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ACIT, Circle 50 (1) , New Delhi Versus Gardenia Shelters P. Ltd. and Vica-Versa

2016 (8) TMI 1035 - ITAT DELHI

TDS u/s 194A - lease premium / lease charges paida to M/s. New Okhla Industrial Development Authority (NOIDA) for the purpose of acquiring land - Held that:- Respectfully following the ratio laid down by Hon’ble Allahabad High Court in case of Canara Bank (2016 (5) TMI 570 - ALLAHABAD HIGH COURT), we hold that the assessee is not liable to deduct TDS u/s 194A of the Act as NOIDA would be a local authority and is a corporation established by the State Act. - TDS u/s 194I - rent paid - Held t .....

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, Section 194-I cannot be made applicable as no rent has been paid or credited. Accordingly, this ground filed by the Revenue stands dismissed. - I.T.A. No.612/Del/2013, C.O. No.161/Del/2013 - Dated:- 21-7-2016 - G. D. AGRAWAL, HON BLE VICE PRESIDENT AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER For The Appellant : Shri T. Vasanthan, Sr. DR For The Respondent : Shri C S Agarwal, Sr. Adv., Shri R P Mall, Adv ORDER PER BEENA A. PILLAI, JM: The present cross appeals have been filed by the Revenue as we .....

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/Flats indicates towards an Allotment Letter dated 19/01/2009. The said allotment letter clearly laid down the plan through which payment of premium installment and interest thereon has to be paid to NOIDA. The Ld CIT(A) has erred in appreciating that the interest ledger shows entry dated 31/03/2010 amounting to ₹ 1,74,93,578/-. If the interest over the installment has been paid than the installment has also been paid during the year. 2) Holding that since NOIDA is a notified corporation e .....

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3) Holding that TDS should be deducted excluding service tax on the payments made u/s 194J of the I.T. Act. B. C.O. No.161/Del/2013 (Assessee s cross objections): 1. That the learned Commissioner of Income Tax (Appeals) has failed to comprehend, that under the terms of the agreement, nature of expenditure could have been held by the AO as either rent or interest to which the provisions of section 1941 or 194Jlcould be invoked. 2. That the learned Commissioner of Income Tax (Appeals) ought to hav .....

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DA (New Okhla Industrial Development Authority) were not chargeable to tax, and therefore there had not been default of the assessee within the meaning of section 194A of the Act had been committed by the assessee. 2. At the outset, Ld. A.R. submitted that he does not wish to pursue the cross objections filed by the assessee. Accordingly, the Cross Objections filed by the assessee stand dismissed as not pressed. 3. The brief facts of the issue raised by the Revenue are as under: 3.1 The assessee .....

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ssment year 2009-10, the assessee was allotted a piece of land i.e. Plot No. 16A in Sector 61, Noida for development and marketing of group housing pockets/flats which had been acquired by NOIDA under the Land Acquisition Act' 1984. The aforesaid lease of plot had been allotted to the assessee for a period of ninety years for consideration of a premium of ₹ 15,81,84,900/- (see pages 26-27 of the Paper Book), out of which 20% of the premium i.e. ₹ 3,16,36,980/- was paid by the ass .....

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e 24.3.2009, the assessee had paid a total sum of ₹ 3,33,18,829/- and incurred a sum towards a stamp duty of ₹ 92,16,000/-, thus the assessee had incurred an aggregate expenditure of ₹ 4,25,34,829/- on or before executing the lease granted for a period of 90 years on 24.03.2009. 3.4 The learned ACIT, Circle - 50 (1), New Delhi vide order dated 23.03.2012, passed order u/s 201(1)/201(1A) of the Income Tax Act, creating a tax liability of ₹ 1,41,51,561/- for purported defau .....

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1(1) and interest under section 201(1A) of the Act. 4. Aggrieved by the order passed by Ld. CIT(A), the Revenue is in appeal before us. Ground No.1 & 2: 5. Ld. D.R. has submitted written submissions on behalf of the Revenue which has been reproduced as under: (A) Write up in support of contention of the revenue that the CO is not maintainable Appeal U/S 253(2) has been filed by the Department. The respondent assessee has not preferred cross appeal U/S 253(1), however respondent assessee has .....

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assessee that "Date of receipt of notice of appeal filed by the appellant to tribunal not properly mentioned. Hence time bared cannot be calculated". However, the assessee has not yet cured the defect. As the cross objection filed by the assessee is beyond time, the cross objections filed by the assessee may kindly be rejected in limine. 3. Without prejudice to the contention of the Department stated In para 2 above, the following objection is also raised by the Department. 3.1 Issue .....

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of impugned order. Under this interpretation the time limit gets extended to much later period, that too without payment of requisite fee. Hon'ble Delhi High Court in its judgment dated 17.01.2000, reported in 2000 IVAD Delhi 145/ AIR 2000 Delhi 208 in the case of MTNL vs. Telecom regulatory authority of India has categorically stated that it is a settled law that what cannot be done directly, cannot also be done indirectly. Para 26 of the order is reproduced as under:- "26. It is settl .....

