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Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI
Before: SHRI G. D. AGRAWAL, HON’BLE & SMT. BEENA A. PILLAI
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘C’, NEW DELHI
BEFORE SHRI G. D. AGRAWAL, HON’BLE VICE PRESIDENT AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER I.T.A. No.612/Del/2013 (Assessment Year 2010-11)
ACIT, Circle 50(1), Vs. Gardenia Shelters P. Ltd., New Delhi C-56/5, 4th Floor, Sector 62, NOIDA GIR / PAN :AADCG4091K
C.O. No.161/Del/2013 (Assessment Year 2010-11)
Gardenia Shelters P. Ltd., Vs. ACIT, Circle 50(12), C-56/5, 4Th Floor, New Delhi Sector 62, NOIDA
(Appellant) (Respondent)
Appellant by :Shri T. Vasanthan, Sr. DR Respondent by :Shri C S Agarwal, Sr. Adv., Shri R P Mall, Adv.
Date of hearing: 05.07.2016 Date of Pronouncement: 21.07.2016 ORDER PER BEENA A. PILLAI, JM: The present cross appeals have been filed by the Revenue as well as the assessee against the order dated 30.11.2012 passed by Ld. CIT(A) XXX, New Delhi for the Assessment Year 2010-11 on the following grounds: A. I.T.A.No. 612/Del/2013 (Revenue’s appeal):
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“1. On the facts and in the circumstances of the case as well as in law, the learned CIT(A) has erred in deciding that no amount as rent and interest has been paid by the assessee to NOIDA during F .Y. 2009-10. As per lease deed dated 24/03/2009 between the development and marketing of Group Housing Pocket/Flats indicates towards an Allotment Letter dated 19/01/2009. The said allotment letter clearly laid down the plan through which payment of premium installment and interest thereon has to be paid to NOIDA. The Ld CIT(A) has erred in appreciating that the interest ledger shows entry dated 31/03/2010 amounting to Rs.1,74,93,578/-. If the interest over the installment has been paid than the installment has also been paid during the year.
2) Holding that since NOIDA is a notified corporation established by Central, State or Provincial Act within the meaning of Section 194A(3)(iii)(f) of the I T Act, no TDS on the interest paid to the NOIDA is chargeable to TDS. The Corporation has been established under a Provincial Act and not by a Provincial Act. Therefore Corporation would not qualify for exemption from the provisions of Section 194A. This distinction has been made by the Apex court in the case of M/s Dalco Engineering Pvt. Ltd vs Satish Prabhakar Padhye & Ors 31 March, 2010. 3) Holding that TDS should be deducted excluding service tax on the payments made u/s 194J of the I.T. Act.”
B. C.O. No.161/Del/2013 (Assessee’s cross objections):
“1. That the learned Commissioner of Income Tax (Appeals) has failed to comprehend, that under the terms of the agreement, nature of expenditure could have been held by the AO as either rent or interest to which the provisions of section 1941 or 194Jlcould be invoked. 2. That the learned Commissioner of Income Tax (Appeals) ought to have held that the amount of Rs.
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1,74,93,578/- was not an interest, to which provisions of section 194A of the Income Tax Act, were applicable and the expenditure incurred by the assessee represented the cost of land allotted to the assessee.(156 TT J 569 ICICI BANK L TD VS. DCIT) 3. That the learned Commissioner of Income Tax (Appeals) ought to have in the alternative and without prejudice further held that the aforesaid sum paid as financial charges incurred by the assessee and payable to NOIDA (New Okhla Industrial Development Authority) were not chargeable to tax, and therefore there had not been default of the assessee within the meaning of section 194A of the Act had been committed by the assessee.”
At the outset, Ld. A.R. submitted that he does not wish to pursue the cross objections filed by the assessee. Accordingly, the Cross Objections filed by the assessee stand dismissed as not pressed. 3. The brief facts of the issue raised by the Revenue are as under: 3.1 The assessee is a company incorporated under the Companies Act, 1956 as a Special Purpose Company comprising of following three members whose share holding are detailed hereunder: S.No. Name of Members %tage of shareholding 1 M/s. Gardenia India Ltd. 80% 2 M/s. Advanced Construction Co. Pvt. Ltd. 10% 3 M/s. Amrapali Realtors 10%
3.2 It was engaged in the business of real estate development and construction during the financial year 2009-10 relevant to A.Y. 2010-11.
