The AO says our EDC paid to HUDA was 'rent' and has raised a s.201 demand for not deducting under s.194-I. Is that right?
No. External Development Charges paid to the Haryana authority are not rent, so s.194-I is not attracted and a s.201(1)/201(1A) order built on s.194-I cannot stand. The Delhi High Court dismissed the Revenue's appeal, holding the point squarely covered by its own earlier decision in DLF Homes Panchkula. It also refused to let the Revenue rescue the order by switching to s.194C at the appeal stage, because s.194C was never the case the AO made.
Decided by the High Court (Vibhu Bakhru J and Tejas Karia J) on 2025-03-19, reported as ITA 252/2024 (Delhi High Court). It bears on section 194-I, section 194C, section 201 of the Income Tax Act 1961, in TDS Defaults matters.
A large number of s.201 orders on EDC were framed under s.194-I because 10 per cent is the attractive rate. This is the Delhi High Court confirming, at appeal level and as recently as 2025, that those orders are bad. It also shows the department cannot repair a wrong-section order by arguing a different section later — which matters because the Delhi High Court has separately held in Puri Constructions that s.194C does apply to EDC.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For assessment year 2016-17 the assessee, a builder, paid Rs. 14,29,20,000 as External Development Charges to HUDA / the Director, Town and Country Planning, Haryana, without deducting tax at source. The Assessing Officer issued a show cause notice and by order dated 22 March 2023 held that the EDC payments were 'rent' within s.194-I, that tax ought to have been deducted at 10 per cent, and that the assessee was an assessee in default under s.201(1) with interest under s.201(1A). The Commissioner (Appeals) allowed the assessee's appeal, relying on the Tribunal's decision in RPS Infrastructure Limited v. Additional Commissioner of Income Tax, which had proceeded on the footing that HUDA was executing government work. The Tribunal upheld that order on 7 December 2023 and the Revenue appealed to the High Court in ITA 252/2024, framing questions on the applicability of TDS to EDC payments and on whether the matter ought to be remanded.
The Revenue's appeal was dismissed. The question whether EDC are in the nature of rent attracting deduction under s.194-I is squarely covered in favour of the assessee by the Court's earlier decision in DLF Homes Panchkula Pvt. Ltd. v. Joint Commissioner of Income Tax, 2023 SCC OnLine Del 2026, and the Assessing Officer's order was therefore unsustainable. No substantial question of law arose (paras 9 to 12).
The Court treated the characterisation of the payment as the controlling issue. Having held in DLF Homes Panchkula that EDC paid to the Haryana authority cannot be described as rent, it followed that an order under s.201(1) and s.201(1A) resting on s.194-I had no foundation (paras 9 and 10). The Revenue sought to rely on the later decision in Puri Constructions Private Limited, where the Court had held s.194C attracted to EDC, but the Court declined to allow that to save the order: the Revenue's own case throughout had been that tax was deductible under s.194-I and not under s.194C, and that case was conceded to be unsustainable (para 11). The appeal was accordingly dismissed as raising no substantial question of law (para 12).
However, as noted above, it was the Revenue's case that the TDS was payable under Section 194I of the Act and not Section 194C of the Act, which concededly is unsustainable.
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Handle my notice → Ask a CA on WhatsAppNo. External Development Charges paid to the Haryana authority are not rent, so s.194-I is not attracted and a s.201(1)/201(1A) order built on s.194-I cannot stand. The Delhi High Court dismissed the Revenue's appeal, holding the point squarely covered by its own earlier decision in DLF Homes Panchkula. It also refused to let the Revenue rescue the order by switching to s.194C at the appeal stage, because s.194C was never the case the AO made. This was decided by the High Court (Vibhu Bakhru J and Tejas Karia J) and bears on section 194-I, section 194C, section 201 of the Income Tax Act 1961. It is reported as ITA 252/2024 (Delhi High Court). A large number of s.201 orders on EDC were framed under s.194-I because 10 per cent is the attractive rate. This is the Delhi High Court confirming, at appeal level and as recently as 2025, that those orders are bad. It also shows the department cannot repair a wrong-section order by arguing a different section later — which matters because the Delhi High Court has separately held in Puri Constructions that s.194C does apply to EDC. If it applies to you, the first step is this: Read the s.201 order and write down the exact section the AO invoked. If it is s.194-I, this decision and DLF Homes Panchkula answer it directly and the ground is a short one.
