the contractor has PAN. In case of no PAN, the rate would be 20 per cent.
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