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3.3 That in the immediately preceding assessment year 2009-10, the assessee was allotted a piece of land i.e. Plot No. 16A in Sector 61, Noida for development and marketing of group housing pockets/flats which had been acquired by NOIDA under the Land Acquisition Act' 1984. The aforesaid lease of plot had been allotted to the assessee for a period of ninety years for consideration of a premium of Rs.15,81,84,900/- (see pages 26-27 of the Paper Book), out of which 20% of the premium i.e. Rs.3,16,36,980/- was paid by the assessee before the allotment (see pages 45-46 of Paper Book) and remaining premium of 80% was required to be paid within eight years (see page 28 of the Paper Book). Apart from the aforesaid premium assessee was required to pay a further sum as lease rental equal to 1 % of the premium for every ten years of lease and was to be enhanced by 50% after every ten years. The first installment of such lease rental was paid by the assessee before the allotment, thus before the date of allotment i.e. before 24.3.2009, the assessee had paid a total sum of Rs. 3,33,18,829/- and incurred a sum towards a stamp duty of Rs. 92,16,000/-, thus the assessee had incurred an aggregate expenditure of Rs.4,25,34,829/- on or before executing the lease granted for a period of 90 years on 24.03.2009. 3.4 The learned ACIT, Circle - 50 (1), New Delhi vide order dated 23.03.2012, passed order u/s 201(1)/201(1A) of the Income Tax Act, creating a tax liability of Rs. 1,41,51,561/- for purported default u/s 194A (non
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deduction of tax at source at the time of crediting the interest of Rs. 1,74,93,578/-), 1941 (non deduction of tax at source at Rs. 4,25,53,059/- being the cost of land), 194J (non deduction of tax at source on service tax).
3.5 The assessee being aggrieved by the aforesaid order, preferred an appeal before the ld. CIT(A) who held that the Ld. A.O. erred in holding that there was a default of having failed to deduct tax at source of Rs. 1,41,40,452/- under section 201(1) and interest under section 201(1A) of the Act. 4. Aggrieved by the order passed by Ld. CIT(A), the Revenue is in appeal before us. Ground No.1 & 2: 5. Ld. D.R. has submitted written submissions on behalf of the Revenue which has been reproduced as under: “(A) Write up in support of contention of the revenue that the CO is not maintainable Appeal U/S 253(2) has been filed by the Department. The respondent assessee has not preferred cross appeal U/S 253(1), however respondent assessee has chosen to file to file cross objection U/S 253(4). The Revenue has objection on the following accounts:-
The cross objection filed by the assessee is beyond the prescribed time limit and has been barred by limitation of time and therefore, ought to be rejected in limine. The Department has filed the appeal bearing appeal no. 612/D/2013 on 31.01.2013 and the assessee has filed the cross objections vide CO no. 161/D/2013 on 29.09.2013. The ITAT has also issued defect notice on 08.10.2013 to the assessee that "Date of receipt of notice of appeal filed by the
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appellant to tribunal not properly mentioned. Hence time bared cannot be calculated". However, the assessee has not yet cured the defect. As the cross objection filed by the assessee is beyond time, the cross objections filed by the assessee may kindly be rejected in limine.
Without prejudice to the contention of the Department stated In para 2 above, the following objection is also raised by the Department.
3.1 Issue under consideration is whether under cross objection respondent assessee is allowed to agitate issues which are not subject matter of appeal against which cross objection has been filed.
3.2 If we allow interpretation that any issue can be raised under CO, than it comes exactly at par with cross appeal. There cannot be any doubt that such interpretation would make use of phrase 'cross objection' and provisions of separate section redundant. Time of filing appeal is 60 days communication of impugned order. Under this interpretation the time limit gets extended to much later period, that too without payment of requisite fee.
