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1.2 That under the facts and circumstances, the provisions of chapter-
XVIIB of the Act are not applicable on the payment of Rs.19,70,00,000/- paid for external development charges (EDC) to Govt. by issuing payment in the name of Haryana Urban Development Authority (HUDA) for and on behalf of and on instructions of Govt., as on payment to Govt., TDS provisions are not applicable.
1.3 That under the facts and circumstances, on merits, the initiation of proceedings and imposition of penalty is unsustainable.
- Clause-I(a) of the said agreement provided for payment of EDC charges to HUDA through Director Town & Country Planning (DTCP), Govt. of Haryana.

- Accordingly, the assessee prepared the EDC payment drafts in the name of "Chief Administrator HUDA" and delivered the same to DTCP, Govt. of Haryana, through covering letter addressed to DTCP which is acknowledged by DTCP.

- Hence in substance, the payment has been made to DTCP, Govt. of Haryana and the draft has been issued in the name of HUDA only on the directions and on instructions and on behalf of DTCP Govt. of Haryana.

- There is no privity of contract / agreement between assessee and HUDA that such payments are to be made to HUDA.

- DTCP, directed to make the payment to HUDA on DTCP behalf, for the reason that HUDA (now known as Haryana Shahkari Vikas Pradhikaran (HSVP) w.e.f.01.06.17) was its executing agency for carrying out external development.

- DTCP, vide its clarification Dtd.19.06.18 also clarified that the payment to HUDA / HSVP is on behalf of State Govt.

- DTCP, vide its clarification Dtd.19.06.18 also clarified that no TDS "was / is" to be made for the payments made to the Govt. for EDC / EDW (External Development Charges).

- The letter of CBDT Dtd. 23.12.17 is subsequent to the payments made

- In the case of RPS Infrastrucutre Ltd., under similar facts it has been held to be a case of reasonable cause.

5. We find that, precisely similar issue had come up for consideration to the coordinate bench of RPS Infrastructure Ltd. vs. ACIT, wherein Tribunal has observed and held as under :-

"11. We have heard the rival submissions, perused the relevant findings given in the orders passed by the authorities below and the various judgments and materials relied upon by both the sides. On going through the facts, we note that dispute is with regard to non- deduction of tax in respect of payment of EDC charges made by the assessee to HUDA. As per the AO, HUDA is neither a local authority nor Government, thus, the payments made to it by the assessee on account of EDC charges were liable for TDS under section 194C of the Act. Since, assessee has failed to deduct the TDS; therefore, it is liable for penalty under section 271C of the Act. On the other hand, the case of the assessee is that obligation to pay EDC charges is arising out of the license granted by DTCP and these payments are to be made for obtaining the license and as per the direction of the DTCP, the same have been paid to HUDA. Further, these payments are not in the nature of payment or in pursuance of works contract. There is no privity of contract between the assessee and the HUDA. On the contrary, the agreement is between Assessee Company and the DTCP which admittedly is a Government Department as agreement has been signed by DTCP on behalf of Governor of Haryana. We are of the view that we need not go in all these issues. From the facts, it is evident that the payments have been made by the assessee to HUDA which is an authority of Haryana Government created by enactment of Legislature for carrying out developmental activities in the state of Haryana. Such Authorities admittedly are not in the category of local authority or Government. These payments were made during the year 2013-2016 and during this period, that is, prior to issue of CBDT Circular dated 23.12.2017, there was no clarity as regard the deduction of tax on these payments. We are of the view that the assessee was under a bonafide belief that no tax is required to be deducted at source on such payments, firstly, for the reason that agreement was between DTCP, who is Governmental authority and licence was granted by the Government and EDC charges was directed to be paid to HUDA, therefore, this could led to reasonable cause that TDS was not required to be deducted; Secondly, DTCP had issued a clarification dated 29.06.2018 to the effect that no TDS was/is required to be deducted in respect of payments of EDC and this clarification issued by DTCP, covers both past and future as the words used are was/is. This shows that Governmental authority itself has demanded not to deduct TDS. In case even if tax was required to be deducted on such payment but not deducted under a bonafide belief then no penalty shall be leviable under section 271C of the Act as there was no contumacious conduct by the assessee. Our view is fully supported from the judgment of the Hon'ble Supreme Court in the case of Commissioner of income tax vs bank of Nova Scotia, 380 ITR 550, wherein the Hon'ble Court has held as under: