TaxTMI 
TaxTMI 
2016 (2) TMI 195
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....74/Del/2015 Rs.2,13,06,703/- 2011-12 2. As the issue involved in these seven appeals are common we dispose them off by this common order. 3. The brief facts of the issue on which penalty is levied is that the assessee is a bank which has obtained deposit from New Okhla Industrial Development Authority i.e. Noida. On these deposits, the bank has made interest payment without deducting tax source u/s 194A of the Income tax Act [hereinafter referred to as „The Act‟]. According to the AO the assessee should have deduct tax at source u/s 194A of the Income Tax Act, 1961 and therefore passed order u/s 201 and 201A of the Act holding that the assessee as „assessee in default‟. This matter came before the ITAT in ITANo.3600 to 3606/Del/2014 along with other banks vide order dated 07.08.2015, wherein on merits it has been held that the payment of interest by the banks to NOIDA does not require any withholding tax u/s 194A of the Act as the same is covered under exceptions provided u/s 194A(3)(iii)(f) of the Act. Resultantly, the order passed by the Addl. CIT(TDS) u/s 201(1) and 201(1A) read with section 194A of the act has been set aside. Meanwh....
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....under section 194A of the I.T. Act, 1961 and the same stands settled by Hon'ble Allahabad High Court in favour of revenue and against the appellant bank.The Id. A.O. had the competence and jurisdiction under section 194A of the Income Tax Act and was competent to enforce the compliance of section 194A of the Income Tax Act 1961 by the appellant bank qua credit or payment of interest on time deposits of the Noida Authority by the appellant bank and other similarly p aced banks and other entities. 47. In respectful submission to the ld. ITAT, Delhi Benches it is submitted that each assessment proceeding or any other proceeding under the income Tax Act are independent proceedings and are to be decided independently and separately with reference to the facts of that particular proceedings and the particular assessment year. The doctrine of res-judicata does not apply to the income tax law nor is there any equity in taxation law. In view of the peculiar facts of each proceeding for each assessment year, the order of an authority under the Income Tax Act, 1961 cannot be the binding precedent for other proceedings for other assessment years and respectfully the order dated 07....
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....hat provisions of section 194A do not apply to area development authority. For this he relied on the decision of the Amritsar Bench of this Tribunal in the case of ITO (TDS) Vs. Jammu & Kashmir Bank, Delhi bench in the case of Oriental Bank of Commerce Vs. ITO as well as order of ITAT Delhi bench dated 07.08.2015 where in the case of several Banks, it has been held that the assessee cannot be held to be an „assessee in default‟ for deduction tax at source u/s 194A read with section 201(1) and 201(1A) of the Act. 6. In response to this the ld DR vehemently argued that the Hon‟ble Allahabad High Court‟s decision has held that Noida is not entity exempted under the provision of section 10(20) of the Act and therefore tax is required to be deduct thereon. He further submitted that Allahabad High Court was also seized of the issue that whether the tax was required to be deducted on the interest payment made to Noida and therefore the issue is covered against the assessee on that count. He further submitted that merely because the assessee has not been held to be an „assessee in default‟ and order u/s 201(1) and 201(1A) of the Act has been set aside....
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....e under sub-section (1) shall be imposed by the Joint Commissioner." 9. Provisions of section 271C of the act are also qualified by the provision of section 273Bof the act which provides that penalty u/s 271C of the act cannot be levied if the failure referred to in the said provision is proved to be because of „reasonable cause.‟ 10. Vide para Nos. 6 to 12 of the order of ITAT, issue about applicability of provisions of withholding tax u/s 194A of the Act on interest paid by assessee bank to Noida is discussed as under :- "6. Now, we espouse the main issue on merits as to whether the assessee was liable to deduct tax at source u/s 194A on interest paid to NOIDA? Before answering this question, it is relevant to consider the provisions of section 194A, the relevant part of which reads as under:- "194A. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident 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 an....