Hon'ble Delhi High Court in its judgment dated 17.01.2000, reported in 2000 IVAD Delhi 145/ AIR 2000 Delhi 208 in the case of MTNL vs. Telecom regulatory authority of India has categorically stated that it is a settled law that what cannot be done directly, cannot also be done indirectly. Para 26 of the order is reproduced as under:-
"26. It is settled law that what cannot be done directly, cannot also be done indirectly. No authority is required for this proposition, but if any authority is required the authorities in the case of Jagir Singh Vs. Ranbir Singh and Another and the case of District Collector, Chittor and Others Vs. Chittoor District Groundunt Traders" Association, Chittoor and Others are sufficient in Jagir Singh's case the Supreme Court
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has held that what cannot be done directly, cannot be allowed to be done indirectly as that would be an evasion of the statute. The Supreme Court has held that it is a well known principle of law that the provisions of law cannot be evaded by shift or contrivance. The Supreme Court has held that in an indirect or circuitous manner the objects of a statute cannot be defeated. In the District Collector's case a circular was issued under the Commodities Act purporting to impose restriction on movement of edible oil and oil seeds and to impose compulsory levy for supply of oil to State Government at a fixed price. The Supreme Court held that there was no power to impose levies and what could not be done directly could not be done indirectly by using the regulatory powers given to that Authority.”
3.4 By applying the above ratio of Hon'ble Supreme Court it can be said that time for filing appeal U/S 253(1) cannot be extended beyond 60 days in the garb of filing CO for issues which have not been agitated in the appeal U/S 253(2) (against which the CO lies).
Further, CO lies in respect of issues which is not emanating from the ground of appeal filed by the Department.
The issue gets directly covered by the judgment of Hon'ble IT AT Ahmedabad dated 30.04.2012 in case of DCIT vs. Sandip M. Patel in appeal Nos. 866 to 871, 1016 & 1339 (AHD) of 2008 ( 137 ITD 104/ 22 taxmann.com 288). In that case also, the assessee tried to agitate issue of validity of the assessment proceedings through cross objection. The issue was decided in the favour of the department at the CIT(A) level and was not appealed against by the assessee U/S 253( 1). The fact that the cross objection were found to be filed beyond prescribed time and were withdrawn with the liberty to argue validity the assessment in departmental appeal on the strength of Rule 27 of ITAT Rules (being respondent), would not
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make much difference because although, the Hon'ble ITA T held that it is not possible to agitate validity of assessment on the strength of the Rule 27, however, it is important to note that the Hon'ble ITA T has ruled,
" ... Had the cross objection was not withdrawn, even then, such a legal issue was beyond the scope of the adjudication through a cross objection under section 253(4) of the IT Act because the impugned legal issue was altogether and independent as well as a separate issue." (emphasis supplied).
B) Written submission for Departmental Appeal
In this connection, it is stated that Ld. CIT(A) erred in deciding that no TDS is applicable on amount paid by assessee to NOIDA as lease hold premium during the year. As per lease deed between NOIDA and M/s Gardenia Shelters Pvt. Ltd. provided by assessee during the assessment proceedings by which land was leased to assessee for development and marketing of group Housing Pocket! flats indicates towards an allotment letter dated 03.09.2009.The said allotment letter clearly laid down the plan through which payment of premium installment and interest thereon has to be paid to NOIDA within 60 days, 12 months, 18 months and so on from the date of allotment letter along with interest at the rate of 11 % per annum and 14% interest compounded half yearly in the case of delay in any installment. It can be concluded that if interest over the installment has been paid then the installment has also been paid during the year.
Further definition of rent u/s 1941 of Income Tax Act 1961 requires following conditions to be satisfied in order to qualify any payment as rent:-
(i) Payment should be made under any lease, sub- lease, tenancy or any other agreement or arrangement.
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ii) Payment should be for the use of land: or building (including factory building); or land appurtenant to a building or machinery; or plant; or equipment; or furniture; fittings.
iii) The payment made to NOIDA is covered under this definition as it satisfy the above criterion laid down in the Act.
Further relevant portion of section 194A clearly states:-
Interest other than 'interest on securities'.
