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2023 (8) TMI 728 - HC - Income TaxDeduction of tax at source u/s 194A - payments made to local authorities, including New Okhla Industrial Development Authority in short, NOIDA - Order passed u/s 201(1)/201(1A) - HELD THAT - The legal issue, (which is that the petitioner bank was not required to deduct tax at source on payments towards interest made to NOIDA with regard to fixed deposits created by them), cannot but accept that the issue is covered against the respondent/revenue, in view of the decision of the Supreme Court in Commissioner of Income Tax (TDS) Kanpur and Anr. vs Canara Bank 2018 (7) TMI 664 - SUPREME COURT . According to us, insofar as the respondent/revenue is concerned, the retention of the amount from the point of view of NOIDA, is contrary to the provisions of Article 265 of the Constitution. If we allow the respondent/revenue to retain the money, it would, in effect, amount to putting the court s imprimatur, on the respondent/revenue s act of levying and/or collecting tax, without the authority of law. In our opinion, in this particular case, having regard to the fact that public funds are involved, law and justice should meld. Therefore, we are inclined to quash the order passed u/s 201(1)/201(1A) r.w.s. 194A of the Income Tax Act, 1961. The respondent/revenue will refund the amount deposited by the petitioner bank within three (3) weeks of receipt of a copy of this judgement.
Issues involved:
The issues involved in the judgment are related to the deduction of tax at source on payments made to local authorities, specifically New Okhla Industrial Development Authority (NOIDA), for the Assessment Year (AY) 2005-06. The main issue is whether the petitioner bank was required to deduct tax at source on payments towards interest made to NOIDA with regard to fixed deposits created by them. Comprehensive details of the judgment for each issue involved: 1. Issue of Tax Deduction at Source: The petitioner bank sought to challenge the order dated 28.02.2013 passed under Section 201(1)/201(1A) of the Income Tax Act, 1961, regarding the deduction of tax at source for AY 2005-06. The petitioner bank contended that, based on the Supreme Court judgment in Commissioner of Income Tax (TDS) Kanpur and Anr. vs Canara Bank, it was not required to deduct tax at source on payments towards interest made to NOIDA. The court noted that the entire defense of the respondent/revenue was based on delay and laches, but considering that NOIDA, as an instrumentality of the State, was blameless, the court decided in favor of the petitioner bank. 2. Delay and Laches: The respondent/revenue argued that the petitioner bank approached the court after a significant delay, indicating delay and laches on the part of the petitioner. However, the court observed that NOIDA had been diligently following up on the matter with the petitioner bank for remedial action. The court found that the petitioner bank's procrastination in taking corrective measures compounded the injury to NOIDA, leading to a delay in resolving the issue. 3. Refund and Compensatory Interest: In its decision, the court quashed the order dated 28.02.2013 and directed the respondent/revenue to refund the amount deposited by the petitioner bank, which was Rs. 1,36,04,250/-. The court also noted that NOIDA may have a case for recovering compensatory interest from the petitioner bank. The judgment specified that the petitioner bank must ensure that a copy of the judgment is placed before the concerned officer in NOIDA, and NOIDA is at liberty to pursue appropriate legal remedies for recovering compensatory interest. 4. Costs and Disposal of Writ Petition: The petitioner bank was directed to deposit Rs. 50,000/- towards costs with the Juvenile Justice Fund. The writ petition was disposed of with instructions for the parties to act based on the digitally signed copy of the judgment. This judgment highlights the importance of timely action in legal matters involving public funds and tax obligations, emphasizing the need for diligence and compliance with legal requirements to avoid unnecessary delays and complications.
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