TMI Blog2016 (2) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of interest made to Noida which is supported by a notification issued as well as several orders of the coordinate benches holding that interest payment made to Development authorities are exempt for deduction of tax u/s 194A(3)(iii)(f) of the Act. - Decided in favour of assessee - ITA No 5968 to 5974/ Del/2015 - - - Dated:- 8-1-2016 - SHRI H.S.SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Sh.AjayWadhwa, Adv Ms. Reema Malik, CA Ms.Aruna Mittal, CA For The Respondent : Sh. A.K.Saroha, CIT DR ORDER PER BENCH, 1. These appeals are filed by the assessee against the orders of penalty u/s 271C of the Act levied by AO vide order dated 28.02.2013. The penalty was further confirmed by learned Commissioner of Income-tax (Appeals) vide his consolidated order dated 14.10.2015 for Assessment Year 2005-06 to 2011-12. The learned Commissioner of Income-tax (Appeals) confirmed the penalty in respect of orders as under:- ITA No. Amount Assessment Year 5968 /Del/2015 Rs.12,60,934 2005-06 5969/Del/2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal by consolidated order holding as under:- 45. The position of the law with regard to the order dated 07/08/2015 of id. ITAT, Delhi Benches and the judgment dated 28/02/2011 of Hon'ble Allahabad High Court needs to be considered as there is clear conflict between the judgment dated 28/02/2011 of Hon'ble Allahabad High Court and the order dated 07/08/2015 passed by Ld. ITAT Delhi Benches both of which are the superior authorities of the CIT(Appeal) at Noida and whose judgment or orders are binding precedents for CIT(A) at Noida in terms of law declared by the Hon'ble Apex Court in the case of Union of India and Others Vs. Kamlakshi Finance Corporation and others AIR (1992) SC 711. 46. Since the order dated 07/08/2015 of Id. ITAT, Delhi Benches has been obtained by concealing the material facts and thereby by playing fraud on Id. ITAT, Delhi Benches the said order is nullity and non-estabinito and cannot be a binding precedence or even a precedence for the undersigned. In any case an order by Id. ITAT Delhi Benches qua1 jurisdiction exercised to a case coming under the territorial jurisdiction of Hon'ble Allahabad High Court cannot supersede the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is in appeal before us . 5. The ld AR of the assessee submitted that ITAT has already cancelled the demand raised by AO u/s 201(1) and 201(1A) rws section 194A of the Act and therefore no default persists and hence penalty cannot be levied on the assessee u/s 271C of the Act. He further submitted that observation of the learned Commissioner of Income-tax (Appeals) at Page 46 of the impugned order are not correct, where it is stated that the order passed by ITAT cancelling the demands u/s 201(1) and 201(1A) are nullity and non-est abinito and was not followed by learned Commissioner of Income-tax (Appeals) is against the settled judicial precedent. He further submitted that learned Commissioner of Income-tax (Appeals) further erred in holding that the applicability of section 194A of the act with respect to payment of interest made to Noida has been settled by Hon‟ble Allahabad High Court in favour of revenue. For this he submitted that decision of the Hon‟ble Allahabad High Court in Writ Petition Tax No.1338 of 2005, where the appellant is one of the respondents, The Hon‟ble High Court did not given any decision on the issue of tax deduction at source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pendent penalty provision one u/s 271(1)(c) and other u/s 271C of the act. In the end, he submitted that learned Commissioner of Income tax (Appeals)‟s order has considered all aspect of facts and law of the case while confirming the penalty. He vehemently supported the order of lower authorities and argued that penalty levied u/s 271C of the act for all those years be confirmed. 7. In the rejoinder ld AR submitted that ITAT in the case of the assessee has passed a reasoned order cancelling the demand u/s 201(1) and 201(1A) of the act and further Honorable Allahabad High Court has not at all decided the issue about deductibility of tax at source on interest payment to Noida u/s 194A of the act. He further submitted that the provision of section 271C cannot be invoked when the assessee is not in default and as in the case of the assessee orders u/s 201(1) and 201(1A) has been set aside , penalty u/s 271C of all those years cannot survive. 8. We have carefully considered the rival submission it is necessary to appreciate the issue to consider the provision of section 271C which are as under:- 271C. (1) If any person fails to- (a) deduct the whole or any part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (3) is relevant for our purpose. This sub-section provides that the provisions of sub-section (1), which cast obligation on the person responsible for paying interest for deduction of tax at source from such interest, shall not apply in the circumstances given in clauses (i) to (xi). Clause (iii) mandates that the requirement of deduction of tax at source contemplated by sub-section (1) shall be waived where such interest is credited or paid to any banking company/financial corporation/LIC/UTI, etc. One of the items of beneficiaries given in such list, as per sub- clause (f) is, '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.' Notification under section 194A(3)(iii)(f) has been issued which is dated 22.10.1970, as has been reproduced on page 1 of the assessment order. There are several institutions, specifically or ITA No.1359/Del/2014 generally, covered under this notification issued u/s 194A(3)(iii)(f). One of such items notified generally is: Any Corporation established by a Central, State or Provinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant to note its facts and ratio. 