Section 194A-(3) The provisions of sub-section (1) shall not apply-
iii) to such income credited or paid to-
f) such other institution or provincial Act, or
Vide notification S.O.3489 (F. No. 121164/68- ITCC/IT) dated 22. 10.2010 central government has notified any corporation established by a central state or provincial Act for the purpose of sub-clause (f) of clause (iii) of sub-section (3) of section 194A of the Income Tax Act, 1961.
But NOIDA constituted under Sec.3 of U.P. Industrial Area Development Act, 1976 is a corporation established under State Act and not by a State Act.
The Difference between being established "by the Act" and "under the Act" has been discussed by the Hon'ble Supreme Court of India in the case of Dalco Engineering Pvt. Ltd. Vs. Satish Prabhakar Padhye & ORS on 31st March 2010. It does not qualify for the said notification which requires the corporation to be established by a central, state, or provincial Act. Therefore any payment made as rent or interest to NOIDA is chargeable to TDS.
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The contention of the assessee and the Ld CIT(A) that TDS provisions are not applicable on the payments to NOIDA is not acceptable due to the following reasons:
a) The NOIDA Authority is not covered u/s 196 of the IT Act, 1961 as the same is not specifically covered under any of the institutions specifically mentioned in the said section.
b) The payment of annual lease charges to NOIDA Authority is clearly covered u/s 194A and as per the section there is no exception whatsoever for non deduction of TDS. Further, TDS is deductible on the interest u/s 194A.
c) NOIDA came into existence on 17th April, 1976 under UP Industrial Area Development Act 1976. Acronym NOIDA is for the Authority (New Okhla Industrial Development Authority) as well as for the township (New Okhla Industrial Development Area). Certain salient features of UP Industrial Area Development Act, 1976, which are relevant are stated below:
i. As per Section 3, the Authority shall be a Body Corporate.
ii. As per Section 11, the Authority may with the previous approval of the state Government levy taxes.
iii. As per Section 23, the Authority shall prepare an annual report to the State Government which shall be laid before both houses of the legislature.
iv. As per section 42, the Authority shall furnish reports, returns and information to the Government as well as the Government has power to inspect. As per Section 51, the State Government may delegate any power exercisable by it except the power to make Rules.
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As can be seen from the above, NOIDA Authority cannot be stated to be Government and rather it reports to the Government.
d) In this regard, NOIDA Authority has issued a letter No. Finance/Taxation/2014-15/1614 dated 03.03.2014 and relevant portion of which is reproduced below:
" However, as per the direction issued by the Honourable Allahabad High Court the Allottees are required to deduct tax at source from the payment of lease rent to the GNOIDA and pay to the account of the Government. Besides, Allottees have to deposit the amount equivalent to tax deducted at source to GNOIDA which shall be kept by the GNOIDA in an interest bearing account till the decision of Honourable Supreme Court of India in the Special Leave Petition filed by the Noida Authority. "
As can be seen from the above, the Hon'ble Allahabad High Court has also held that the Allottees are required to deduct TDSon applicable payments to NOIDA.
e) Judicial Decisions:
Reliance is placed on the decision of the Hon,ble ITAT, Chennai in the case of Foxconn India Developer (P) Ltd vs ITO. (2012) 24 taxmann.com 48 (Chennai), wherein the Hon'ble ITAT has held that TDS is deductible in such cases.
Reliance is also placed on the decision of the Hon'ble Supreme Court in the case of Smt. Tarulata Shyam and others vs CIT, West Bengal (1997) 108 ITR 345 (SC) wherein the Hon'ble court held as under:
" ……in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in,
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nothing is to be implied. One can only look fairly at the language used.
Once it is shown that the case of the assessee comes within the letter of the law, he must be taxed, however great the hardship may appear to the judicial mind to be.
When the language of the section is clear and unambiguous, there is no scope for importing into the statute words which are not there. Such importation would be, not to construe, but to amend the statute. Even if there be a casus omissus, the defect can be remedied only by legislature and not by judicial interpretation. "
When the provisions of section 1941 and its Explanation are self-contained, further words should not be imported to interpret the statute. Therefore, the decision of the Hon'ble ITAT in the case of ITO vs The Indian News Papers Society may not be followed for deciding the issue under consideration as the Hon'ble ITAT has erred in bringing in the provisions of Transfer of Property Act, 1882 .
