TaxTMI 
TaxTMI 
2017 (9) TMI 241
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....se 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 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." 3. The revenue has raised the following grounds of appeal in ITA No. 4280/Del/2015:- "4. 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 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 payme....
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....erest on deferred payment of F.DC lease premium u/s 194A Ignoring the fact that the payment made by the assessee to YEEDA under the head interest cannot he merely nomenclature of EDO (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 und on facts in deleting the demand on account of payment of interest on non-convertible debentures ignoring the. fact that the provisions of section 194A are Applicable on payment of interest on non- convertible debentures." 6. The revenue has raised the following grounds of appeal in ITA No. 4285/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 b....
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....u/s 201(1A) of Rs. 13,665/- 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 Rs. 44,067/-) from lease rent payments to the YEIDA in respect of the 90 years 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 prejudice to each other. 6. That order of the Ld. CIT(A) is against law and facts of the case involved. 9. The revenue has raised the following grounds of appeal in ITA No. 4285/Del/2015:- 1. That the Learned Assessing Officer [Ld. AO] has erred on facts and in law in holding the appellant as assessee in default u/s 201(1) of the Income Tax Act (the Act) for a sum of Rs. 43,948/- for non-deduction of tax at source from lease rent payments to Yamuna Expressway Industrial Development Authority (YEIDA) and further holding it liable for inte....
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....he income tax act on annual lease rent. He further submitted that that the finding of the Ld. CIT (A) holding that it is the responsibility of the assessing officer to ascertain whether the payee has paid the tax on the payments made by the assessee is not in accordance with the law. He further referred to the proviso to section 201(1) of the income tax act which enables the deductor to furnish a certificate that the deduct the has filed return and paid tax thereon. He further submitted that the interest liability under section 201 (1A) till that time, rest on the tax deductor. 13. With respect to the deduction of tax on the interest he relied on the orders of the Ld. AO. He further list reliance on the decision of Hon'ble Madras High Court 239 ITR 136 holding that interest payment beyond the period of credit for supply of goods on credit is covered under section 2 (28A) of the act. He further relied upon the decision of the Hon'ble Gujarat High Court in case of Vijay ship breaking Corporation 261 ITR 113. 14. With respect to the tax deduction at source on the bank guarantee he relied upon the order of the Ld. assessing officer. 15. Ld. authorised representative submitted ....
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....ve issue is covered in favour of the assessee by the order of Hon'ble Allahabad High Court in 386 ITR 504 in CIT (TDS) Vs. Canara Bank as under:- "5. The issue that arises for consideration in this appeal is as to whether Noida is a corporation entitled for exemption from deduction of tax at source under the provisions of the notification dated October 22, 1970, issued under section 194A(3)(iii)(f) of the Act. This notification provides that the provisions of sub-section (1) of section 194A of the Act shall not apply to any corporation established by a Central, State or Provincial Act. According to the appellants, the Noida is not a corporation that has been established by the Industrial Act and, therefore, would not be entitled for exemption while according to the bank, it is a corporation established by the Industrial Act and, therefore, entitled for exemption. 6. In order to appreciate the rival contentions, it will be appropriate to refer to the provisions of the Acts involved and the notification. 7. Section 194A(1) of the Act provides that any person, not being an individual or a Hindu undivided family, who is responsible for paying to a residen....
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.... a Central, State or Provincial Act. In support of this contention, learned counsel have placed reliance upon the decision of the Supreme Court in Dalco Engineering P. Ltd. v. Satish Prabhakar Padhye [2010] 164 Comp Cas 275 (SC) ; [2010] 4 SCC 378. 9. Sri Balbir Singh, learned senior counsel appearing for the bank assisted by Sri Abhinav Mehrotra and Sri Ankit Vijaywargiya has, while relying upon the same decision of the Supreme Court in Dalco Engineering Pvt. Ltd. (supra) submitted that Noida is a corporation established by the Industrial Act and, therefore, entitled for exemption from deduction of Income-tax at source. 10. We have carefully considered the submissions advanced by learned counsel for the parties. 11. In order to appreciate the contentions advanced by learned counsel for the parties, it will be appropriate at this stage to refer to the provisions of the Industrial Act so as to determine whether Noida is a corporation that has been established by a State Act or it has been established under a State Act. 12. The State Act in issue is the Industrial Act. The preamble to the said Act states that it is an Act to provide for the constit....
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....lopment of the Industrial Development Areas. The functions amongst others are : (i) to acquire land in the industrial development area by agreement or through proceedings under the Land Acquisition Act for the purpose of the Act ; (ii) to prepare a plan for the development of the industrial area ; and (iii) to provide amenities. 14. Section 11 deals with levy of tax. It provides that for the purposes of providing, maintaining or continuing any amenities in the industrial development area, the Authority may with the previous approval of the State Government, levy such taxes as it may consider necessary in respect of any site or building on the transferee or occupier thereof, provided that the total incidence of such tax shall not exceed twenty five per cent. of the annual value of such site or building. 15. Section 20 deals with the funds of the authority and sub-section (1) of section 20 is as follows : "20. Fund of the Authority.-(1) The Authority shall have and maintain its own fund to which shall be credited- (a) all moneys received by the Authority from the State Govern ment by way of grants, loans, advances or otherwise ; (b) all mo....
