M/s. Syndicate Bank, Noida V. Add CIT (TDS), Ghaziabad

ITA 6126/DEL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7396 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 07-01-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 17-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRUPMA KO TRA
• Assessee Lawyers: K N GOYAL
• Keywords: Benefit of exemption
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SRI J.SUDHAKAR REDDY, AM AND SRI S. SRIVAS TAVA, JM ITA NO. 6125 TO 6130/DEL./2015 ASSTT. YEAR : 2007-08 ASSTT. YEAR : 2008-09 ASSTT. YEAR : 2009-10 ASSTT. YEAR : 2010-11 ASSTT. YEAR : 2011-12 ASSTT. YEAR : 2012-13 SYNDICATE BANK, SECTOR-18 NOIDA VS ACIT (TDS) GHAZIABAD (APPELLANT) (RESPONDENT) PAN NO. AACCS4699E ASSESSEE BY : SH. K.N.GOYAL , CA REVENUE BY : MS. NIRUPMA KO TRA, CIT, DR DATE OF HEARING : 07.01.2016 DATE OF PRONOUNCEMENT : 12.01.2016 ORDER PER BENCH ALL THESE APPEALS FILED BY THE ASSESSEE AND ARE DI RECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-1, NOIDA, FOR THE ASSESSMENT YEARS 2007-08 TO ASSESSMENT YEAR 2012 13 ON THE FOLLOWING GROUNDS -: GROUNDS FOR THE ASSESSMENT YEAR 2006-07 -: ITA NO. 6125-6130/DEL/2015 SYNDICATE BANK-NOIDA 2 1. THAT THE IMPUGNED ORDER OF THE LEARNED ADDL. CIT(TDS) IS PATENTLY AGAINST LAW, ERRONEOUS AND MERITS TO BE QUASHED. 2. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED ADDL. CIT(TDS) HAS GROSSLY ERRED IN HOLDING THAT THE APPELLANT WAS LIABLE TO DEDUCT TAX AT SOURCE UNDER THE INCOME TAX ACT, 1961 (ACT) FROM INTEREST PAYMENT TO NEW OKHLA INDUSTRIAL DEVELOPMENT AUTHORITY (NOIDA AUTHORITY), A CORPORATION ESTABLISHED UNDER A STATE ACT. 3. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED ADDL. CIT(TDS) GROSSLY ERRE D IN LEVYING A PENALTY OF RS. 40,84,387/- UNDER SECTI ON 271C OF THE ACT FOR ALLEGED DEFAULT IN DEDUCTING TA X AT SOURCE UNDER SECTION 194A OF THE ACT ON THE PAYMENT OF INTEREST TO NOIDA AUTHORITY, WHICH NEEDS TO BE DELETED. 4. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A), IN HIS ORDER DATED 9.10.2015, HAS GROSSLY ERRED IN CONFIRMING THE PENA LTY OF RS. 40,84,387/- LEVIED BY THE ADDL. CIT(TDS) UND ER SECTION 271C OF THE ACT FOR ALLEGED DEFAULT IN DEDUCTING TAX AT SOURCE UNDER SECTION 194A OF THE A CT ON THE PAYMENT OF INTEREST TO NOIDA AUTHORITY. 2. WE HAVE HEARD SRI K.N.GOYAL THE LD. COUNSEL FOR THE ASSESSEE AND M/S NIRUPMA KOTRA, LD. C.I.T., DR ON B EHALF OF THE REVENUE. 