Further, the decision of the Hon'ble ITAT in the case of Add!. CIT(TDS) vs. Canara Bank may not be followed for deciding the applicability of section 194 A as the Hon'ble ITAT has erred as under:
(i) In 194A (3 )(ii)(b), the legislature has used the words "by or under" whereas in the Notification u/s 194A(iii)(t), the word used is only "by". When legislature has chosen to use or not to use a certain word, Hon'ble ITA T could not have imported any further word for interpreting statute.
ii) The strict interpretation on the difference between being established "by the Act" and as per the Act" discussed by the Hon'ble Supreme Court of India in the case of Dalco Engineering Pvt. Ltd. V s. Satish Prabhakar Padhye & ORS on 31st March 2010 is
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binding on the Hon’ble ITA T specially in view of the decision of the Hon'ble Supreme Court in the case of Smt. Tarulata Shyam and others vs CIT, West Bengal (1997) 108 ITR 345 (SC).
(iii) The decision of the Hon'ble ITA T in the case of Addl. CIT(TDS) vs. Canara Bank may not be followed as per the Doctrine of Binding Precedent as held by the Hon'ble Supreme court in :
Union of India Vs. Raghubir Singh 178 ITR 548 (SC) (556 &557 ) -Surinder Kumar and others, State of Punjab and others [1992] 194 ITR 434(SC).
(C) Without prejudice submission w.r.t default u/s 1941
Without prejudice to the above, the following submission is also made:
The Ld. CIT(A) has stated that he has verified certain ledger accounts and other documents for A.Y. 2010-11 & A.Y. 2009-10. These ledger accounts and documents are new evidence furnished by the assessee for the first time before the CIT(A), which were not furnished before the A.O. Further, the CIT(A) had also not sought for remand report from the A.O for verification of the new evidence. This is against the principles laid down by the Hon'ble Delhi High Court in the case of CIT vs. Manish Buildwell Pvt. Ltd. 2011- TIOL-756 HC- Del- IT.
In case the Hon'ble IT AT is of the opinion that the penalty may be applicable for A.Y. 2009-10 and not for A. Y. 2010-11, the Hon'ble IT A T may set aside the issue and also issue the necessary directions to the A.O. to examine the issue afresh for taking appropriate action for A.Y 2010-11 or A.Y. 2009-10, as applicable.”
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Referring to the relevant paragraphs of written submissions, Ld. D.R. submitted that assessee should be held liable for not deduction of TDS u/s 194A and 194I of the Act. 7. On the contrary, the Ld. A.R. submitted that the assessee has paid interest to NOIDA without deduction of tax at source as it iss a local authority and hence income was exempted from tax and as such, no deduction of tax at source was required. He placed his reliance upon the decision of this Tribunal in the case of ACIT (TDS) Vs Canara Bank in I.T.A. No.1359/Del/2014 for A.Y. 206-07. Ld. A.R. submitted that the order dated 07.08.2015 by the Tribunal in the case of Canara Bank (supra) has been upheld by Hon’ble Allahabad High Court reported in 69 Taxman.com 204. Ld. A.R. submitted that the decision of Hon’ble Allahabad High Court relied upon by the Ld. D.R. in Civil Writ Tax No.1338/2005 in the case of NOIDA Vs Chief CIT decided on 28.02.2011 has been extensively considered by the Hon’ble Allahabad High Court in its judgement in CIT Vs Canara Bank (supra), which is subsequent one and has distinguished the same. Ld. A.R. submitted that the contention of the assessee that NOIDA is a corporation established by State and therefore, is exempt from TDS in view of the Notification dated 22nd October 1970 issued u/s 194A(3)(iii)(f) of the Act, has been upheld. He also submitted that the decision of Hon'ble Supreme Court in case of Delco Engineering Pvt. Ltd. Vs Satish Prabhakar Padhya (2010) 4 SCC 378 has
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been distinguished by Hon’ble Allahabad High Court in the case of CIT Vs Canara Bank (supra), wherein the issue was definition of “usage of term a corporation established by or under an Act.” Hon’ble Allahabad High Court has relied upon the decision of Hon’ble Supreme Court in the case of Suikhdev Singh and others Vs Bhagat Ram Sardar Singh Raghuvanshi (1975) 01 SCC 421 wherein the Hon’ble Supreme Court observed as under: “A company incorporated under the Companies Act is not created by the Companies Acts 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)”.
