M/S INFRASTRUCTURE DEVP.AUTHOR V. THE COMMISSIONER OF INCOME TAX

CWJC/3795/2009

AI Insights

The case involves the Infrastructure Development Authority, a government undertaking of Bihar, which sought a tax exemption on interest income from fixed deposit receipts under Section 197 of the Income Tax Act, 1961. The petitioner argued that the interest income, being state money, should be exempt from tax under Article 289 of the Constitution of India. The initial applications for tax exemption for the financial year 2008-09 were rejected by the Income Tax authorities, leading to this writ petition under Article 226 of the Constitution. The court found that the authorities had not adequately considered the petitioner's status as a nodal agency for state infrastructure development and had not provided cogent reasons for deviating from past practices where similar exemptions were granted.

• Counselvise Citation: [2009] 140 COUNSELVISE.COM (IT) 751764 (HC-PATNA)
• Appeal Type: Others
• Pronouncement Date: 20-07-2009
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax vs. Delhi State Industrial Development, Commissioner of Income Tax and Another vs. Karnataka Urban Infrastructure Development and Finance Corporation
• Laws Referred To: Article 226 of the Constitution of India, Bihar State Infrastructure Development Enabling Act, 2006, Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: HARSHWARDHAN PRASAD; ARCHANA SINHA; NILU AGRAWAL
• Assessee Lawyers: A K RASTOGI; SATYABIR BHARTI
• Keywords: Financial year; Income tax exemption; Public Private Partnership; Tax deduction at source; TDS; State government money
• Section: 264; 197(1)