3. ADMITTEDLY THE ISSUES ARISING IN THESE APPEALS A RE COVERED BY THE FOLLOWING DECISIONS OF THE COORDINATE BENCH OF THE TRIBUNAL. (A) ITA NO. 1359.DEL.2014 TO THE ASSESSMENT YE AR 2006-07 IN THE CASE OF ADDITIONAL CIT (TDS), GHAZIABAD VS. CANARA BANK ORDER DATED 07.08.2015. ITA NO. 6125-6130/DEL/2015 SYNDICATE BANK-NOIDA 3 (B) ITA NO. 1360/DEL/2014 AND 1362/DEL/2014 IN THE CASE OF ADDITIONAL CIT(TDS) GHAZIABAD VS. CANARA BANK AND B ATCH OF APPEALS OF DIFFERENT VIDE ITAT F BENCH, NEW DELHI ORDER DATED 07.08.2015. (C) ITA NO. 2228/DEL/2011 IN THE CASE OF SR. MANA GER ORIENTAL BANK OF COMMERCE VS. ITO (TDS) GHAZIABAD O RDER DATED 15 JULY, 2011 VIDE ITAT DELHI IBENCH. 4. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT THE HONBLE ALLAHABAD HIGH COURT, VIDE THIS JUDGMENT DA TED 28.02.2011 HELD THAT NOIDA IS NOT A LOCAL AUTHORITY AND CANNO T CLAIM THE BENEFIT OF EXEMPTION U/S 10(20) OF THE ACT AND HENC E THE ISSUE SHOULD BE DECIDED AGAINST THE ASSESSEE. 5. WE FIND THAT THIS JUDGMENT WAS CONSIDERED BY T HE VARIOUS BENCHES OF THE TRIBUNAL IN THEIR ORDERS REFERRED AB OVE. THE TRIBUNAL IN THE CASE OF CANARA BANK (SUPRA) FOR THE ASSESSME NT YEAR 2006-07 HELD AS FOLLOWED -: 8. IT IS OBSERVED THAT THE ASSESSEE IS A CREA TION OF THE UP INDUSTRIAL AREA DEVELOPMENT ACT, 1976, A COPY OF WH ICH HAS BEEN PLACED ON PAGE 102 OF THE ASSESSEES PAPER BOOK. P REAMBLE OF THIS ACT READS AS : AN ACT TO PROVIDE FOR THE CONSTITUT ION OF AN AUTHORITY FOR THE DEVELOPMENT OF CERTAIN AREAS IN THE STATE I NTO INDUSTRIAL AND URBAN TOWNSHIP AND FOR MATTERS CONNECTED THEREWITH. THE TERM AUTHORITY HAS BEEN DEFINED U/S 2(B) TO MEAN: AUT HORITY CONSTITUTED U/S 3 OF THE ACT. SECTION 3(I), IN TURN, PROVIDES THAT: THE STATE GOVERNMENT MAY, BY NOTIFICATION, CONSTITUTE FOR THE PURPOSE OF THIS ACT, AN AUTHORITY TO BE CALLED (NAME OF THE AREA), INDUSTRIAL DEVELOPMENT AUTHORITY, FOR ANY INDUSTRIAL DEVELOPME NT AREA. IT IS UNDER THE UP INDUSTRIAL AREA DEVELOPMENT ACT, 1976 THAT THE UP ITA NO. 6125-6130/DEL/2015 SYNDICATE BANK-NOIDA 4 GOVERNMENT CONSTITUTED VARIOUS INDUSTRIAL DEVELOPME NT AUTHORITIES WITH THE NAME OF THE AREA, SUCH AS, NOIDA AUTHORIT Y AND GHAZIABAD AUTHORITY, ETC. THE CASE OF THE REVENUE IS THAT ONL Y A CORPORATION ESTABLISHED BY, INTER ALIA, A STATE ACT CAN BE BR OUGHT WITHIN THE PURVIEW OF EXEMPTION. THE LD. DR ARGUED THAT IF TH E CORPORATION IS ESTABLISHED UNDER THE STATE ACT, THEN, THE EXEMPT ION TO THE PAYER BANK FROM DEDUCTION OF TAX AT SOURCE ON THE INTERES T INCOME, IS NOT AVAILABLE. THE LD. DR VEHEMENTLY ARGUED THAT SINCE NOIDA HAS BEEN CONSTITUTED AS A CORPORATION ESTABLISHED `UNDER T HE STATE ACT AND NOT BY THE STATE ACT, THE EXEMPTION TO THE ASSESSEE B ANK FROM TAX WITHHOLDING STOOD WAIVED. IN ORDER TO BUTTRESS TH IS CONTENTION, THE LD. DR RELIED ON THE JUDGMENT OF THE HONBLE SUPREME CO URT IN THE CASE OF DALCO ENGINEERING