2018 (7) TMI 664 - SC - Income Tax

TDS u/s 194A - NOIDA - interest paid to the Authority on its deposits - Authority is Corporation or not - conditions to be satisfied as established by a Central, State or Provincial Act as per hte Notification dated 22.10.1970 - Held that - A Constitution Bench of this Court in Sukhdev Singh and Others vs. Bhagatram Sardar Singh Raghuvanshi and Another, (1975 (2) TMI 111 - SUPREME COURT)had occasion to consider the nature and character of Corporation including its early history. Justice Mathew, delivering his concurrent opinion noted that Corporations in 17th, 18th and 19th Centuries were far more like the bodies corporate we call public authorities today. Section 194A(3)(iii) clauses (b), (c) and (d) refer to expression established . In sub clause (b) expression used is established by or under a Central, State or Provincial Act , in sub clause (c) the expression used is established under the Life Insurance Corporation Act and in sub clause (d) expression used is established under the Unit Trust of India Act . The Section thus uses both the expressions by or under . The expression established by or under an Act have come for consideration before this Court on several occasions. As we revert back to the provisions of 1976, Act. The very preamble of that Act reads an Act to provide for the Constitution of an Authority for the development of certain areas in the State into industrial and urban township and for masses connected through with . Thus, the Act itself provides for constitution of an authority. Section 2(b) of the 1976 Act defines Authority as authority constituted under Section 3 of the Act. This Court having already laid down in Dalco Engineering (2010 (3) TMI 912 - SUPREME COURT OF INDIA) that establishment of various financial corporations under State Financial Corporation Act, 1951 is establishment of a Corporation by an Act or under an Act. We are of the view that the above ratio fully covers the present case and we have no doubt that the Authority have been established by the 1976 Act and it is clearly covered by the Notification dated 22.10.1970. It is further relevant to note that composition of the Authority is statutorily provided by Section 3 of 1976 Act itself, hence, there is no denying that Authority has been constituted by Act itself. Thus High Court 2016 (5) TMI 570 - ALLAHABAD HIGH COURT did not commit any error in dismissing the appeal filed by the Revenue.

Summary

Issues Involved:
1. Whether the New Okhla Industrial Development Authority (NOIDA) is a Corporation established by a State Act.
2. Whether NOIDA is entitled to the benefit of the Notification dated 22.10.1970 under Section 194A(3)(iii)(f) of the Income Tax Act, 1961.
3. Interpretation of the terms "established by" and "established under" an Act.

Issue-wise Detailed Analysis:

1. Whether the New Okhla Industrial Development Authority (NOIDA) is a Corporation established by a State Act:

The Supreme Court examined whether NOIDA, constituted under the Uttar Pradesh Industrial Area Development Act, 1976 ("1976 Act"), qualifies as a Corporation established by a State Act. The Court referenced the preamble of the 1976 Act, which explicitly states its purpose to provide for the constitution of an authority for the development of certain areas in the State into industrial and urban townships. Section 3 of the 1976 Act empowers the State Government to constitute an authority by notification, which would be a body corporate. The Court compared this with the establishment procedures under the State Financial Corporations Act, 1951, concluding that NOIDA was indeed established by the 1976 Act. The Court emphasized that the composition of NOIDA is statutorily provided by Section 3 of the 1976 Act, reinforcing that NOIDA is a statutory corporation established by the Act itself.

2. Whether NOIDA is entitled to the benefit of the Notification dated 22.10.1970 under Section 194A(3)(iii)(f) of the Income Tax Act, 1961:

The Court examined the Notification dated 22.10.1970, which exempts corporations established by a Central, State, or Provincial Act from the requirement to deduct tax at source under Section 194A of the Income Tax Act, 1961. The Court analyzed the language of Section 194A(3)(iii) and the Notification, noting that the exemption applies to corporations established by or under an Act. The Court referenced previous judgments to interpret the terms "by" and "under" an Act, concluding that NOIDA, established by a notification under the 1976 Act, falls within the scope of the Notification. The Court held that NOIDA is entitled to the benefit of the exemption from tax deduction at source.

3. Interpretation of the terms "established by" and "established under" an Act:

The Court provided a detailed interpretation of the terms "established by" and "established under" an Act, referencing several judgments. The Court noted that a corporation established "by" an Act is one directly created by the statute, while a corporation established "under" an Act is one brought into existence in accordance with the provisions of the statute. The Court highlighted that the distinction is significant in determining eligibility for statutory benefits and exemptions. The Court concluded that NOIDA, established by a notification under the 1976 Act, satisfies the criteria of being established "by" the Act, thereby qualifying for the exemption under the Notification dated 22.10.1970.

Conclusion:

The Supreme Court upheld the judgment of the Allahabad High Court, affirming that NOIDA is a Corporation established by the 1976 Act and is entitled to the benefit of the Notification dated 22.10.1970 under Section 194A(3)(iii)(f) of the Income Tax Act, 1961. The appeals filed by the Revenue were dismissed, and the Court emphasized the importance of interpreting statutory provisions in their context and entirety.