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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 ..... h court in WP No 1338 of 2005 on writ petition filed by NOIDA. 2. Therefore these appeals are filed by the assessees against the order ld CIT (A)-I, Noida u/s 154/250 of the Income Tax Act dated 27.10.2015. 3. The assessee has raised the following grounds of appeal:- "1. Because, the impugned order dated 30.11.2015 passed by the Respondent No. 1 is bad in law, ultra vires and purely abuse to the process of law. 2. Because, the impugned order dated 30.11.2015 passed by the Respondent No. 1 is mechanically arbitrary and without applying the judicious mind and is a clear cut case of non understanding of law. 3. Because, the impugned order dated 30.11.2015 passed by the Respondent No. 1 is against the Principles of Natural Justice. 4. Because, the impugned order dated 30.11.2015 passed by the Respondent No. 1 is without giving an opportunity of being heard to the Appellant. 5. Because, the Respondents concluded the fact that order dated 07.08.2015 of this Hon'ble Tribunal as not being in conformity with the judgment of the Hon'ble Allahabad High Court thereby grossly ignoring and appreciating the actual facts and circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failure to point out such a creamy fact during the course of hearing of the Appeal and pointing at this stage clearly demonstrates the deliberate and planned strategy of disobeying and disrespecting the order of this Hon'ble Tribunal. 9. That it is submitted before this Hon'ble Tribunal that the Respondents deliberately and intentionally flouted the principles of judicial discipline which requires that the order of the Higher Appellate authorities should be followed unreservedly by the subordinate authorities. That it is also submitted - that the mere fact that the order of the Appellate Authority is not "acceptable" to the department- in itself is an objectionable phrase, thereby calling and inviting the Contempt of Court proceedings. 10. That it is also submitted that if this healthy rule is not followed and such tactics of the Respondents are not stopped, the result will only be undue harassment to Assessees and chaos in administration of tax laws. 11. That the Appellant craves leave to add, alter, amend and/ or withdraw all or any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reted that NOIDA (New Okhla Industrial Development Authority) is a corporation established by U.P. Industrial Area Development Act, 1976 and not a body established under the aforesaid Act." It transpires from the records of the appeal that the Assessing Officer noticed that for the Assessment Years 2006-07 and 2007-08, M/s. Canara Bank2 failed to deduct tax at source under section 194-A(1) of the Act on the interest credited/paid on the fixed deposit receipts purchased by the New Okhla Industrial Development Authority3. In the present Appeal, we are concerned with the Assessment Year 2006-07. Accordingly, a notice was issued to the Bank. The contention of the Bank that NOIDA is a Corporation established by a State Act and, therefore, exempted from deduction of income tax at source in view of the notification dated 22 October 1970 issued under section 194-A(3)(iii)(f) of the Act was not accepted. The Assessing Officer also did not accept that NOIDA was a local authority even after 1 April 2003 within the meaning of section 10(20) of the Act and, therefore, entitled to exemption from payment of income-tax. The Bank was held to be an assessee in default and an order under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned with sub-clause (iii)(f) of section 194-A(3) which exempts income credited or paid to such other institution, association or body or classes or class of institutions, association or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette. It is under this provision that the notification dated 22 October 1970 was issued by the Central Government which reads as follows : "In pursuance of sub-clause (f) of clause (iii) of sub-section (3) of section 194A of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notify the following for the purposes of the said sub clause:- (i) any corporation established by a Central, State or Provincial Act; (ii) any company in which all the shares are held (whether singly or taken together) by the Government or the Reserve Bank of India or a Corporation owned by that Bank; and (iii) any undertaking or body, including a society registered under the Societies Registration Act, 1860 (21 of 1860), financed wholly by the Government." Sri Ashok Kumar and Sri Praveen Kumar, learned counsel appearing for the appellants submit that NOIDA is not a "local authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion dated 17 April 1976 declared that the area comprising the villages mentioned in the Schedule annexed with the notification shall be an "Industrial Development Area" called "New Okhla Industrial Development Authority". The constitution of the Authority has also been provided as also the list of 37 villages of Tehsil Sikandarabad of District Bulandshahr. The