Delhi High Court Dismisses Revenue Appeals Against ITAT Order In Mahagun TDS Dispute Over NOIDA Lease Rent

The Delhi High Court has dismissed three appeals filed by the Income Tax Department challenging orders of the Income Tax Appellate Tribunal (ITAT) that had granted relief to Mahagun developers in a long-running dispute over deduction of tax at source (TDS) on lease rent payments made to the NOIDA Authority.

A Division Bench of Justices Dinesh Mehta and Justice Vinod Kumar rejected the appeals after noting that the controversy was squarely covered by its earlier ruling in Rajesh Projects (India) Pvt. Ltd. v. Commissioner of Income-tax (2017), which held that while TDS under Section 194-I of the Income Tax Act is applicable on lease rent paid to Greater Noida Developmental Authority, the law would operate prospectively from the date of that judgment.

The Court observed that the Revenue was unable to point out any material distinction between the facts of Mahagun's case and Rajesh Projects. It further noted that the ruling in Rajesh Projects had been affirmed by the Supreme Court in New Okhla Industrial Development Authority v. CIT, reinforcing the prospective application of the obligation to deduct TDS on such lease rentals.

Accordingly, the Court upheld the ITAT's view that the Income Tax Department could not treat Mahagun as an “assessee in default” under Sections 201(1) and 201(1A) of the Act for Assessment Year 2012–13, and dismissed all three appeals filed by the Revenue.

ITAT had quashed TDS demands of over ₹62 lakh raised against Mahagun in the second round of proceedings under Sections 201(1) and 201(1A) of the Act.

The Tribunal had accepted Mahagun's contention that it had acted under a bona fide belief that lease rent paid to the NOIDA Authority did not attract TDS under Section 194-I, relying on express communications issued by the Authority itself.

Additionally, the ITAT held that once proceedings under Section 201 had already been concluded earlier, initiating a second round of proceedings on the same issue was not justified in the absence of statutory reopening.

Upholding this reasoning, the High Court dismissed the Revenue's appeals.

For Petitioner: Senior Standing Counsel Puneet Rai with Junior Standing Counsel Ashwini Kumar

For Respondent: Advocate Somil Agarwal and Advocate Dushyant Agarwal