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....urce. The relevant provisions of section 194A of the Act for the purpose of deciding the controversy involved in this appeal, are reproduced below : "194A. (1) Any person, not being an individual or a Hindu undi vided 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 any other mode, whichever is earlier, deduct Income-tax thereon at the rates in force... (3) The provisions of sub-section (1) shall not apply-... (iii) to such income credited or paid to- (a) any banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies, or any co-operative society engaged in car rying on the business of banking (including a co-operative land mort gage bank), or (b) any financial corporation established by or under a Central, State or Provincial Act, or (c) the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), or (d) the Unit T....
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....d directed the employer to reinstate the said respondent and shift him to a suitable post after holding that though Dalco Engineering was a private limited company but it was an "establishment" within the meaning of section 2(k) of the Disabilities Act and consequently section 47 enjoined it not to dispense with the services of its employee who had acquired a disability. 23. Section 47 of the Disabilities Act which deals with non-discrimination in Government employment is reproduced below : "(1) No establishment shall dispense with, or reduce in rank, an employee who acquires a disability during his service : Provided that, if an employee, after acquiring disability is not suit able for the post he was holding, could be shifted to some other post with the same pay scale and service benefits : Provided further that if it is not possible to adjust the employee against any post, he may be kept on a supernumerary post until a suitable post is available or he attains the age of superannuation, whichever is earlier. (2) No promotion shall be denied to a person merely on the ground of his disability : Provided that the appropriate Gove....
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....rnment and partly by one or more State Governments. The Supreme Court observed that the term is always used to denote certain categories of authorities which are "State" as contrasted from non-statutory companies which do not fall under the ambit of "State". 26. After considering the earlier judgments rendered in S. S. Dhanoa v. Municipal Corporation, AIR 1981 SC 1395 and Executive Committee of Vaish Degree College v. Lakshmi Narain [1976] 2 SCC 58, the Supreme Court further observed that a "company" is not "established" under the Companies Act as an incorporated company formed by the act of any seven or more persons (or two or more persons for a private company) associated for any lawful purpose subscribing their names to a memorandum of association and by complying with the requirements of the Companies Act in respect of registration. Therefore, a "company" is incorporated and registered under the Companies Act and not established under the Companies Act. On the contrary, the Companies Act itself establishes the National Company Law Tribunal and the National Company Law Appellate Tribunal and those two statutory authorities owe their existence to the Companies Act. ....
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.... a statutory corporation as contrasted from a non-statutory corporation incorporated or registered under the Companies Act." (emphasis supplied) 28. In S. S. Dhanoa (supra), on which reliance was placed in the aforesaid judgment, the Supreme Court had observed : "9. Corporation, in its widest sense, may mean any association of individuals entitled to act as an individual. But that certainly is not the sense in which it is used here. Corporation established by or under an Act of Legislature can only mean a body corporate which owes its mexistence, and not merely its corporate status, to the Act. For example, a Municipality, a Zilla Parishad or a Gram Panchayat owes its exist ence and status to an Act of Legislature. On the other hand, an asso ciation of persons constituting themselves into a company under the Companies Act or a society under the Societies Registration Act owes its existence not to the Act of Legislature but to acts of parties though, it may owe its status as a body corporate to an Act of Legislature. 10. There is a distinction between a corporation established by or under an Act and a body incorporated under an Act. The distinction was bro....
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....ed by a Central Act. The distinction that is sought to be made by learned counsel for the appellants is that whereas the State Bank of India and Life Insurance Corporation of India have been established by an Act for the reason that they have been named in the Act but Noida has neither been named nor its area has been determined. Learned counsel for the appellants in fact have submitted that like Noida, the State Financial Corporation has also been established under the State Financial Corporation Act, 1951. Their contention is that section 3 of the State Financial Corporation Act relates to establishment of State Financial Corporations and provides that the State Government may, like in the case of an Authority under the provisions of the Industrial Act, by a notification in the Official Gazette, establish a Financial Corporation for the State under such name as may be specified in the notification. According to him, there is no distinction between the State Government establishing a Financial Corporation under such name as may be specified in the notification and the State Government constituting an Industrial Development Authority under section 3(1) of the Industrial Act. Learne....
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....notice is that in Dalco Engineering Pvt. Ltd. (supra), the Supreme Court while dealing with the State 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. 34. It also needs to be noted, 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 Au....
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.... 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 authorises the State Government to issue the notification. 38. In this connection, we need to remind ourselves by observations made in paragraph 9 in the judgment of 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. 39. Noida has been granted a status of a Municipality under article 243Q 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 fro....
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.... 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. Similarly, in the case of the assessee a State Act also constituted the recipient. In the result ground No.2 of the appeal of the revenue is dismissed. 20. Ground No. 3 of the appeal of the assessee is with respect to deduction of tax at source on bank guarantee commission u/s 194H of the Act. In the case before us the ld CIT(A) has held that on bank guarantee commission no tax is required to be deducted following the decision of Hon'ble Delhi High Court in case of CIT Vs. Living Media India Ltd dated 06.05.2008. Furthermore, the assessee is acting not as an agent but on principle-to-principle basis. 21. We have carefully considered the rival contentions and we are of the opinion that the bank guarantee commission is not subject to withholding tax u/s 194H of the Act as it does not fall into Clause (i) of the Explanation of Section 194H. In view of this Ground No. 3 of the appeal of the Revenue is dismissed. 22. In the result all the three appeals of the revenue are partly allowed. 23. N....