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TMI Blog2017 (4) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... (5) TMI 570 - ALLAHABAD HIGH COURT], we hold that the order of the ld CIT(A) in challenge before us is not sustainable. Further as the matter has reached before Hon'ble Supreme Court for adjudication whether tax is required to be deducted on interest payments made by the banks to NOIDA, itself suggests that the issue was debatable and do not fall in the purview of provisions of section 154 of the Act under which the impugned order was passed by the ld CIT (A). On this count also the ld CIT(A) erred in reversing his order based on application of the Addl. CIT, TDS. Hence, we quash the order of the ld CIT (A). - ITA No. 6850-Del-2015, ITA No. 6851/Del/2015 - - - Dated:- 24-3-2017 - SHRI H.S.SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Sh. Pankaj Garg, Adv Sh. Milind Garg, Adv For The Revenue : Sh SK Jain, DR ORDER PER PRASHANT MAHARISHI, A. M. 1. These appeals have similar grounds of appeal as it involves the common issue whether appellant banks are required to withhold tax at sources on interest payments made to NOIDA (New Okhla Industrial Development Authority). Originally the Ld CIT (A) decided the issue in favou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dena Bank, Sector-18, Noida as 'Respondent'. Secondly, in the Writ Petition No. 1338 of 2005, the sole contention raised before the Hon'ble High Court was 'Whether, after 1.4.2003, New Okhla Industrial Development Authority (Noida) (the Petitioner) is a local authority within the meaning of section 10 (20) of the Income Tax Act, 1961 (the Act) ', however in the Appeal before the Hon'ble Tribunal, the contentions raised were viz., 'jurisdiction of the Ld. CIT (A), Noida to pass the order and deletion of the demand created by the Addl. CIT(TDS), Ghaziabad under Section 201(1) and 201 (1A) of the Income Tax Act, 1961 towards failure of the Assessee to deduct tax at source from the interest paid by it to New Okhla Industrial Development Authority (NOIDA) . 7. Because, it is again worthwhile mentioning herein that the judgment of Hon'ble Allahabad High Court and the order of Hon'ble Tribunal are way different from each other and in no way the judgment of the Hon'ble High Court is binding precedent and covered by the doctrine of constructive res-judicata the conclusions of Respondent No. 1, therefore the question of adhering to the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld CIT(A) the present appeal is preferred. 5. The ld AR relied upon the orders of the coordinate bench in ITA No. 1356 1359/Del/2014 wherein, it has been held that the assessee bank cannot be treated as assessee in default u/s 201(1) and 201(1A) of the Act. further the ld AR relied upon the decision of the Hon ble Allahabad High Court in ITA No. 64/2016 dated 04.04.2016 wherein, the orders of the coordinate bench were upheld. 6. The ld DR relied upon the orders of ld CIT(A) and further submitted that the revenue has filed an SLP before Hon'ble Supreme Court against the order of the Hon ble Allahabad High Court which is admitted on 18.11.2016 and therefore he submitted that appellant bank should have deducted tax at source on interest payment made to NOIDA. 7. We have carefully considered the rival contentions. The decision of the Hon ble Allahabad High Court upholding the orders of the coordinate bench vide its order dated 04.04.2016 has held as under:- AFR Court No.39 Case :- INCOME TAX APPEAL No. - 64 of 2016 Appellant :- Commissioner Of Income Tax (Tds) And Another Respondent :- Canara Bank Counsel for Appellant :- Ashok Kumar,Praveen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly, been filed by the department. The issue that arises for consideration in this appeal is as to whether NOIDA is a corporation entitled for exemption from deduction of tax at source under the provisions of the notification dated 22 October 1970 issued under section 194-A(3)(iii)(f) of the Act. This notification provides that the provisions of sub-section (1) of section 194-A of the Act shall not apply to any corporation established by a Central, State or Provincial Act. According to the appellants, the NOIDA is not a corporation that has been established by Industrial Act and, therefore, would not be entitled for exemption while according to the Bank, it is a corporation established by the Industrial Act and, therefore, entitled for exemption. In order to appreciate the rival contentions, it will be appropriate to refer to the provisions of the Acts involved and the notification. Section 194-A(1) of the Act provides that 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 acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appearing for the Bank assisted by Sri Abhinav Mehrotra and Sri Ankit Vijaywargiya has, while relying upon the same decision of the Supreme Court in Dalco Engineering Pvt. Ltd. (supra) submitted that NOIDA is a corporation established by the Industrial Act and, therefore, entitled for exemption from deduction of income