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April 2024

Rent — TDS — Agreement with State Government for development — External Development Charges (EDC) paid under Agreement with State Government — Not in the nature of rent — No tax deductible on such charges.

By K B Bhujle | Ritu Punjabi, Advocates
Reading Time 3 mins

93 DLF Homes Panchkula Pvt. Ltd. vs. JCIT(OSD)

[2023] 459 ITR 773 (Del.)

Date of Order: 24th March, 2023

Ss. 194I read with 194C of the IT Act

Rent — TDS — Agreement with State Government for development — External Development Charges (EDC) paid under Agreement with State Government — Not in the nature of rent — No tax deductible on such charges.

The assessee was engaged in the business of developing real estate. The assessee made application to Director General, Town and Country Planning for grant of license for setting up an IT Park as well as a Group Housing Colony. As per the rules of Haryana Development and Regulation of Urban Areas Rules, 1976 (HUDA Rules), the assessee entered into agreement with the State Government of Haryana for setting up the IT Park and Group Housing Colony. The agreement required the assessee to pay proportionate development charges as and when required and as determined by the Director General.

The Assessing Officer held that the external development charges were in the nature of “rent” and, therefore, tax was liable to be deducted at source under section 194-I of the Act at the rate of 1

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