For assessment year 2016-17 the assessee, a builder, paid Rs. 14,29,20,000 as External Development Charges to HUDA / the Director, Town and Country Planning, Haryana, without deducting tax at source. The Assessing Officer issued a show cause notice and by order dated 22 March 2023 held that the EDC payments were 'rent' within s.194-I, that tax ought to have been deducted at 10 per cent, and that the assessee was an assessee in default under s.201(1) with interest under s.201(1A). The Commissioner (Appeals) allowed the assessee's appeal, relying on the Tribunal's decision in RPS Infrastructure Limited v. Additional Commissioner of Income Tax, which had proceeded on the footing that HUDA was executing government work. The Tribunal upheld that order on 7 December 2023 and the Revenue appealed to the High Court in ITA 252/2024, framing questions on the applicability of TDS to EDC payments and on whether the matter ought to be remanded. The matter was decided on 2025-03-19 by the High Court (Vibhu Bakhru J and Tejas Karia J). On those facts the High Court held as follows. The Revenue's appeal was dismissed. The question whether EDC are in the nature of rent attracting deduction under s.194-I is squarely covered in favour of the assessee by the Court's earlier decision in DLF Homes Panchkula Pvt. Ltd. v. Joint Commissioner of Income Tax, 2023 SCC OnLine Del 2026, and the Assessing Officer's order was therefore unsustainable. No substantial question of law arose (paras 9 to 12).
The Court treated the characterisation of the payment as the controlling issue. Having held in DLF Homes Panchkula that EDC paid to the Haryana authority cannot be described as rent, it followed that an order under s.201(1) and s.201(1A) resting on s.194-I had no foundation (paras 9 and 10). The Revenue sought to rely on the later decision in Puri Constructions Private Limited, where the Court had held s.194C attracted to EDC, but the Court declined to allow that to save the order: the Revenue's own case throughout had been that tax was deductible under s.194-I and not under s.194C, and that case was conceded to be unsustainable (para 11). The appeal was accordingly dismissed as raising no substantial question of law (para 12). In the words reproduced by the source cited on this page: "However, as noted above, it was the Revenue's case that the TDS was payable under Section 194I of the Act and not Section 194C of the Act, which concededly is unsustainable." The decision followed or applied DLF Homes Panchkula Pvt. Ltd. v. Joint Commissioner of Income Tax, 2023 SCC OnLine Del 2026 (Delhi) - followed as squarely covering the issue; Puri Constructions Private Limited v. Additional Commissioner of Income Tax (Delhi, 13 February 2024) - cited by the Revenue, held not to assist because its case rested on s.194-I.
It was decided by the High Court on 2025-03-19 and is reported as ITA 252/2024 (Delhi High Court). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 194-I, section 194C, section 201, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The Revenue's appeal was dismissed. The question whether EDC are in the nature of rent attracting deduction under s.194-I is squarely covered in favour of the assessee by the Court's earlier decision in DLF Homes Panchkula Pvt. Ltd. v. Joint Commissioner of Income Tax, 2023 SCC OnLine Del 2026, and the Assessing Officer's order was therefore unsustainable. No substantial question of law arose (paras 9 to 12). It arises in TDS Defaults matters, on section 194-I, section 194C, section 201 of the Income Tax Act 1961, and was decided by Vibhu Bakhru J and Tejas Karia J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Object at once if the department, in appeal or in a remand report, tries to re-label the payment as a s.194C contract payment. Both this order and DLF Homes Panchkula hold that the AO's own characterisation is what the order stands or falls on. Resist a remand for the AO to 'apply the correct provision'. That was exactly what the Revenue asked for here and in DLF Homes Panchkula, and it was refused. Do not read this as saying EDC never attracts TDS. Puri Constructions Pvt. Ltd. v. Addl. CIT (Delhi High Court, 13 February 2024) holds that s.194C is attracted to EDC. If your order is under s.194C, this decision does not help you. Independently, check whether HUDA/HSVP has offered the receipt to tax and, if so, invoke the first proviso to s.201(1) with a Form 26A certificate, which caps exposure to interest under s.201(1A) up to the payee's date of payment.
Validity check could not be completed. Too recent for settled later treatment. No decision citing, doubting or following this order was located, and it could not be confirmed whether the Revenue has filed a special leave petition. The precedent it applies, DLF Homes Panchkula, was itself followed later in 2025 by another Division Bench of the same Court. Note that the Delhi High Court's separate holding in Puri Constructions, that s.194C is attracted to EDC, is untouched by this order. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Listed on the Delhi High Court site under 'Orders' rather than 'Judgments'; it is a short reasoned order dismissing the Revenue's appeal at admission for want of a substantial question of law. No law-report citation was located, so only the appeal number is given. Third-party lists circulate this as a s.194-I EDC authority of 2025, which is correct as to year, court and parties. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Revenue's appeal was dismissed. The question whether EDC are in the nature of rent attracting deduction under s.194-I is squarely covered in favour of the assessee by the Court's earlier decision in DLF Homes Panchkula Pvt. Ltd. v. Joint Commissioner of Income Tax, 2023 SCC OnLine Del 2026, and the Assessing Officer's order was therefore unsustainable. No substantial question of law arose (paras 9 to 12).
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