tax at source. We have carefully considered the submissions advanced by learned counsel for the parties. In order to appreciate the contentions advanced by learned counsel for the parties, it will be appropriate at this stage to refer to the provisions of Industrial Act so as to determine whether NOIDA is a corporation that has been established by a State Act or it has been established under a State Act. The State Act in issue is the Industrial Act. The preamble to the said Act states that it is 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. Section 3 provides that the State Government may, by notification, constitute for the purposes of the Act, an Authority to be called (Name of the area) Industrial Development Authority, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inuing any amenities in the industrial development area, the Authority may with the previous approval of the State Government, levy such taxes as it may consider necessary in respect of any site or building on the transferee or occupier thereof, provided that the total incidence of such tax shall not exceed twenty five per cent of the annual value of such site or building. Section 20 deals with the funds of the Authority and sub-section (1) of section 20 is as follows : 20. Fund of the Authority (1) The Authority shall have and maintain its own fund to which shall be credited (a) all moneys received by the Authority from the State Government by way of grants, loans, advances or otherwise; (b) all moneys borrowed by the Authority from securities other than the State Government by way of loans or debentures; (c) all fees, tolls and charges received by the Authority under the Act, (d) all moneys received by the Authority from the deposit of lands, buildings and other properties movable and immovable; and (e) all moneys received by the Authority by way of rents and profits or in any other manner or from any other source. Section 21 deals with the budget of the Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force: ...................... ...................... (3) The provisions of sub-section (1) shall not apply- ...................... ...................... (ii)................. (iii) to such income credited or paid to (a) any banking company to which the Banking Regulation Act, 1949, applies or any co-operative society engaged in carrying on the business of banking; or (b) any financial corporation established by or under a Central, State or Provincial Act; or (c) the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956; or (d) the Unit Trust of India established under the Unit Trust of India Act, 1963; or (e) any company or co-operative society carrying on the business of insurance; or (f) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette. .................... .................... A peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is reproduced below : (1) No establishment shall dispense with, or reduce in rank, an employee who acquires a disability during his service: Provided that, if an employee, after acquiring disability is not suitable for the post he was holding, could be shifted to some other post with the same pay scale and service benefits: Provided further that if it is not possible to adjust the employee against any post, he may be kept on a supernumerary post until a suitable post is available or he attains the age of superannuation, whichever is earlier. (2) No promotion shall be denied to a person merely on the ground of his disability: Provided that the appropriate Government may, having regard to the type of work carried on in any establishment, by notification and subject to such conditions, if any, as may be specified in such notification, exempt any establishment from the provisions of this section. The term establishment is defined in section 2(k) of the Disabilities Act and is as follows : 2. Definitions.--In this Act, unless the context otherwise requires, - (k) establishment means a corporation established by or under a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company formed by the act of any seven or more persons (or two or more persons for a private company) associated for any lawful purpose subscribing their names to a memorandum of association and by complying with the requirements of the Companies Act in respect of registration. Therefore, a company is incorporated and registered under the Companies Act and not established under the Companies Act. On the contrary, the Companies Act itself establishes the National Company Law Tribunal and the National Company Law Appellate Tribunal and those two statutory authorities owe their existence to the Companies Act. In this context, it will be useful to reproduce paragraphs 21, 22 and 23 of the judgment which are as follows : 21. Where the definition of establishment uses the term a corporation established by or under an Act , the emphasis should be on the word established in addition to the words by or under . The word established refers to coming into existence by virtue of an enactment. It does not refer to a company, which, when it comes into existence, is governed in accordance with the provisions of the Companies Act. But then, what is the difference between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and status to an Act of legislature. On the other hand, an association of persons constituting themselves into a Company under the Companies Act or a Society under the Societies Registration Act owes its existence not to the Act of legislature but to acts of parties though, it may owe its status as a body corporate to an Act of legislature. 