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TMI Blog2017 (9) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... of law and make all payments, which would have been otherwise part of the deductions, for the periods, in question, till end of the date of this judgment.” Now if the assessee wishes to take benefit of the proviso to section 201 of the income tax act, then it is for the assessee to furnish necessary detail, so that assessee cannot be treated as assessee in default with respect to the amount of tax deductible. As the proviso added to section 201 is for mitigating any hardship therefore we set aside the issue to the file of the assessing officer with a direction to the assessee to furnish necessary detail is provided therein and to deposit necessary interest under section 201(1A) of the act in accordance with the law.- Decided in favor of revenue and partly in favor of assessee. TDS u/s 194A - payment of interest on deferred payment of EDC lease premium - payment of interest to YEIDA - Held that:- As decided in CIT (TDS) Vs. Canara Bank [2016 (5) TMI 570 - ALLAHABAD HIGH COURT] while deciding the issue on payment of interest to Noida has held that authorities constituted by the State Act are entitled to exemption of payment of tax at source u/s 194A of the Act.Therefore ,TDS u/s 194 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e within the meaning of section 1941 of the I.T.Act,1961. 5. Ld. CIT (A)-l Noida has erred in law and on facts in deleting the demand on account of payment of interest on deferred payment of EDC lease premium u/s 194A ignoring the fact that the payment made by the assessee to YEIDA under the head interest cannot be merely nomenclature of EDC (External Development Charges) owing to the fact that these are uniformly and periodically made payments. 6. Ld. CIT(A)-1, Noida has erred in law and on fact in deleting the demand on account of payments of Bank gurantee commission ignoring the fact that notification no. 56/2012[F.No. 275/53/2012-IT(B)], dated 31.12.2012 which provides that no TDS shall be done on payment like Bank guarantee commission is effect from 01.01.2013 while in the case of the assessee the payment of Bank guarantee commission was done before 01.01.2013. 4. The revenue has raised the following grounds of appeal in ITA No. 4281/Del/2015:- 7. Ld. CIT (A)-l, Noida has erred in law and on facts in deleting the demand on account of payment of lease rent ignoring the fact that the clauses recorded in the lease deed clearly prove that the assessee is a lessee within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of EDC lease premium u/s 194A ignoring the fact that the payment made by the assessee to YEIDA under the head interest cannot be merely nomenclature of EDC (External Development Charges) owing to the fact that these are uniformly and periodically made payments. 3. Ld. CIT(A)-1, Noida has erred in law and on fact in deleting the demand on account of payments of interest on non-convertible debentures ignoring the fact that the provisions of section 19 applicable on payment of interest on non-convertible debentures." 7. The revenue has raised the following grounds of appeal in ITA No. 4286/Del/2015:- 1. Ld. CIT(A)-1, Noida has erred in law and on facts in deleting the demand on account of payment of lease rent ignoring the fact that the clauses recorded in the lease deed clearly prove that the assessee is a lessee within the meaning of section 1941 of the I.T.Act,1961. 2. Ld. CIT(A)-1 Noida has erred in law and on facts in deleting the demand on account of payment of interest on deferred payment of EDC lease premium u/s 194A ignoring the fact that the payment made by the assessee to YEIDA under the head interest cannot be merely nomenclature of EDC (External Development Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strial Development Authority (YEIDA) and further holding it liable for interest u/s 201(1A) of ₹ 9,663/- and the Learned CIT (Appeals) [Ld. CIT(A)] has erred in sustaining the same. 2. That the order involved of the Ld. AO is unlawful and against principles of natural justice without providing sufficient and proper lawful opportunity to the appellant and the Ld. CIT(A) has erred in not quashing the same. 3. That the order of Ld. CIT(A) holding the appellant as assessee in default u/s 201(1) for ₹ 43,948/- and further holding it liable for interest u/s 201(1A) of ₹ 9,663/- are based on erroneous views, non appreciation of facts and law contrary to binding case laws in the appellant's favour, without proper consideration and rebuttal of filings and submissions on record. 4. That the Ld. AO has erred on the fact and in law in holding the appellant as assessee-in-default u/s 201 of the Act for non deduction of tax at source (in the sum of ₹ 43,948/-) from lease rent payments to the YEIDA in respect of the 90 year leases of land. The Ld. CIT(A) has erred in upholding the view of the Ld. AO. 5. That the Grounds of Appeal, as herein are without prej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed representative submitted that on the ground No. 1. The issue is squarely covered in favour of the revenue by the decision of the Hon'ble Delhi High Court and on ground No. 2 the issue is squarely covered in favour of the assessee by the decision of the Hon'ble allowable High Court. On the issue of the bank guarantee commission, he submitted that it is a principle-to-principle transaction to provisions of section 194H of the act does not apply. 16. We have carefully considered the rival contention and perused the orders of the lower authorities. 17. On the issue of deduction of tax at source on annual maintenance charges paid by the assessee to Yamuna development express authority limited under section 194I of the income tax act is now squarely covered in favour of the revenue by the decision of Hon'ble Delhi High Court [2017] 78 taxmann.com 263 (Delhi) Rajesh Projects (India) (P.) Ltd. v. Commissioner of Income-tax (TDS)-II* where in it has been held that "amounts constituting annual lease rent, expressed in terms of percentage (e.g. 1%) of the total premium for the duration of the lease, are rent, and therefore subject to TDS. Since the petitioners could not make the deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent 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 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. However, sub-section (3) of section 194A provides that the provisions of sub-section (1) shall not apply in certain cases. In the present case, we are concerned with sub-clause (iii)(f) of section 194A(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 October 22, 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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, for any industrial development area. Sub-section (2) of section 3 also provides that the Authority shall be a body corporate, while sub-section (3) provides for the constitution of the Authority. "Authority" has been defined under section 2(b) to mean Authority constituted under section 3 of the Act. The State Government by notification dated April 17, 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges received by the Authority under the Act, (d) all moneys received by the Authority from the disposal of lands, buildings and other properties movable and immovable ; and (e) all moneys received by the Authority by way of rents and pro fits or in any other manner or from any other source." 