PVT. LTD. VS. SATISH PRABHAKAR PADHYE AND ORS., DATED 31.3.2010, A COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK. THE LD. AR ALSO DREW STRENGTH TO FORTIFY HIS POINT OF VIEW BY RELYING ON THE SAME JUDGMENT FOR CONTENDING THAT THE ASSESSEE IS A CORPORATION ESTABLISHED BY THE STATE ACT. SINCE BOTH THE SID ES HAVE HEAVILY RELIED ON THE SAME JUDGMENT, IT BECOMES SIGNIFICANT TO NOT E ITS FACTS AND RATIO. 9. IN THAT CASE, THE APPELLANT, A PRIVATE LIMIT ED COMPANY, EMPLOYED RESPONDENT FOR MORE THAN TWO DECADES. THE RESPONDE NTS SERVICE WAS TERMINATED BY THE APPELLANT DUE TO SOME PHYSICAL DI SABILITY. THE RESPONDENT COMPLAINED TO THE DISABILITY COMMISSIONE R AGAINST SUCH TERMINATION. THE DISABILITY COMMISSIONER `SUGGESTE D THE EMPLOYER TO RE-EMPLOY THE RESPONDENT, WHICH SUGGESTION WAS T URNED DOWN BY THE APPELLANT. THE RESPONDENT ARGUED THAT THE COMM ISSIONER, INSTEAD OF MAKING A MERE SUGGESTION, OUGHT TO HAVE ISSUED A DIRECTION TO THE EMPLOYER. HE FILED A WRIT PETITION ON THIS ASPECT. THE HONBLE HIGH COURT ALLOWED THE SAID WRIT PETITION AND DIRECTED T HE EMPLOYER COMPANY TO REINSTATE THE RESPONDENT. THE HONBLE H IGH COURT HELD THAT THE APPELLANT, THOUGH A PRIVATE LIMITED COMPAN Y, WAS AN ESTABLISHMENT UNDER THE ACT. THE APPELLANT TOOK THE MATTER TO THE HONBLE SUPREME COURT URGING THAT IT WAS NOT COVERE D WITHIN THE MEANING OF ESTABLISHMENT AND, HENCE, THE PROVISIO NS OF SECTION 47 WERE NOT APPLICABLE. THE HONBLE SUPREME COURT HEL D THAT THE ITA NO. 6125-6130/DEL/2015 SYNDICATE BANK-NOIDA 5 ASSESSEE COMPANY WAS NOT AN ESTABLISHMENT UNDER T HE ACT. IN REACHING THIS CONCLUSION, THE HONBLE SUPREME COURT CONSIDERED THE DEFINITION OF THE TERM ESTABLISHMENT UNDER THE RE LEVANT ACT AS : A CORPORATION ESTABLISHED BY OR UNDER A CENTRAL, PROV INCIAL OR STATE ACT, THE HONBLE SUPREME COURT HIGHLIGHTED THE USE OF THE WORDS BY OR UNDER IN THE DEFINITION OF THE TERM ESTABLISHMENT AND EXPLAINED THE DIFFERENCE BETWEEN A CORPORATION ESTA BLISHED `BY AN ACT AND A CORPORATION ESTABLISHED `UNDER AN ACT. THE HONBLE APEX COURT HELD THAT A CORPORATION IS ESTABLISHED `BY A N ACT, WHERE THE ACT ITSELF ESTABLISHES THE CORPORATION, SUCH AS, STATE BANK OF INDIA ACT AND LIFE INSURANCE CORPORATION OF INDIA ACT. O N THE OTHER HAND, A CORPORATION IS ESTABLISHED `UNDER AN ACT, WHEN I T IS NOTIFIED BY THE DELEGATED AUTHORITY, THOUGH UNDER THE ACT. IN THE LIGHT OF THE ABOVE DISTINCTION, IT WAS HELD THAT A COMPANY IS INCORPOR ATED AND REGISTERED UNDER THE COMPANIES ACT AND NOT ESTABLISHED UNDER T HE COMPANIES ACT. 10. IT IS SIGNIFICANT TO NOTE THAT THE LINE OF DISTINCTION DRAWN BY THE HONBLE SUPREME COURT BETWEEN THE CORPORATIONS ESTA