10. There is a distinction between a corporation established by or under an Act and a body incorporated under an Act. The distinction was brought out by this Court in Sukhdev Singh and Ors. v. Bhagatram Sardar Singh Raghuvanshi and Ors., (1975) 1 SCC 421. It was observed: 25. A company incorporated under the Companies Act is not created by the Companies Act but comes into existence in accordance with the provisions of the Act. There is thus a well-marked distinction between a body created by a statute and a body which, after coming into existence, is governed in accordance with the provisions of a statute. (emphasis supplied) In Vaish Degree College (supra), the Supreme Court had also observed as follows : 10. ..... In other words the position seems to be that the institution concerned must owe its very existe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Industrial Act, by a notification in the Official Gazette, establish a Financial Corporation for the State under such name as may be specified in the notification. According to him, there is no distinction between the State Government establishing a Financial Corporation under such name as may be specified in the notification and the State Government constituting an Industrial Development Authority under section 3(1) of the Industrial Act. Learned counsel, therefore, submitted that the Commissioner of Income Tax (Appeals) as also the Income Tax Appellate Tribunal committed gross illegality in holding that the NOIDA has been established by the State Act and, accordingly, granting exemption from deduction of tax under section 194-A(1) of the Act. Sri Balbir Singh, learned Senior Counsel appearing for the Bank, however, submitted that there can be no doubt that the NOIDA has been constituted by the Industrial Act. His contention is that except for naming NOIDA or any other Industrial Development Authority all matters have been specified in section 3(1) and the other provisions of the Industrial Act and, therefore, it is not a case where NOIDA has been constituted under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority that is to be constituted under section 3(1) of the Act, the name of the Authority has been indicated. So far as the NOIDA is concerned, the name of the Authority is the New Okhla Industrial Development Authority. Thus, except for naming a particular Industrial Area Development Authority, since more than one Authority could be constituted, the Authority has been constituted by the Act and merely because the area of the Authority has not been defined under the Act and has been left to the discretion of the State Government, cannot, in our opinion, make any difference for the purposes of determining whether it has been established by an Act. The Authority is a body corporate and consists of officers of the State Government. The objects and functions of the Authority have been clearly defined under section 6 of the Industrial Act. The main functions are to acquire land in the industrial development area by agreement or by acquisition under the Land Acquisition Act; to prepare a plan for the development of the industrial area and to provide amenities. The Authority has also been empowered to levy tax as is clear from the provisions of section 11. It empowers the Author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ila parishad; or a gram panchayat which owe their existence and status to an Act of Legislature. 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. The said Article provides that there shall be constituted in every State, - (a) a Nagar Panchayat for a transitional area, that is to say, an area in transition from a rural area to an urban area; (b) a Municipal Council for a smaller urban area; and (c) a Municipal Corporation for a larger urban area. The proviso to Article 243-Q, however, stipulates that a Municipality under this clause may not be constituted in such urban area or part thereof as the Governor may, having regard to the size of the area and the municipal services being provided or proposed to be provided by an industrial establishment in that area and such other factors as he may deem fit, specify to be an industrial township. The State Government has issued a notification dated 24 December 2001 in exercise of the powers conferred under the proviso to clause (1) of Article 243-Q of the Constitution. The said notification provides that having regard to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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