Judgement Text

" CIVIL WRIT JURISDICTION CASE No.3795 OF 2009 ******* In the matter of an application under Article 226 of the Constitution of India. ******* M/S INFRASTRUCTURE DEVELOPMENT AUTHORITY, A GOVERNMENT OF BIHAR UNDERTAKING, CONSTITUTED UNDER THE BIHAR STATE INFRASTRUCTURE DEVELOPMENT ENABLING ACT, 2006 HAVING ITS OFFICE AT 1ST FLOOR, UDYOG BHAWAN, EAST GANDHI MAIDAN, PATNA, THROUGH ITS DIRECTOR (FINANCE) CHANDRA NATH JHA, SON OF LATE VISHWANATH JHA, RESIDENT OF R 19- JAGAT ENCLAVE, ASHIANA NAGAR, P.S. SHASHTRI NAGAR, DISTRICT-PATNA. -PETITIONER Versus 1.THE COMMISSIONER OF INCOME TAX (TDS), CENTRAL REVENUE BUILDING, GARDINER ROAD, PATNA. 2.THE ASSISTANT COMMISSIOINER OF INCOME TAX, TDS CIRCLE, PATNA. 3.BANK OF BARODA, FRASER ROAD, DAK BUNGLOW CHOWK, PATNA, THROUGH BRANCH MANAGER. 4.BANK OF INDIA, CHAUHATTA, ASHOK RAJPATH AND SECRETARIAT BRANCHES, NEAR SECRETARIAT, P.S. PATNA, THROUGH BRANCH MANAGER. 5.CANARA BANK, SHEIKPURA, RAJA BAZAR AND EXHIBITION ROAD BRANCHES, PATNA, THROUGH BRANCH MANAGER. 6. CENTRAL BANK OF INDIA, LAXMI COMPLEX, BORING ROAD, THROUGH BRANCH MANAGER. 7. ICICI BANK, B.S.F.C. BUILDING, FRASER ROAD, PATNA, THROUGH BRANCH MANAGER. 8. PUNJAB & SINDH BANK, DAK BUNGLOW CHOWK, FRASER ROAD, PATNA, THROUGH BRANCH MANAGER. 9. PUNJAB NATIONAL BANK, EAST GANDHI MAIDAN, PATNA, THROUGH BRANCH MANAGER. 10.STATE BANK OF INDIA, ALANKAR PALACE, BORING ROAD/SECRETARIAT AND MAIN BRANCH, GANDHI MAIDAN, PATNA, THROUGH BRANCH MANAGER. 11.UCO BANK, JEEVAN DEEP BUILDING, FRASER ROAD, ALPANA MARKET AND PATLIPUTRA BRANCHES, 2 PATNA, THROUGH BRANCH MANAGER. 12.ICICI HOME FINANCE LTD. KOLKATA, WEST BENGAL THROUGH GENERAL MANAGER. -RESPONDENTS ******* For the Petitioner : M/s A.K. Rastogi & Satyabir Bharti For Respondents 1 : M/s Harshwardhan Prasad, & 2. Sr.Standing Counsel With Archana Sinha, Jr.Standing Counsel For Respondents 10 : Ms. Nilu Agrawal. & 11 ******* P R E S E N T THE HON'BLE THE ACTING CHIEF JUSTICE THE HON'BLE JUSTICE SMT. ANJANA PRAKASH S.K. Singh, ACJ & Anjana Prakash,J. Heard the parties. 2. It is the case of the petitioner that this Authority (petitioner) was constituted on 21st April, 2006 under the Bihar State Infrastructure Development Enabling Act, 2006 for the purpose of acting as the nodal Agency of the State for developing the basic infrastructure in the 3 State of Bihar. It is accepted to be a facilitator in public Private partnership projects. 3. Annexure-1 to the writ petition is not in dispute and it shows that a Certificate no.131 dated 31st March, 2008 under Section 197 (1) of the Income Tax Act, 1961 was issued by Assistant Commissioner, of Income Tax Circle-I, Patna. It was valid for the financial year 2007-08 till 31st March 2008. The amount of interest over fixed deposit receipts shown to be Rs.13,50,73,205 payable by the Branch Manager, UCO Bank, Exhibition Road Branch, Patna, was the subject matter of the Certificate. The prayer of the petitioner made to the competent Authority under Section 197 of the Income Tax Act for the year 2008-09 was, however, rejected by order dated 02nd February, 2009, contained in Annexure-3. Against that order petitioner preferred an application under Section 264 4 of the Income Tax Act before the Commissioner of Income Tax (TDS) seeking revision of the order dated 02nd February, 2009. That application has also been rejected by the impugned order dated 03rd March, 2009, contained in Annexure-4. 4. On behalf of the petitioner it has been submitted that the Assistant Commissioner of Income Tax, TDS Circle, Patna, while passing the order dated 02nd February, 2009 failed to keep in mind the certificate issued for the earlier year in identical facts and circumstances and also the fact that the money deposited through FDR has been shown to belong to State of Bihar and interest earned thereupon has also been shown through notes as money of the State of Bihar. It was submitted that in view of facts undisputed and noted even in the impugned order, contained in Annexure-4, the interest money to be received by the petitioner on account of FDR in Banks 5 belongs to the State of Bihar and is exempted from tax on income under Article 289 of the Constitution of India. 5. In support of his submissions learned counsel for the petitioner has placed reliance upon a judgment of Delhi High Court in the case of Commissioner of Income Tax Vrs. Delhi State Industrial Development; (2007) 295 ITR 419 (Delhi) and another judgment by Karnataka High Court in the case of Commissioner of Income Tax and Another Vrs. Karnataka Urban Infrastructure Development and Finance Corporation; (2006) 284 ITR 582 (Karnataka). 6. Learned counsel appearing on behalf of the Commissioner and other concerned Authorities of Income Tax Department has submitted that the matter relates to tax deduction at source and can be easily examined in detail in course of assessment proceedings and hence the issue raised on behalf of the petitioner need not be decided 6 by this Court at the present stage. On the other hand, learned counsel for the petitioner submits that the impugned orders are without any authority of law and amount to taxing State Government money against the provisions of the Constitution and ignoring the past practice of the Authorities themselves. It has further been submitted that the Authorities have not disputed the accounts of the petitioner for the past assessment years nor they have assessed the money in hand as that of the petitioner but still they have refused to issue the certificate which they ought to have issued under Section 197 of the Income Tax Act. 7. On going through the order passed by the Income Tax Authorities dated 02nd February, 2009 (Annexure-3) and 03rd March, 2009 (Annexure-4), this Court finds that the Authorities have failed to consider the prayer of the petitioner under Section 197 7 of the Income Tax Act in accordance with law and no cogent reasons have been given for taking a different view than what the Authority had taken in the past year. The status of the petitioner that it is acting as nodal Agency of the State for developing infrastructure in the State of Bihar is not in dispute as evident from the order contained in Annexure-4. In view of undisputed facts, prima facie, the judgments relied upon by the learned counsel for the petitioner appear to be relevant and the principles settled therein should have been taken into consideration by the Income Tax Authorities while passing the order under Section 197 or under Section 264 of the Income Tax Act. 8. Prima-facie, this Court finds merit in the claim of the petitioner that the interest income over money belonging to the State of Bihar cannot be subjected to income tax or TDS by the Income Tax Authorities. 8 However, since the assessment orders have not been passed in respect of petitioner for the relevant years, hence this Court would not like to give a definite and positive finding over the issues involved, at this stage. Hence, the orders contained in Annexures 3 and 4 are quashed and the matter is remitted back to the concerned Authority of the Income Tax Department, i.e., Assistant Commissioner of Income Tax, TDS Circle, Patna for passing fresh order in accordance with law and after due application of mind to all relevant facts, some of which have been noticed in this order. The said Authority should pass fresh order in respect of petitioner’s application under Section 197 of the Act without any delay and preferably within one month from today. Till then no coercive action shall be taken to realize tax deduction at source in respect of interest income which the petitioner may receive. 9 9. The writ petition is allowed to the aforesaid extent. (Shiva Kirti Singh, ACJ.) (Anjana Prakash, J.) Patna High Court, The 20th July, 2009. AAhmad/ (AFR). "