BLISHED `UNDER THE ACT AND CORPORATIONS ESTABLISHED `BY THE ACT I S TO BE SEEN IN THE BACKGROUND OF THE FACTS PREVAILING IN THAT CASE IN WHICH THE RESPONDENT URGED THAT THE APPELLANT, A COMPANY, BE DECLARED AS ESTABLISHED BY OR UNDER THE ACT. THE HONBLE SUP REME COURT FURTHER OBSERVED THAT: `THUS, A STATE FINANCIAL CORPORATION IS ESTABLISHED UNDER A CENTRAL ACT. THEREFORE, WHEN THE WORDS 'BY AND UNDER AN ACT' ARE PRECEDED BY THE WORDS 'ESTABLISHED', IT IS CLEA R THAT THE REFERENCE IS TO A CORPORATION ESTABLISHED, THAT IT IS BROUGHT INTO EXISTENCE, BY AN ACT OR UNDER AN ACT. IN SHORT, THE TERM REFERS TO A STATUTORY CORPORATION AS CONTRASTED FROM A NON-STATUTORY CORP ORATION INCORPORATED OR REGISTERED UNDER THE COMPANIES ACT . FROM THE ITALICIZED PORTION OF THE ABOVE PRESCRIPTION OF TH E JUDGMENT, IT IS MANIFEST THAT IN THE CONTEXT OF A STATUTORY CORPORA TION, THE WORDS `BY AND UNDER AN ACT CAN BE READ AS `BY AN ACT OR UNDE R AN ACT. THE ABOVE OBSERVATIONS MAKE IT EXPLICIT THAT IN CONTRA ST TO A NON-STATUTORY CORPORATION, A STATUTORY CORPORATION IS CONSIDERED AS ESTABLISHED BY ITA NO. 6125-6130/DEL/2015 SYNDICATE BANK-NOIDA 6 OR UNDER AN ACT AND THE USE OF THE WORDS `BY AND ` UNDER IN SUCH A SITUATION, IS INTERCHANGEABLE. 11. ADVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT THE ASSESSEE IS A STATUTORY CORPORATION ESTABLISHED BY MEANS OF THE UP INDUSTRIAL AREA DEVELOPMENT ACT, 1976. IT HAS BEEN NOTICED ABOVE FROM THE PREAMBLE OF THIS ACT THAT IT HAS BEEN MADE FOR DEVELOPMENT OF CERTAIN AREAS IN THE STATE INTO INDUSTRIAL AND URBA N TOWNSHIP. INSTEAD OF ENACTING AREA-WISE INDUSTRIAL AREA DEVELOPMENT A CTS, THE UP GOVERNMENT ENACTED A COMMON UP INDUSTRIAL AREA DEVE LOPMENT ACT, 1976 TO COVER AUTHORITIES UNDER DIFFERENT AREAS WIT H ITS DISTINCT NAME. BUT, FOR THE CREATION OF VARIOUS AREA-WISE AUTHORIT IES SUCH AS NOIDA AND GHAZIABAD AUTHORITIES, THERE IS NO OTHER PURPOS E OF THE UP INDUSTRIAL AREA DEVELOPMENT ACT, 1976. IN OTHER WO RDS, WE CAN ALSO SAY THAT THIS ACT IS NOTHING BUT A CULMINATION OF S EVERAL AREA-WISE INDUSTRIAL AREA DEVELOPMENT ACTS. SINCE NOIDA HAS BEEN NOTIFIED UNDER THE UP INDUSTRIAL AREA DEVELOPMENT ACT, WE AR E OF THE CONSIDERED OPINION THAT THE EXPRESSION ANY CORPORA TION ESTABLISHED BY A STATE ACT SHALL INCLUDE NOIDA (NEW OKHLA INDU STRIAL DEVELOPMENT AUTHORITY) IN THE GIVEN CIRCUMSTANCES. 