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TMI Blog2015 (8) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... (hereinafter also called `the Act'). The Hon'ble Allahabad High Court, vide its order dated 28.02.2011 decided the issue against NOIDA, thereby denying the benefit of exemption u/s 10(20) of the Act. Pursuant to this order by the Hon'ble Allahabad High Court, the Addl. Commissioner of Income-tax (TDS), Ghaziabad, took up proceedings u/s 201(1) and 201(1A) of the Act and issued a show cause notice to the assessee as to why it may not be declared as 'assessee in default' for non-deduction of tax at source on the amount of interest paid by it to NOIDA. The assessee contended before the Addl. CIT (TDS) that no deduction of tax at source on interest payment made to NOIDA was warranted in view of the applicability of the provisions of section 194A(3)(iii)(f). The assessee contended that the payment to NOIDA authority was covered under clause 39 of the Notification No. 3489 dated 22.10.1970 issued pursuant to the above provision and, as such, there was no requirement on its part to deduct tax at source on the amount of interest paid. Not convinced, the Addl. CIT(TDS) Ghaziabad, passed order dt. 28.2.2013 u/ss 201(1) and 201(1A) read with section 194A of the Act treating the assessee in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vered under the jurisdiction of CIT (A), Noida and not the officers working at other stations including Ghaziabad under CIT(TDS), Kanpur. Here, it is important to mention that CIT(TDS), Kanpur, exercises jurisdiction over a larger part of the state of UP, which also includes Noida and Ghaziabad. From the impugned order, it can be noticed that the assessee filed appeal before the ld. CIT(A), Noida on 14.3.2013 and the impugned order was passed on 2.12.2013. Then, there is a letter dated 18.7.2014 addressed by the CCIT, Ghaziabad to the Principal CCIT, Kanpur, submitting that she received a reference from Addl. CIT (TDS), Ghaziabad, regarding transfer of cases from CIT(A), Noida to CIT(A), Ghaziabad, where orders u/s 201(1) and 201(1A) were passed by him as per the Notification dated 27.3.2012. Then, there is a reference to a letter dated 5.6.2014 by which CIT(A), Noida was requested to transfer all the appeals against the orders passed by the Addl.CIT (TDS), Ghaziabad in the case of banks, to the CIT(A), Ghaziabad. The same letter dated 18.7.2014 addressed by the CCIT, Ghaziabad, then indicates that a meeting was called by her on 14.7.2014 to examine the issue of transfer of cases f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the completion of his arguments on the question of jurisdiction prayed for the closure of the proceedings for the time being and requested the Bench to first pass an interim order on the question of jurisdiction. As we are seized of the entire appeal and not a particular aspect of jurisdiction, we expressed over opinion in the open Court that the appeal will be heard in entirety and not in a truncated manner and only one comprehensive order will be passed dealing with all the issues including that of jurisdiction. Thereafter, the ld. DR started his arguments on merits, which we shall discuss hereinafter. 6. Now, we espouse the main issue on merits as to whether the assessee was liable to deduct tax at source u/s 194A on interest paid to NOIDA? Before answering this question, it is relevant to consider the provisions of section 194A, the relevant part of which reads as under:- "194A. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper book. Preamble of this Act reads as : "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 matters connected therewith." The term 'Authority' has been defined u/s 2(b) to mean: 'Authority constituted u/s 3 of the Act.' Section 3(i), in turn, provides that: 'The State Government may, by notification, constitute for the purpose of this Act, an Authority to be called (Name of the area), industrial development authority, for any industrial development area.' It is under the UP Industrial Area Development Act, 1976 that the UP Government constituted various industrial development authorities with the name of the area, such as, NOIDA Authority and Ghaziabad Authority, etc. The case of the Revenue is that only a corporation established 'by', inter alia, a State Act can be brought within the purview of exemption. The ld. DR argued that if the corporation is established 'under' the State Act, then, the exemption to the payer bank from deduction of tax at source on the interest income, is not available. The ld. DR vehemently argued that since NOIDA has been constituted as a corporation esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Life Insurance Corporation of India Act. On the other hand, a Corporation is established `under' an Act, when it is notified by the delegated authority, though under the Act. In the light of the above distinction, it was held that a company is incorporated and registered under the Companies Act and not established under the Companies Act. 10. It is significant to note that the line of distinction drawn by the Hon'ble Supreme Court between the Corporations established `under' the Act and Corporations established `by' the Act is to be seen in the background of the facts prevailing in that case in which the Respondent urged that the appellant, a company, be declared as 'established by or under the Act.' The Hon'ble Supreme Court further observed that: `Thus, a State Financial Corporation is established under a central Act. Therefore, when the words "by and under an Act" are preceded by the words "established", it is clear that the reference is to a corporation established, that it is brought into existence, by an Act or under an Act. In short, the term refers to a statutory corporation as contrasted from a non-statutory corporation incorporated or registered under the Companies Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal has 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., by its order dated 2.7.2012, a copy of which has also been placed on record. 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. Further, the ld. DR failed to point out any contrary decision. In view of the legal position discussed supra and these precedents, we are of the considered opinion that the ld. CIT(A) was justifie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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