Delhi High Court on TDS liability for payments to GNOIDA: Effect of Rajesh Projects ruling in case of non-party assessee

Background and Context

The Delhi High Court in CIT (TDS)-2 Vs Sikka Infrastructure Pvt Ltd examined whether an assessee making lease payments to Greater Noida Industrial Development Authority (GNOIDA) could be treated as a defaulter for non-deduction of tax at source, when such non-deduction occurred pursuant to GNOIDA’s own stand that no tax was deductible.

The Department had invoked its appellate jurisdiction under Section 260A of the Income Tax Act 1961, challenging an order of the Income Tax Appellate Tribunal (ITAT), Delhi Bench “G”. The dispute related to Assessment Year 2012-13.

At the core of the controversy was the interplay between:

• The earlier judgment of the Delhi High Court in Rajesh Projects (India) Pvt. Ltd. and Ors v. Commissioner of Income Tax (TDS)-II and Ors., reported in [2017] 392 ITR 483 (decided on 16.02.2017), and
• The assessee’s obligation to deduct tax at source on lease payments made to GNOIDA, treated by GNOIDA as a “Government” authority for TDS purposes.

Procedural History

Appeal before the ITAT

1. The Assessing Officer treated the assessee, Sikka Infrastructure Pvt Ltd, as an assessee in default for non-deduction of tax at source on payments made to GNOIDA, holding that TDS was required on annual lease rent.
2. The assessee succeeded before the Commissioner of Income Tax (Appeals) by relying on the reasoning adopted by the Delhi High Court in Rajesh Projects (India) Pvt. Ltd. and by pointing to GNOIDA’s own insistence that no TDS be deducted.
3. The Department appealed to the ITAT, which, by order dated 28.03.2025 in ITA No. 2495/Del/2022, affirmed the relief granted to the assessee. The Tribunal placed reliance, inter alia, on:
   • Rajesh Projects (India) Pvt. Ltd. and Ors v. Commissioner of Income Tax (TDS)-II and Ors. [2017] 392 ITR 483 (Delhi High Court), and
   • Mahagun (India) (P.) Ltd. vs. ACIT [2024] 209 ITD 236 (Delhi) (Trib.) (ITAT Delhi Bench E, order dated 04.09.2024).

Department’s Appeal under Section 260A

Aggrieved by the ITAT’s order, the Department invoked Section 260A and approached the Delhi High Court. The appeal was restricted to AY 2012-13, as per the impugned order dated 28.03.2025.

The High Court was called upon to determine whether any substantial question of law arose, warranting interference with the ITAT’s conclusions regarding TDS non-deduction on payments made to GNOIDA.

Revenue’s Contentions

Counsel for the Revenue argued broadly along the following lines:

• Rajesh Projects confined to its own facts
  The Department contended that the decision in Rajesh Projects (India) Pvt. Ltd. turned on the specific factual matrix before the Court and could not automatically regulate the TDS position of a different assessee, particularly one that was not a party to that writ petition.

• Assessee not a petitioner in Rajesh Projects
  Since Sikka Infrastructure Pvt Ltd had not participated as a petitioner in Rajesh Projects (India) Pvt. Ltd., the Revenue submitted that the protective direction granted there — that no adverse action be taken against assessees who had not deducted tax at GNOIDA’s insistence — should not be extended to the present assessee by default.

• No presumption about GNOIDA’s conduct towards this assessee
  Relying on paragraph 20(2) of the Rajesh Projects (India) Pvt. Ltd. judgment, the Department argued that:

  1. The High Court could not presume that GNOIDA had instructed this particular assessee not to deduct tax; and