7.1 He further submitted that the decision relied upon by the Ld. D.R. in the case of Faxconn India Developers Pvt. Ltd. Vs ITO reported in (2012) 24 Taxman.com 48 passed by Chennai Bench of the Tribunal has been reversed by Hon’ble Madras High Court in case of Falcom India Developers Pvt. Ltd. Vs ITO reported in 68 Taxman.com 95. He, therefore, submitted that the issue; whether the assessee is subject to TDS u/s 194A, stands squarely covered by the decision of Hon’ble Allahabad High Court in case of CIT Vs Canara Bank (supra). 8. We have heard rival contentions and submissions advanced, perused the relevant pages of paper book
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referred and the judgements relied upon by both the parties. 8.1 The A.O. issued notice on 2.02.2012 for verification u/s 201(1)/201(1A) after receiving information from DGIT (Inv.), where search and seizure operation were conducted on M/s. Gardenia Group. The A.O. passed order on 23.03.2012. The Ld. A.O. computed the tax of Rs.87,65,930/- u/s 201(1) of the Income Tax Act on the ground that the assessee has paid leas premium / lease charges of Rs.42553059/- to M/s. New Okhla Industrial Development Authority (NOIDA) for the purpose of acquiring land and has not deducted TDS u/s 1941 of the Income Tax Act. 8.2 Sub-Section (1) of Section 194A casts an obligation on the person responsible for paying interest to a resident to deduct TDS at the time of credit of such income to the income of the payee or at the time of payment, whichever is earlier:- “7 Sub-section (l) of section 194A casts an obligation on the person responsible for paying interest to a resident, to deduct tax at source at the time of credit of such income to the account of the payee or at the time of payment thereof, whichever is earlier. Sub-section (" (3) is relevant for our purpose. This sub-section provides that the provisions of sub-section (I), which cast obligation on the person responsible for paying interest for deduction of tax at source from such interest, shall not apply in the circumstances. given in clauses (i) to (xi). Clause (iii) mandates that the requirement of deduction of tax at source contemplated by sub-section (1) shall be waived where such interest is credited or paid to
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any banking company/financial corporation/LIC/UTI, etc. One of the items of beneficiaries given in such list, as per sub- clause (f) is, '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.' Notification under section 194A(3)(iii)(f) has been issued which is dated 22.1 0.1970, as has been reproduced on page 1 of the assessment order. There are several institutions, specifically or generally, covered under this notification issued u/s 194A(3)(iii)(f). One of such items notified generally is: "Any Corporation established by a Central, State or Provincial Act." The crux of the controversy before us IS whether or not the assessee falls under this item? Whereas the case of the assessee is that it 1S a corporation established by the State Act, the Revenue has canvassed a view that the assessee is not a corporation established by a State Act."
8.3 Hon’ble Allahabad High Court in the case of CITVs Canara Bank (supra) has held as under: “32. With regard to the decision of the Supreme Court in Dalco Engineering (P.) 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 Supreme Court in paragraph 23 of the judgment rendered in Dalco Engineering (P.) Ltd. (supra) observed that the State Financial Corporation had been established under a State Act.
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What is important to notice is that in Dalco Engineering (P.) Ltd. (supra), the Supreme Court while dealing with the tat Financial Corporation, specifically observed that when the words 'by or under an Act" are preceded by the words “established", it is clear that the reference is to a corporation that it is brought into existence by an Act or under an Act.
It also needs to be noted is, as is also clear from the preamble to the Industrial Act, that the Act provides for the constitution of an Authority for the development of certain areas in the State. Thus, the Act itself constitutes the Authority. Section 3(1) of the Act provides that the name of the area shall be added before the Industrial Development Authority. In other words, whether it be NOIDA or any other 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 lot 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 Authority with the previous approval of the State Government to levy such taxes, as it may
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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 yen 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 empted from payment of tax at source. There is no doubt that Life Insurance Corporation of India and the Unit Trust of India are established by the Acts. The Act, therefore, does not place any emphasis on 'by' or 'under' the Act.