constitution of the Authority is as follows : (i) Secretary to the Government, Uttar Pradesh, Industries Department, Ex-officio Member Chairman. [Under clause (a)] (ii) Secretary to the Government, Uttar Pradesh, Public Works Department, Ex-officio Member [Under clause (b)] (iii) Secretary to the Government, Uttar Pradesh, Local Self-Government Department, Ex-fficio Member [Under clause (c)] (iv) Secretary to the Government, Uttar Pradesh, Finance Department, Ex-officio Member [Under clause (d)] (v) Managing Director, U.P. State Industrial Development Corporation Ltd., Ex-officio Member [Under clause (e)] (vi) Chairman, U.P. State Electricity Board, Ex-officio Member [Nominated under clause (f)] (vii) Managing Director, U.P. Jal Nigam, Ex-officio Member [Nominated under clause (f)] (viii) Chief Engineer, Ir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure of the Authority. 22. Accounts and Audit--(1) The Authority shall maintain proper accounts and other relevant records and prepare annual statement of accounts including the Balance Sheet in such form as the State Government may specify. (2) The accounts of the Authority shall be subject to audit by the examiner Local Fund Accounts. (3)................. (4)................. (5)................." Section 23 provides that the Authority shall prepare for every year a report of its activities during that year and submit the report to the State Government in such form and on or before such date as the State Government may specify and such report shall be laid before both the Houses of the Legislature. Section 41 deals with the control by the State Government while section 58 deals with the dissolution of the Authority. Section 58(1) provides that where the State Government is satisfied that the purposes for which the Authority was established under this Act have been substantially achieved so as to render the continued existence of the Authority in the opinion of the State Government unnecessary, the Government ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f banking, financial corporation established by or under a Central or State Act, Life Insurance Corporation of India, Unit Trust of India or those notified under section 194-A(1)(3)(iii)(f) of the Act. The notification dated 22 October 1970 exempts any Corporation established by a Central, State or Provincial Act. The Bank asserts that NOIDA is a Corporation established by a State Act and is, therefore, exempted from deduction of income tax on the basis of the notification dated 22 October 1970 issued under section 194-A(3)(iii)(f) of the Act. Learned counsel for the parties have relied upon the decision of the Supreme Court in Dalco Engineering Pvt. Ltd. (supra). Two Civil Appeals were decided. The first Civil Appeal was filed by Dalco Engineering Pvt. Ltd., a Private Limited Company incorporated under the provisions of Companies Act, 19567. The respondent Satish Prabhakar Padhye claimed the benefit of section 47 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 19958 and filed the writ petition in the Bombay High Court for not only quashing the order dated 12 October 2001 issued by the Disability Commissioner suggest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The issue that arose before the Supreme Court was whether a Company incorporated under the Companies Act other than a government Company, as defined in section 617 of the Companies Act, was an "establishment" as defined in section 2(k) of the Disabilities Act and as to whether the respondent was entitled to claim any relief with reference to section 47 of the Disabilities Act. It is in this context that the Supreme Court observed that the words "a corporation established by or under a Central, Provincial or State Act" is a standard term used in several enactments to denote a statutory corporation established or brought into existence by or under a statute. The Supreme Court referred to the definition of "public property" contained in the Prevention of Damage to Public Property Act, 1984 to mean any property owned by, or in the possession of, or under the control of - (i) the Central Government; or (ii) any State Government; or (iii) any local authority; or (iv) any corporation established by, or under, a Central, Provincial or State Act; or (v) any company as defined in Section 617 of the Companies Act, 1956; or (vi) any institution, concern or undertaking which the Central Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank of India Act, 1955 provides that a bank to be called State Bank of India shall be constituted to carry on the business of banking. Section 3 of the Life Insurance Corporation Act, 1956 provides that 3. Establishment and incorporation of Life Insurance Corporation of India.-- (1) With effect from such date as the Central Government may, by notification in the Official Gazette, appoint, there shall be established a Corporation called the Life Insurance Corporation of India." State Bank of India and Life Insurance Corporation of India are two examples of corporations established by "a Central Act". 