2016 (9) TMI 308 - HC - Income Tax

TDS u/s 194A on Interes - Whether NOIDA is a corporation established by U.P. Industrial Area Development Act, 1976 and not a body established under the aforesaid Act - Held that - NOIDA has been granted a status of a Municipality under Article 243-Q of the Constitution of India which deals with the constitution of a Municipality. Notification dated 24 December 2001 provides that having regard to the size of NOIDA which has been declared to be an Industrial Development Area by a notification dated 17 April 1976 and the municipal services being provided by NOIDA, the Governor is pleased to specify that NOIDA would be an Industrial Township with effect from the date of publication of the notification. This clearly means that instead of Municipal Corporation providing services, NOIDA would provide the said services and if that be so, then as observed by the Supreme Court in S.S. Dhanoa (1981 (5) TMI 124 - SUPREME COURT ), NOIDA will owe its existence to an Act of the State. The NOIDA has been constituted by the State Act and, therefore, entitled to exemption of payment of tax at source under section 194-A(1) of the Act. See Commissioner of Income Tax (Tds) And Another Versus Canara Bank 2016 (5) TMI 570 - ALLAHABAD HIGH COURT - Decided against the revenue.

Summary

Issues:
1. Penalty under Section 271C deletion by ITAT, Delhi.
2. Ignoring the Supreme Court's ratio in a specific case.
3. Dismissal of Writ Petition No.1338 of 2005 by Hon'ble Allahabad High Court.
4. Ignoring the doctrine of constructive res-judicata by ITAT Delhi.

Analysis:
1. The appeal questioned the correctness of ITAT Delhi's decision to delete the penalty under Section 271C without the assessee demonstrating a reasonable cause as per Section 273B of the I.T. Act. The High Court noted the substantial questions of law raised and examined the facts and legal provisions in this regard.

2. The appeal also raised concerns about ITAT Delhi ignoring the ratio laid down by the Hon'ble Supreme Court in a specific case. The High Court scrutinized the application of the Supreme Court's decision and its relevance to the present case, emphasizing the importance of adhering to established legal principles.

3. Another issue highlighted was the dismissal of Writ Petition No.1338 of 2005 by the Hon'ble Allahabad High Court, which had a specific prayer seeking exemption from Section 194A in tax deduction at source by Banks. The High Court reviewed the previous judgment and its implications on the current matter, analyzing the legal implications of the dismissal on the present case.

4. The appeal also contended that ITAT Delhi overlooked the doctrine of constructive res-judicata by adjudicating the issue of jurisdiction under Section 194A of the Income Tax Act, which had already been decided by the Hon'ble Allahabad High Court in a previous order. The High Court delved into the concept of res-judicata and its application in the context of the present case, considering the legal implications of the prior judgment on the current dispute.

In the final judgment, the High Court dismissed the appeal, reasoning that the issue of NOIDA's status as a corporation established by the State Act had been conclusively settled in a previous judgment. The Court emphasized that the previous decisions had already answered the questions raised against the appellant, leading to the dismissal of the appeal based on the established legal precedents and interpretations.