In this view of the matter, reference to the Financial Corporation Act by learned counsel for the appellants to substantiate that NOIDA has been established under a State Act is not of significance. This apart, as has been pointed out by learned Senior Counsel for the respondent-Bank, the said Central Act authorised the State Government to issue the notification whereas the Industrial Act authorities the State Government to issue the notification.
In this connection, we need to remind ourselves by observations made in paragraph 9 in the judgment of
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'S.S.Dhanoa (supra). The Supreme Court pointed out that a Corporation established "by" or ''under'' an Act of Legislature can only mean a body corporate which owes its existence and not merely its corporate status to the Act and in this connection the Supreme Court referred to : a municipality; a zila 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.
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 size of NOIDA which has been declared to be an Industrial Development Area by a notification dated 17 April 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
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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.”
8.4 Respectfully following the ratio laid down by Hon’ble Allahabad High Court in case of Canara Bank (supra), we hold that the assessee is not liable to deduct TDS u/s 194A of the Act as NOIDA would be a local authority and is a corporation established by the State Act. Accordingly, Ground No.1 of the Revenue’s appeal stands dismissed. Ground No.2: 9. In respect of Ground No.2, Ld. A.R. submitted that the assessee has neither credited nor paid any rent during the year under consideration. He submitted that the amount has been paid in the previous year relevant to A.Y. 2009-10, which has been shown as the opening WIP for the year under consideration. He thus submitted that
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the provisions of Section 194-I of the Act are not applicable. 10. We have perused the submissions and rival contentions of both the parties. It is observed that a sum of Rs.4,25,53,059/- has been paid during the A.Y. 2009- 10 (page 45-46 of the pb) and the sum so paid are presumed payment towards purchase of industrial plot and stamp duty for the instrument entered into. In our considered opinion that payment cannot be considered as rent, in any event, these payments pertain to A.Y. 2009- 10 and from the financial statement filed in the paper book, no rent has been paid during the year under consideration. We, are therefore, of the considered opinion that in such a case, Section 194-I cannot be made applicable as no rent has been paid or credited. Accordingly, this ground filed by the Revenue stands dismissed. Ground No.3: 11. In respect of ground No.3, Ld. D.R. submitted that the issue stands squarely covered in favour of the assessee vide CBDT Circular No.4/208 dated 28.04.2008 wherein the CBDT has clarified in para 3 that service tax paid by the tenant does not partake the notice of income of the landlord and the land lord only acts as collecting agency for Government for collection of service tax.
11.1 As this ground raised by the Revenue has been admittedly submitted to be covered by the Circular
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No.4/2008 dated 28.04.2008, we, therefore, are of the considered opinion that pursuant to circular referred to above, no obligation to deduct tax at source u/s 194-I of the Act would arise on the assessee. Accordingly, this ground of the Revenue stands dismissed. 12. In the result, appeal filed by the Revenue and Cross Objection filed by the assessee stand dismissed. Order pronounced in the open court on 21st July, 2016.
Sd./- Sd./- (G. D. AGARWAL) (BEENA A. PILLAI) VICE PRESIDENT JUDICIAL MEMBER Date: 21.07.2016 Sp. Copy forwarded to:- 1. The appellant 2. The respondent 3. The CIT 4. The CIT (A)-, New Delhi. 5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi. True copy. By Order
(ITAT, New Delhi)
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S.No. Details Date Initials Designation 1 Draft dictated on Sr. PS/PS 2 Draft placed before author Sr. PS/PS Draft proposed & placed before 3 JM/AM the Second Member Draft discussed/approved by 4 AM/AM Second Member Approved Draft comes to the 21/7/16 5 Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement 21/7 Sr. PS/PS 7 File sent to Bench Clerk 21/7 Sr. PS/PS Date on which the file goes to 8 Head Clerk 9 Date on which file goes to A.R. 10 Date of Dispatch of order