23. We may next refer to the State Financial Corporation Act, 1951 which provides for establishment of various financial corporations under that Act. Section 3 of that Act relates to establishment of State Financial Corporations and provides that "the State Government may, by notification in the Official Gazette, establish a financial corporation for the State under such name as may be specified in the notification" and such financial corporation shall be a body corporate by the name notified. Thus, a State Financial Corporation is established under a Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutory body, but if the institution has a separate existence of its own without any reference to the statute concerned but is merely governed by the statutory provisions it cannot be said to be a statutory body. (emphasis supplied)" The contention of Sri Ashok Kumar and Sri Praveen Kumar, learned counsel for the appellants is that NOIDA has been created under the provisions of Industrial Act and, therefore, would not be exempted under section 194-A of the Act. The submission of learned counsel is that it is only when the corporation is established by an Act, as is contemplated under the notification dated 22 October 1970, that it would be exempted from deduction of tax at source under section 194-A(1) of the Act. In this connection, learned counsel pointed out that NOIDA has been constituted by the State Government by a notification after identifying the areas. According to them, this is an example of a corporation having been constituted under the State Act. In order to draw a distinction from a corporation having been established by a State Act, learned counsel referred to the establishment of the State Bank of India under the provisions of State Bank of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 194-A(3)(iii)(c) of the Act for the reason that even Life Insurance Corporation of India is referred to in that section. According to him, there is no need to meticulously examine the difference in using "by" or "under" when the Legislature itself has not considered it necessary to place such a fine distinction as is sought to be raised by learned counsel for the appellants. His contention is that in view of the exemptions granted under section 194-A(3)(iii)(f) of the Act as also the notification dated 22 October 1970, NOIDA is exempted from deduction of tax at source under section 194-A(1) of the Act. With regard to the decision of the Supreme Court in Dalco Engineering Pvt. Ltd. (supra), which deals with the State Financial Corporation Act, 1951, learned Senior Counsel submitted that the Central Act in section 3 provides that the State Government may, by notification in the Official Gazette, establish a Financial Corporation for the State under such name as may be specified in the notification, while in the case of NOIDA, the State Act itself provides for constitution of an Authority by issuance of a notification. His submission is that it is for this reason that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und. The object of the Authority is to prepare in such form and at such time every year as the State Government may specify, a budget. Section 41 deals with the control of the State Government over the Authority. The dissolution of the Authority is also provided for in section 58. It can appropriately be gathered from the aforesaid provisions that NOIDA has been established by the Industrial Act and otherwise also even by necessary implications it is more than apparent that NOIDA has been established by the State Industrial Act. There is, therefore, no doubt that NOIDA owes its existence to a Statute which is the fountainhead of its powers. Even otherwise, the fine distinction sought to be made by learned counsel for the appellants losses significance when the provisions of section 194-A(3)(iii)(c) and (d) are examined. They provide that the income credited or paid to the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1952 or the Unit Trust of India established under the Unit Trust of India Act, 1963 are exempted from payment of tax at source. There is no doubt that Life Insurance Corporation of India and the Unit Trust of India are establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (supra), NOIDA will owe its existence to an Act of the State. We have, therefore, no manner of doubt from a reading of the provisions of the Industrial Area Development Act that 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. The decision of the Division Bench of this Court in New Okhla Industrial Development Authority (supra), on which reliance has been placed by learned counsel for the appellants, would, therefore, not come to the aid of the appellants as it was restricted to the issue as to whether NOIDA would be a local authority or not and did not deal with the issue involved in this appeal as to whether the NOIDA is a Corporation established by a State Act. We, therefore, answer the question of law framed by us in negative and hold that NOIDA is a Corporation established by the Uttar Pra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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