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2015 (8) TMI 415 - AT - Income TaxLiability to deduct tax at source u/s 194A on interest paid to NOIDA - lack of jurisdiction of the ld. CIT(A), Noida for passing order against the order of Addl.CIT(TDS), Ghaziabad - Held that - The Principal CCIT, Kanpur issued order on 15.11.2014 reverting jurisdiction to the CIT(A), Noida over the orders passed by Addl.CIT(TDS), Ghaziabad and the other authorities working under CIT (TDS), Kanpur. This shows that between 5.6.2014 and 15.11.2014, the jurisdiction of the first appellate authority to pass the orders against the orders passed by the Addl.CIT, Ghaziabad rested with the CIT(A), Ghaziabad and for the periods prior to 5.6.2014 and after 15.11.2014, it vested in CIT(A), Noida. Since the impugned order was passed on 2.12.2013, it becomes palpable that it was only the CIT(A), Noida who had rightful jurisdiction over the appeal emanating from the order passed by the Addl. CIT(TDS), Ghaziabad. Ex consequenti, the contention raised by the ld. DR about the lack of jurisdiction of the ld. CIT(A), Noida for passing order against the order of Addl.CIT(TDS), Ghaziabad, is unfounded and is hereby rejected. Identical issue involving payment of interest by some banks to Ghaziabad Development Authority without tax withholding came up for consideration before the Delhi Bench of the Tribunal in the case of Chief/Senior Manager, Oriental Bank of Commerce vs. ITO. 2013 (2) TMI 204 - ITAT NEW DELHI wherein held that the payment of interest by Oriental Bank of Commerce to Ghaziabad Development Authority is covered within the provisions of section 194A(3)(iii)(f) and, hence, there is no obligation for deduction of tax at source. Consequently, the order passed u/s 201(1) was set aside. Similar view has been taken in the case of ITO (TDS) vs. Branch Manager Jammu & Kashmir Bank Ltd. 2012 (4) TMI 573 - ITAT AMRITSAR as held that payment of interest by the bank to Jammu Development Authority (Jammu) is exempt u/s 194A(3)(iii)(f) and, hence, there can be no liability u/s 201(1) and 201(1A) on the bank and resultantly, the bank cannot be treated as an assessee in default u/s 201(1) and 201(1A). Likewise view has been taken by the Amritsar Bench of the Tribunal in ITO vs. the Branch Manager, Jammu, Jammu & Kashmir Bank Ltd., 2012 (12) TMI 727 - ITAT AMRITSAR . All these precedents support the proposition that the payment of interest by banks to the State Industrial Development Authorities does not require any deduction of tax at source in terms of section 194A(3)(iii)(f) and, hence, the failure to deduct tax at source on such interest cannot lead to the banks being treated as assessee in default. No material has been placed on record to demonstrate that all/any of the above orders have either been reversed or modified in any manner by the Hon ble High Courts. CIT(A) was justified in reversing the order passed by the Addl. CIT (TDS), Ghaziabad declaring the assessee liable u/s 201(1) and 201(1A) of the Act. We, therefore, uphold the impugned order. - Decided against revenue.
Issues Involved:
1. Jurisdiction of CIT(A), Noida over the order passed by Addl. CIT (TDS), Ghaziabad. 2. Obligation of the assessee to deduct tax at source under section 194A on interest paid to NOIDA. Issue-wise Detailed Analysis: 1. Jurisdiction of CIT(A), Noida over the order passed by Addl. CIT (TDS), Ghaziabad: The Revenue challenged the jurisdiction of CIT(A), Noida, arguing that the correct jurisdiction lay with CIT(A), Ghaziabad. The Revenue based its argument on a Notification dated 27.8.2001 issued by CCIT, Meerut, which showed CIT(A), Ghaziabad, having jurisdiction over appeals against orders passed by officers under CIT, Ghaziabad, and CIT, Aligarh. However, the Addl. CIT(TDS), Ghaziabad, falls under CIT(TDS), Kanpur, not CIT, Ghaziabad. A subsequent Notification dated 27.3.2012 issued by CCIT, Kanpur, gave CIT(A), Noida, jurisdiction over appeals against orders by officers working at Noida under CIT(TDS), Kanpur. The Revenue contended this did not cover officers at Ghaziabad. However, the sequence of events showed confusion about jurisdiction, with the Principal CCIT, Kanpur, issuing an order on 15.11.2014, confirming CIT(A), Noida's jurisdiction over appeals from Addl. CIT(TDS), Ghaziabad. The Tribunal concluded that between 5.6.2014 and 15.11.2014, jurisdiction rested with CIT(A), Ghaziabad, but before and after these dates, it vested in CIT(A), Noida. Since the impugned order was passed on 2.12.2013, CIT(A), Noida, had rightful jurisdiction. Hence, the Revenue's contention was rejected. 2. Obligation of the assessee to deduct tax at source under section 194A on interest paid to NOIDA: The main issue was whether the assessee was liable to deduct tax at source under section 194A on interest paid to NOIDA. Section 194A(1) mandates tax deduction at source on interest payments, but subsection (3)(iii)(f) exempts payments to certain notified institutions, including "any corporation established by a Central, State or Provincial Act." The assessee argued that NOIDA, established under the UP Industrial Area Development Act, 1976, was such a corporation. The Revenue contended that NOIDA was established "under" rather than "by" the Act, thus not qualifying for the exemption. Both sides relied on the Supreme Court judgment in Dalco Engineering Pvt. Ltd. vs. Satish Prabhakar Padhye, which distinguished between corporations established "by" an Act and those established "under" an Act. The Tribunal noted that the UP Industrial Area Development Act, 1976, was enacted to create various development authorities, including NOIDA. The Tribunal concluded that NOIDA, being a statutory corporation established by the Act, fell within the exemption under section 194A(3)(iii)(f). Supporting precedents included the Delhi Bench of the Tribunal's decision in Chief/Senior Manager, Oriental Bank of Commerce vs. ITO, and the Amritsar Bench's decisions in ITO (TDS) vs. Branch Manager Jammu & Kashmir Bank Ltd., which held that payments to similar development authorities did not require tax deduction at source. In light of these precedents and the legal position, the Tribunal upheld the CIT(A)'s decision, reversing the Addl. CIT (TDS), Ghaziabad's order, and declaring the assessee not liable under sections 201(1) and 201(1A). Conclusion: The appeal was dismissed, and the order was pronounced in open court on 07.08.2015.
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