ISSUE
Whether NOIDA is a Corporation
established by or under the Uttar Pradesh Industrial Area Development Act,
1976, consequent to which it is eligible for exemption from the requirement of tax
deduction at source in respect of payment of interest made to it by Canara
Bank?
FACTS:
1.The assessee, New Okhla
Industrial Development Authority (NOIDA), was constituted by a notification
issued under Uttar Pradesh Industrial Development Act, 1976.
2. Canara Bank made payment of
interest on deposits to the assessee (NOIDA) without deducting tax u/s 194A.
3.The Commissioner of Income-tax
(TDS) issued notices to Canara Bank, asking for information pertaining to
interest paid without deducting tax at source u/s 194A.
PROVISION APPLICABLE
1. Section 194A requires deduction
of tax at source while making interest payments.
2.Sec. 194A(3)(iii)(f) provides
that sub-section (1) shall not apply to income credited or paid to
institutions, associations notified by Central Govt.
3. A notification dated October
22, 1970 is issued by CG u/s 194A(3)(iii)(f) exempting payments made to “any
corporation established by a Central, State or Provincial Act” from the requirement of tax deduction at source.
ANALYSIS:
1) Assessee should be
‘corporation’ being a separate legal entity The Supreme Court explained a
‘corporation’ as an artificial being created by law having a legal entity
entirely separate and distinct from the individuals. There was no dispute about
NOIDA being a corporation and a statutory corporation.
2) Corporation should be
‘established by or under’ Statute SC rejected Revenue’s submission that the
assessee-Authority was not established by 1976 Act rather it was established
under the 1976 Act. SC held that words “by and under” were interchangeably used
in the IT Act, 1961 and there was no difference between them. SC held that the
emphasize should be on the word “established” in addition to the words “by or
under”. SC held that that the phrase “established by or under” is used to
denote a statutory corporation established or brought into existence by or
under a statute. SC noted that the establishment of Corporation is by a
notification issued by State Government. In the present case, notification has
been issued by the State Government in exercise of power under the Act and the
Authority has been constituted.
3) Preamble to Act provided for
constitution of Authority SC observed that very preamble of that Act read 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 masses
connected through with”. Thus, SC analysed that the Act itself provided for
constitution of an authority.
4) Thus, SC held that NOIDA has,
thus, been established by the 1976 Act and is clearly covered under the
Notification issued u/s 194A(3)(iii)(f). Hence, it is
eligible for exemption from tax
deduction at source provided under section 194A(3)(iii)(f).
CONCLUSION:
SC holds that NOIDA is
constituted 'by' the State Act and is covered by the notification dated October
22, 1970, is, therefore, entitled to TDS exemption u/s. 194A(3)(iii)(f)
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