12. WE FIND THAT IDENTICAL ISSUE INVOLVING PAYMENT OF INTEREST BY SOME BANKS TO GHAZIABAD DEVELOPMENT AUTHORITY WITHO UT TAX WITHHOLDING CAME UP FOR CONSIDERATION BEFORE THE DE LHI BENCH OF THE TRIBUNAL IN THE CASE OF CHIEF/SENIOR MANAGER, ORIEN TAL BANK OF COMMERCE VS. ITO. VIDE ITS ORDER DATED 15.7.2011 I N ITA NO.2228/DEL/2011, THE TRIBUNAL HAS HELD THAT THE PA YMENT OF INTEREST BY ORIENTAL BANK OF COMMERCE TO GHAZIABAD DEVELOPME NT AUTHORITY IS COVERED WITHIN THE PROVISIONS OF SECTION 194A(3) (III)(F) AND, HENCE, THERE IS NO OBLIGATION FOR DEDUCTION OF TAX AT SOUR CE. CONSEQUENTLY, THE ORDER PASSED U/S 201(1) WAS SET ASIDE. SIMILAR VIEW HAS BEEN TAKEN BY THE AMRITSAR BENCH OF THE TRIBUNAL IN THE CASE OF ITO (TDS) VS. BRANCH MANAGER JAMMU & KASHMIR BANK LTD. VIDE ITS ORDER DATED 24.4.2012 IN ITA NO.206 TO 210/ASR/2011, THE TRIBUNAL HAS HELD THAT PAYMENT OF INTEREST BY THE BANK TO JAMMU DEVEL OPMENT AUTHORITY (JAMMU) IS EXEMPT U/S 194A(3)(III)(F) AND, HENCE, T HERE CAN BE NO LIABILITY U/S 201(1) AND 201(1A) ON THE BANK AND RE SULTANTLY, THE BANK ITA NO. 6125-6130/DEL/2015 SYNDICATE BANK-NOIDA 7 CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT U/S 201 (1) AND 201(1A). LIKEWISE VIEW HAS BEEN TAKEN BY THE AMRITSAR BENCH OF THE TRIBUNAL IN ITO VS. THE BRANCH MANAGER, JAMMU, JAMMU & KASHMIR BANK LTD., BY ITS ORDER DATED 2.7.2012, A COPY OF WHICH HAS AL SO BEEN PLACED ON RECORD. ALL THESE PRECEDENTS SUPPORT THE PROPOSITI ON THAT THE PAYMENT OF INTEREST BY BANKS TO THE STATE INDUSTRIAL DEVELO PMENT AUTHORITIES DOES NOT REQUIRE ANY DEDUCTION OF TAX AT SOURCE IN TERMS OF SECTION 194A(3)(III)(F) AND, HENCE, THE FAILURE TO DEDUCT T AX AT SOURCE ON SUCH INTEREST CANNOT LEAD TO THE BANKS BEING TREATED AS ASSESSEE IN DEFAULT. NO MATERIAL HAS BEEN PLACED ON RECORD TO DEMONSTRAT E THAT ALL/ANY OF THE ABOVE ORDERS HAVE EITHER BEEN REVERSED OR MODIF IED IN ANY MANNER BY THE HONBLE HIGH COURTS. FURTHER, THE LD. DR FAI LED TO POINT OUT ANY CONTRARY DECISION. IN VIEW OF THE LEGAL POSITIO N DISCUSSED SUPRA AND THESE PRECEDENTS, WE ARE OF THE CONSIDERED OPI NION THAT THE LD. CIT(A) WAS JUSTIFIED IN REVERSING THE ORDER PASSED BY THE ADDL. CIT (TDS), GHAZIABAD DECLARING THE ASSESSEE LIABLE U/S 201(1) AND 201(1A) OF THE ACT. WE, THEREFORE, UPHOLD THE IMPU GNED ORDER. 13. IN THE RESULT, THE APPEAL IS DISMISSED. 7. WE RESPECTFULLY FOLLOW THE PROPOSITIONS LAID DO WN IN THESE ORDERS AND UPHOLD THE CONTENTIONS OF THE ASSESSEE. 8. IN THE RESULT, ALL THE ASSESSEES APPEALS ARE A LLOWED. (ORDER PRONOUNCED IN THE COURT ON 12/01/2016 ). SD/- SD/- (SUDHANSHU SRIVASTAVA) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTA NT MEMBER DATED: 12 / 01/2016 *BINITA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ITA NO. 6125-6130/DEL/2015 SYNDICATE BANK-NOIDA 8 DATE INITIAL 1. DRAFT DICTATED ON 11.01.2016 2. DRAFT PLACED BEFORE AUTHOR 11.01.2016 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.