TMI Blog2016 (5) TMI 570X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices, NOIDA would provide the said services and if that be so, then as observed by the Supreme Court in S.S. Dhanoa (1981 (5) TMI 124 - SUPREME COURT ), NOIDA will owe its existence to an Act of the State. The NOIDA has been constituted by the State Act and, therefore, entitled to exemption of payment of tax at source under section 194-A(1) of the Act. - Decided against the revenue. - Income Tax Appeal No. - 64 of 2016 - - - Dated:- 4-4-2016 - Hon'ble Dilip Gupta And Hon'ble Surya Prakash Kesarwani, JJ. For the Appellant : Ashok Kumar,Praveen Kumar ORDER This appeal, which has been filed under section 260-A of the Income Tax Act, 1961 The Act at the instance of the Department, was admitted on the following question of law : (A) Whether the ITAT as well as the Commissioner of Income Tax (A) have erroneously interpreted that NOIDA (New Okhla Industrial Development Authority) is a corporation established by U.P. Industrial Area Development Act, 1976 and not a body established under the aforesaid Act. It transpires from the records of the appeal that the Assessing Officer noticed that for the Assessment Years 2006-07 and 2007-08, M/s. Canara B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is a corporation established by the Industrial Act and, therefore, entitled for exemption. In order to appreciate the rival contentions, it will be appropriate to refer to the provisions of the Acts involved and the notification. Section 194-A(1) of the Act provides that 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 any other mode, whichever is earlier, deduct income-tax thereon at the rates in force. However, sub-section (3) of section 194-A provides that the provisions of sub-section (1) shall not apply in certain cases. In the present case, we are concerned with sub-clause (iii)(f) of section 194-A(3) which exempts income credited or paid to such other institution, association or body or classes or class of institutions, association or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette. It is under this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be appropriate at this stage to refer to the provisions of 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. 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 constitution of an Authority for the development of certain areas in the State into industrial and urban township and for matters connected therewith. Section 3 provides that the State Government may, by notification, constitute for the purposes of the Act, an Authority to be called (Name of the area) Industrial Development Authority, for any industrial development area. Sub-section (2) of section 3 also provides that the Authority shall be a body corporate, while sub-section (3) provides for the constitution of the Authority. Authority has been defined under section 2(b) to mean Authority constituted under section 3 of the Act. The State Government by notification dated 17 April 1976 declared that the area comprising the villages mentioned in the Schedule annexed with the notification shall be an Industrial Development Area called New Okhla In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 Government by way of grants, loans, advances or otherwise; (b) all moneys borrowed by the Authority from securities other than the State Government by way of loans or debentures; (c) all fees, tolls and charges received by the Authority under the Act, (d) all moneys received by the Authority from the deposit of lands, buildings and other properties movable and immovable; and (e) all moneys received by the Authority by way of rents and profits or in any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come 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- ...................... ...................... (ii) .................. (iii) to such income credited or paid to - (a) any banking company to which the Banking Regulation Act, 1949, applies or any co-operative society engaged in carrying on the business of banking; 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; 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 O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disability. 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 suitable 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 Government may, having regard to the type of work carried on in any establishment, by notification and subject to such conditions, if any, as may be specified in such notification, exempt any establishment from the provisions of this section. The term establishment is defined in section 2(k) of the Disabilities Act and is as follows : 2. Definitions.--In this Act, unless the context oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In this context, it will be useful to reproduce paragraphs 21, 22 and 23 of the judgment which are as follows : 21. Where the definition of establishment uses the term a corporation established by or under an Act , the emphasis should be on the word established in addition to the words by or under . The word established refers to coming into existence by virtue of an enactment. It does not refer to a company, which, when it comes into existence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to the Act. For example, a Municipality, a Zilla Parishad or a Gram Panchayat owes its existence and status to an Act of legislature. On the other hand, an association 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 brought out by this Court in Sukhdev Singh and Ors. v. Bhagatram Sardar Singh Raghuvanshi and Ors., (1975) 1 SCC 421. It was observed: 25. A company incorporated under the Companies Act is not created by the Companies Act but comes into existence in accordance with the provisions of the Act. There is thus a well-marked distinction between a body created by a statute and a body which, after coming into existence, is governed in accordance with the provisions of a statute. (emphasis supplied) In Vaish Degree College (supra), the Supreme Court had also observed as follows : 10. ..... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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. Learned counsel, therefore, submitted that the Commissioner of Income Tax (Appeals) as also the Income Tax Appellate Tribunal committed gross illegality in holding that the NOIDA has been established by the State Act and, accordingly, granting exemption from deduction of tax under section 194-A(1) of the Act. Sri Balbir Singh, learned Senior Counsel appearing for the Bank, however, submitted that there can be no doubt that the NOIDA has been constituted by the Industrial Act. His contention is that except for naming NOIDA or any other Industrial Development Authority all matters have been specified in section 3(1) and the other provisions of the Indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 Authority has not been defined under the Act and has been left to the discretion of the State Government, cannot, in our opinion, make any difference for the purposes of determining whether it has been established by an Act. The Authority is a body corporate and consists of officers of the State Government. The objects and functions of the Authority have been clearly defined under section 6 of the Industrial Act. The main functions are to acquire land in the industrial development area by agreement or by acquisition under the Land Acquisition Act; to prepare a plan for the development of the industrial area and to provide amenities. The Authority has also been empowered to levy ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his 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. NOIDA has been granted a status of a Municipality under Article 243-Q 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 from a rural area to an urban area; (b) a Municipal Council for a smaller urban area; and (c) a Municipal Corporation for a larger urban area. The proviso to Article 243-Q, however, stipulates that a Municipality under this clause may not be constituted in such urban area or part thereof as the Governor may, having regard to the size of the area and the municipal services being provided or proposed to be provided by an industrial establishment in that area and such other factors as he may deem fit, specify to be an industrial township. The State Government has issued a notification dated 24 December 2001 in exercise of the powers conferred under the proviso to clause (1) of Article 243-Q of the Constitution. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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