2016 (2) TMI 457 - AT - Income Tax

Non deduction of tds u/s 194A by the banks including the assessee bank with respect to interest paid to NOIDA - Held that - As decided in case of Canara Bank 2015 (8) TMI 1259 - ITAT DELHI payment of interest by the banks to NOIDA does not require any tax withholding as the same is covered u/s 194A(3)(iii)(f). Resultantly the order passed by the Addl CIT(TDS) u/s 201(1) and 201(1A) read with section 194A has been set aside.- Decided in favour of assessee. - Decided in favour of assessee

Summary

Issues:
Appeal against CIT(A) order for assessment years 2007-08 to 2012-13 on grounds of incorrect tax deduction, penalty under section 271C, and exemption under section 10(20) for interest payment to Noida Authority.

Analysis:
1. The appeals raised issues regarding incorrect tax deduction, penalty imposition, and exemption under section 10(20) for interest payment to Noida Authority. The arguments focused on the legality of the CIT(A) order and the applicability of tax deduction provisions.

2. The Tribunal considered previous decisions related to similar issues, including cases involving Canara Bank and Oriental Bank of Commerce, to determine the legal standing of the matter. The Hon'ble Allahabad High Court judgment regarding NOIDA's status as a local authority was also referenced.

3. The Tribunal analyzed the establishment of NOIDA under the UP Industrial Area Development Act, 1976, to establish its eligibility for exemption under section 10(20). The distinction between a corporation established 'by' and 'under' an Act, as highlighted in judicial precedents, was crucial in determining NOIDA's classification.

4. Referring to the Canara Bank case, the Tribunal emphasized that NOIDA being a statutory corporation established under the State Act qualified for exemption from tax withholding on interest payments. The Tribunal's decision aligned with previous rulings, indicating a consistent interpretation of tax deduction requirements for payments to State Industrial Development Authorities.

5. Citing precedents where banks were not held in default for not deducting tax on interest payments to State Authorities, the Tribunal upheld the assessee's contentions. The legal position and precedents supported the conclusion that tax deduction was not mandatory in such cases, affirming the CIT(A)'s decision and dismissing the appeal.

6. The Tribunal's detailed analysis of NOIDA's establishment under the State Act, combined with consistent judicial interpretations and precedents, led to the allowance of all the assessee's appeals. The decision clarified the tax treatment concerning interest payments to State Industrial Development Authorities, providing a comprehensive legal perspective on the matter.