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.... Development Act, 1976, a copy of which has been placed on page 102 of the assessee's paper book. Preamble of this Act reads as : "An Act to provide for the constitution of an Authority for the development of certain areas in the State into industrial and urban township and for matters connected therewith." The term 'Authority' has been defined u/s 2(b) to mean: 'Authority 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 ITA No.1359/Del/2014 development area.' It is under the UP Industrial Area Development Act, 1976 that the UP Government constituted various industrial development authorities with the name of the area, such as, NOIDA Authority and Ghaziabad Authority, etc. The case of the Revenue is that only a corporation established 'by', inter alia, a State Act can be brought within the purview of exemption. The ld. DR argued that if the corporation is established 'under' the State Act, then, the exemption to the payer bank from deducti....
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....39;establishment' and explained the difference between a corporation established `by' an Act and a corporation established `under' an Act. The Hon'ble Apex Court held that a Corporation is established `by' an Act, where the Act itself establishes the Corporation, such as, State Bank of India Act and Life Insurance Corporation of India Act. On the other hand, a Corporation is established `under' an Act, when it is notified by the delegated authority, though under the Act. In the light of the above distinction, it was held that a company is incorporated and registered under the Companies Act and not established under the Companies Act. 10. It is significant to note that the line of distinction drawn by the Hon'ble Supreme Court between the Corporations established `under' the Act and Corporations established `by' the Act is 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 Hon'ble Supreme Court further observed that: `Thus, a State Financial Corporation is established under a central Act. Therefore,....
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....e to Ghaziabad Development Authority is covered within the provisions of section 194A(3)(iii)(f) and, hence, there is no obligation for deduction of tax at source. 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 ITANo.206 to 210/Asr/2011, the Tribunal has held that payment of interest by the bank to Jammu Development Authority (Jammu) is exempt u/s 194A(3)(iii)(f) and, hence, there can be no liability u/s 201(1) and 201(1A) on the bank and ITA No.1359/Del/2014 resultantly, the bank 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 also been placed on record. All these precedents support the proposition that the payment of interest by banks to the State Industrial Development Authorities does not require any deduction of tax at source in terms of section 194A(3)(iii)(f) and, hence, the failure to deduct tax at s....
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....bdquo;reasonable cause‟ for non deduction of tax at source on payment of interest made to Noida for following reasons:- a. ITAT has held that according to notification issued dated 22.10.1990 where it has been held that any corporation which is established by Central State or provisional act will fall under the exception to provision of section 194A in sub-section 3(iii)(f) the Act. The assessee has pleaded before all the authorities that it is covered by this notification and no tax is required to be deducted on interest paid to NOIDA. The plea of the assessee also could not be said to be false because of the reason that Noida is a creation of The Uttar Pradesh Industrial Area Development Act, 1976 and therefore the assessee was having a bonafide belief that it is not required to deduct any tax at source on payment made to Noida. Ld DR as well as lower authority did not whisper a word about this aspect of the issue for non deduction of tax source. b. Prior to the decision of ITAT in the case of the assessee under similar circumstances Delhi Bench of ITAT in the case of Oriental Bank of Commerce Vs. ITO vide its order dated 15.07.2011 in ITA No. 2228/Del/201....
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....e term reasonable cause in the case of Woodward Governors India (P.) Ltd Vs., CIT, 253 ITR 745 as under:- "„Reasonable cause‟ as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. It can be described as a probable cause. It means an honest belief founded upon reasonable grounds, of the existence of a state of circumstances, which assuming them to be true, would reasonably lead any ordinary prudent and cautious man, placed in the position of the person concerned, to come to the conclusion that same was the right thing to do. The cause shown has to be considered and only if it is found to be frivolous, without substance or foundation, the prescribed consequences will follow." 16. In the present case it is apparent that belief of the assessee was reasonable to not to deduct tax at source which is also based upon the notification issued by CBDT u/s 194A(3(iii)(f) of the Act as well as several judicial precedents. In our view, it cannot be said that Hon‟ble Allahabad High Court has laid down any law with respect to deduction of tax at source on interest payment made by the assessee to Noida. 17. In vie....