16. Section 21 deals with the budget of the Authority while section 22 deals with the accounts and audit. These sections are reproduced below : "21. Budget of the Authority.-The Authority shall prepare in such form and at such time every year as the State Government may spe cify, a budget in respect of the financial year next ensuing showing the estimated receipts and 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 annually by the examiner Local Fund Accounts." 17. 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 Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Offi cial Gazette ;" 20. A perusal of section 194A(1), (3)(iii) clearly indicates that the provisions of sub-section (1) of section 194A of the Act shall not apply to such income credited or paid to banking company to which the Banking Regulation Act, 1949 applies, or any co-operative society engaged in the business of 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 194A(1), (3)(iii)(f) of the Act. The notification dated October 22, 1970, exempts any Corporation established by a Central, State or Provincial Act. 21. 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 October 22, 1970, issued under section 194A(3)(iii)(f) of the Act. 22. 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 appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Central, Provincial or State Act, or an authority or a body owned or controlled or aided by the Government or a local authority or a Government company as defined in section 617 of the Companies Act 1956 (1 of 1956), and includes Departments of a Government ;" 25. 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" containe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder'. 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 'established by a Central Act' and 'established under a Central Act' ? 22. The difference is best explained by some illustrations. A cor poration is established by an Act, where the Act itself establishes the corporation. For example, section 3 of the State 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atute and a body which, after coming into existence, is governed in accordance with the provisions of a statute." (emphasis supplied) 29. 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 existence to a statute which would be the fountainhead of its powers. The question in such case to be asked is, if there is no statute, would the institution have any legal existence. If the answer is in the negative, then undoubtedly it is a statutory 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." (emphasis1 supplied) 30. 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 the Industrial Act and, therefore, would not be exempted under section 194A 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 October 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubt 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 provisions of the Industrial Act. His submission is that even otherwise it would not be appropriate to examine as to whether Noida has been constituted by the State Act or under the State Act having regard to the provisions of section 194A(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 194A(3)(iii)(f) of the Act as also the notification dated October 22, 1970, Noida is exempted from deduction of tax at source under section 194A(1) of the Act. 32. With regard to the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Authority with the previous approval of the State Government to levy such taxes, as it may consider necessary, for maintaining or continuing any amenities in the industrial development area. The Authority has to maintain its own fund. 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. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other factors as he may deem fit, specify to be an industrial township. 40. The State Government has issued a notification dated December 24, 2001, in exercise of the powers conferred under the proviso to clause (1) of article 243Q of the Constitution. The said notification provides that having regard to the size of Noida which has been declared to be an Industrial Development Area by a notification dated April 17, 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 (supra), Noida will owe its existence to an Act of the State. 41. 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 194A(1) of the Act. 42. The decision of the Division Bench of this court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Revenue is covered by ground No. 1 of the appeal of the Revenue in case of Jaypee Sports International ltd wherein relying upon the decision of the Hon'ble Delhi High Court we have held that TDS u/s 194I is required to be deducted on rent payment, on lease to Yamuna Development Authority. Therefore, ground No. 1 of the appeal of Revenue is allowed. 26. Ground No. 2 of the appeal of the Revenue is against TDS on interest paid. While Ground No. 2 of the appeal of the Revenue is covered by ground No. 2 of the appeal of the Revenue in case of Jaypee Sports International ltd wherein relying upon the decision of the Hon'ble Allahabad High Court we have held that TDS u/s 194A is not required to be deducted on interest payment to Yamuna Development Authority. Therefore, ground No. 2 of the appeal of Revenue is dismissed. 27. Ground No. 3 of the appeal of the Revenue is against TDS on bank guarantee charged. While Ground No. 3 of the appeal of the Revenue is covered by ground No. 3 of the appeal of the Revenue in case of Jaypee Sports International ltd wherein we have held that bank guarantee charges are not subject to TDS u/s 194H of the Act. In view of this ground, No. 3 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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