9. In that case, the appellant, a private limited company, employed respondent for more than two decades. The Respondent's service was terminated by the appellant due to some physical disability. The Respondent complained to the Disability Commissioner against such termination. The Disability Commissioner `suggested' the employer to re-employ the Respondent, which suggestion was turned down by the appellant. The Respondent argued that the Commissioner, instead of making a mere suggestion, ought to have issued a direction to the employer. He filed a writ petition on this aspect. The Hon'ble High Court allowed the said writ petition and directed the employer company to reinstate the Respondent. The Hon'ble High Court held that the appellant, though a private limited company, was an 'establishment' under the Act. The appellant took the matter to the Hon'ble Supreme Court urging that it was not covered within the meaning of 'establishment' and, hence, the provisions of section 47 were not ITA No.1359/Del/2014 applicable. The Hon'ble Supreme Court held that the assessee company was not an 'establishment& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 urban township. Instead of enacting area-wise Industrial Area Development Acts, the UP Government enacted a common UP Industrial Area Development Act, 1976 to cover Authorities under different areas with its distinct name. But, for the creation of various area-wise authorities such as NOIDA and Ghaziabad Authorities, there is no other purpose of the UP Industrial Area Development Act, 1976. In other words, we can also say that this Act is nothing but a culmination of several area-wise Industrial Area Development Acts. Since NOIDA has been notified under the UP Industrial Area Development Act, we are of the considered opinion that the expression 'any corporation established by a State Act' shall include ITANo.1359/Del/2014 NOIDA (New Okhla Industrial Development Authority) in the given circumstances. 12. We find that identical issue invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat revenue has filed a miscellaneous application before ITAT in that appeal which is pending. Be that it may. At this point of time it has been held by various benches of ITAT that no tax is required to be deducted u/s 194A of the Act by the banks including the assessee bank with respect to interest paid to NOIDA. Therefore, at present it cannot be said that assessee has failed to deduct tax at sources on such payment of interest. Hence, on this score only penalty orders are deserved to be set aside. 12. Regarding the contention of revenue, that ITAT has not considered the decision of Honourable Allahabad high court dated 28.02.2011 is also devoid of any merit. Firstly because ITAT in para no. 2 of the order has made a mention of that decision. According to the above facts recited by ITAT therein we are of the view that ITAT has decided the issue after considering the decision of Hon‟ble Allahabad High Court dated 28.02.2011. Therefore, in our opinion it is incorrect to infer that ITAT has not considered the decision of Hon‟ble Allahabad High Court. Further on perusal of decision of Honourable Allahabad high court at para no 15 of that decision it is crystal clear t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act. Before us, no contrary decision was placed on record to demonstrate that that tax is required to be deducted on payment made to development authorities which are established by the statute. Therefore the interpretation adopted by the assessee was also supported by various decisions of ITAT .Hence, it cannot be said the plea of the assessee that no tax is required to be deducted on payment of interest made to Noida is incorrect. 14. Hon. Delhi High court in CIT Vs. Mitsui Co. Ltd. 272 ITR 545 of Hon‟ble Delhi High Court which is held that the assessee is require to prove the existence of reasonable cause of preponderance of probability only and not by way of adducing any proof beyond reasonable doubt. We are also aware about the decision of Hon. Delhi High Court in CIT Vs Fourways International, 166 Taxman 461 (Del)wherein it is held that section 273B of the Act does not make a levy of penalty u/s 271C of the Act mandatory. The assessee would not be liable to be penalized if he is able to prove that there was a reasonable cause for failing to deduct the tax. Further the Hon‟ble Andhra Pradesh High Court had a occasion to interpret the term reasonable cause i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the LD DR on the issue whether the penalty provision of section 271C can be invoked independently without passing an order u/s 201(1) of the Income tax Act holding assesse in default‟. We are of the view that as assessee has not committed any default regarding non deduction of tax at sources and further even otherwise there is reasonable cause‟ in non deduction of tax at source, the issue raised becomes only academic and therefore we do not express any opinion on the same. 19. While parting we would like to state that learned Commissioner of Income-tax (Appeals) who is a subordinate judicial authority to the ITAT has held that order of ITAT Delhi Bench dated 07.08.2015 is nullity and non-est abinito and cannot be a binding precedence or even a precedent. We are of the view that The learned Commissioner of Income-tax (Appeals) gravely erred in holding so because Hon‟ble Allahabad High Court has not adjudicated on issue of deduction of tax at source u/s 194A of Act on interest payments made to NOIDA by assessee. The learned Commissioner of Income-tax (Appeals) did not carefully perused para 15 of the order of Hon‟ble Allahabad High Court which has only d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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