2023 (7) TMI 693

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.... of TDS on account of interest paid to the Jammu Development Authority even when the same is taxable entity and as such the assessee-Bank was under an obligation to deduct the TDS on interest payment to Jammu Development Authority under Section 194A of the Income Tax Act, 1961" 2. For both the assessment years i.e 2010-11 and 2011-12, the Joint Commissioner of Income Tax, Range-1 Jammu ['the Assessing Authority'] decided the issue in favour of the Revenue and held that the Jammu Development Authority ['JDA'] is a Local Authority which is not exempt from payment of tax and, therefore, the assessee-Bank was under an obligation to deduct the TDS on the deposits of JDA. Reliance was placed by the Assessing Authority on the judgment of Hon'ble Supreme Court rendered in the case of Adityapur Industrial Area Development Authority vs. Union of India and others, (2006) 283 ITR 97 (SC). On appeal by the assessee-Bank against the order of assessment passed by the Assessing Authority, the Commissioner of Income Tax (Appeals), Jammu ['CIT(A)'] accepted the plea of the assessee-Bank and held that, it was not required to deduct any tax at source on its interest payments made to the JDA. The CI....

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.... receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44-AB during the financial year immediately proceeding the financial year in which such income by way of rent is credited or paid, shall be liable to deduct income-tax under this section. Explanation.--For the purposes of this section, where any income by way of interest as aforesaid is credited to any account, whether called 'Interest payable account' or 'Suspense account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. (3) The provisions of Sub-section (1) shall not apply-- (i) where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the person referred to in Sub-section (1) to the account of, or to, the payee, does not exceed- (a) forty thousand rupees, where the payer is a banking ....

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.... (c) the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), or (d) the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), or (e) any company or co-operative society carrying on the business of insurance, or (f) 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 ; (iv) to such income credited or paid by a firm to a partner of the firm; (v) to such income credited or paid by a co-operative society to a member, thereof or to any other co-operative society ; (vi) to such income credited or paid in respect of deposits under any scheme framed by the Central Government and notified by it in this behalf in the Official Gazette ; (vii) to such income credited or paid in respect of deposits (other than time deposits made on or after the 1st day of July, 1995) with a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking ins....

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....ation Act, 1956, or (d) the Unit Trust of India established under the Unit Trust of India Act, 1963 or (e) any company or co-operative society carrying on the business of insurance, or (f) 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. 8. In the exercise of powers conferred upon the Central Government under Section 194A(3)(iii)(f) of the Act, the Central Government has issued a Notification SO 3489 dated 22.10.1970 which reads thus: "In pursuance of sub-clause (f) of clause (iii) of sub-section (3) of section 194A of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies the following for the purposes of the said sub-clause:- (i) any corporation established by a Central, State or Provincial Act; (ii) any company in which all the shares are held (whether singly or taken together) by the Government or the Reserve Bank of India or a Corporation owned by that Bank; and (iii) any undertaking or body, including a society registered under....

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....egislature and, therefore, exempt from the provisions of Section 194A (1) of the Act. Hon'ble Supreme Court ruled that the Canara Bank was under no obligation to deduct the TDS form the interest income paid by it to NOIDA on its fixed deposits lying with the Bank. The Supreme Court strongly relied upon the judgment of Dalco Engineering Private Limited vs. Satish Prabhakar Padhye and Others (2010) 4 SCC 378. This judgment of the Supreme Court was also followed in the later case of Union bank of India vs. Additional Commissioner of Income Tax (TDS) (2022) 442 ITR 194 (SC) in respect of Agra Development Authority established/constituted under the provisions of Uttar Pradesh Urban Planning and Development Act, 1973. What was said by the Supreme Court in respect of Agra Development Authority may be set out below: "6. The issue which is raised in the present appeals is covered by the judgment of a two-Judge Bench of this Court in Commissioner of Income Tax (TDS) Kanpur and Another vs Canara Bank. In that case, the issue pertained to the applicability of the notification dated 22 October 1970 in relation to payments made by Canara Bank to the New Okhla Industrial Development Auth....

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....y corporate known by the name of Jammu Development Authority and shall have perpetual succession and a common seal etc. That being the position, there can hardly be any dispute that JDA is a corporation constituted under the State Act i.e the Development Act 1970. S.O 3489 of 1970 clearly notifies a corporation established by a Central, State or Provincial Act exempt from the operation of sub-section (1) of Section 194A of the Act. The JDA is not incorporated like the company which is incorporated under the Companies Act or the Cooperative Society which is registered under the Cooperative Societies Act. The JDA is a statutory body which owes its origin to the Development Act 1970 and is regulated in its functions by the provisions of Development Act 1970 and the rules framed thereunder. 14. In view of the clear exposition of law made by the Supreme Court in the aforesaid two judgments, it would be a superfluous exercise for us to go into the issue in detail once again. 15. The JDA is similar to the Agra Development Authority constituted under the provisions of Uttar Pradesh Urban Planning and Development Act, 1973 and NOIDA established under Uttar Pradesh Industrial Area Deve....