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ly as that would be an evasion of the statute. The Supreme Court has held that it is a well known principle of law that the provisions of law cannot be evaded by shift or contrivance. The Supreme Court has held that in an indirect or circuitous manner the objects of a statute cannot be defeated. In the District Collector's case a circular was issued under the Commodities Act purporting to impose restriction on movement of edible oil and oil seeds and to impose compulsory levy for supply of o .....

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ther, CO lies in respect of issues which is not emanating from the ground of appeal filed by the Department. 5. The issue gets directly covered by the judgment of Hon'ble IT AT Ahmedabad dated 30.04.2012 in case of DCIT vs. Sandip M. Patel in appeal Nos. 866 to 871, 1016 & 1339 (AHD) of 2008 ( 137 ITD 104/ 22 taxmann.com 288). In that case also, the assessee tried to agitate issue of validity of the assessment proceedings through cross objection. The issue was decided in the favour of th .....

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t is important to note that the Hon'ble ITA T has ruled, " ... Had the cross objection was not withdrawn, even then, such a legal issue was beyond the scope of the adjudication through a cross objection under section 253(4) of the IT Act because the impugned legal issue was altogether and independent as well as a separate issue." (emphasis supplied). B) Written submission for Departmental Appeal 1. In this connection, it is stated that Ld. CIT(A) erred in deciding that no TDS is ap .....

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DA within 60 days, 12 months, 18 months and so on from the date of allotment letter along with interest at the rate of 11 % per annum and 14% interest compounded half yearly in the case of delay in any installment. It can be concluded that if interest over the installment has been paid then the installment has also been paid during the year. 2. Further definition of rent u/s 1941 of Income Tax Act 1961 requires following conditions to be satisfied in order to qualify any payment as rent:- (i) Pa .....

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s'. Section 194A-(3) The provisions of sub-section (1) shall not apply- iii) to such income credited or paid to- f) such other institution or provincial Act, or Vide notification S.O.3489 (F. No. 121164/68- ITCC/IT) dated 22. 10.2010 central government has notified any corporation established by a central state or provincial Act for the purpose of sub-clause (f) of clause (iii) of sub-section (3) of section 194A of the Income Tax Act, 1961. But NOIDA constituted under Sec.3 of U.P. Industria .....

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ny payment made as rent or interest to NOIDA is chargeable to TDS. 4. The contention of the assessee and the Ld CIT(A) that TDS provisions are not applicable on the payments to NOIDA is not acceptable due to the following reasons: a) The NOIDA Authority is not covered u/s 196 of the IT Act, 1961 as the same is not specifically covered under any of the institutions specifically mentioned in the said section. b) The payment of annual lease charges to NOIDA Authority is clearly covered u/s 194A and .....

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n 3, the Authority shall be a Body Corporate. ii. As per Section 11, the Authority may with the previous approval of the state Government levy taxes. iii. As per Section 23, the Authority shall prepare an annual report to the State Government which shall be laid before both houses of the legislature. iv. As per section 42, the Authority shall furnish reports, returns and information to the Government as well as the Government has power to inspect. As per Section 51, the State Government may dele .....

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ase rent to the GNOIDA and pay to the account of the Government. Besides, Allottees have to deposit the amount equivalent to tax deducted at source to GNOIDA which shall be kept by the GNOIDA in an interest bearing account till the decision of Honourable Supreme Court of India in the Special Leave Petition filed by the Noida Authority. " As can be seen from the above, the Hon'ble Allahabad High Court has also held that the Allottees are required to deduct TDSon applicable payments to NO .....

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g Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. Once it is shown that the case of the assessee comes within the letter of the law, he must be taxed, however great the hardship may appear to the judicial mind to be. When the language of the section is clear and unambiguous, there is no sco .....

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ot be followed for deciding the issue under consideration as the Hon'ble ITAT has erred in bringing in the provisions of Transfer of Property Act, 1882 . Further, the decision of the Hon'ble ITAT in the case of Add!. CIT(TDS) vs. Canara Bank may not be followed for deciding the applicability of section 194 A as the Hon'ble ITAT has erred as under: (i) In 194A (3 )(ii)(b), the legislature has used the words "by or under" whereas in the Notification u/s 194A(iii)(t), the word .....

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view of the decision of the Hon'ble Supreme Court in the case of Smt. Tarulata Shyam and others vs CIT, West Bengal (1997) 108 ITR 345 (SC). (iii) The decision of the Hon'ble ITA T in the case of Addl. CIT(TDS) vs. Canara Bank may not be followed as per the Doctrine of Binding Precedent as held by the Hon'ble Supreme court in : Union of India Vs. Raghubir Singh 178 ITR 548 (SC) (556 &557 ) -Surinder Kumar and others, State of Punjab and others [1992] 194 ITR 434(SC). (C) Without .....

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ew evidence. This is against the principles laid down by the Hon'ble Delhi High Court in the case of CIT vs. Manish Buildwell Pvt. Ltd. 2011- TIOL-756 HC- Del- IT. 2. In case the Hon'ble IT AT is of the opinion that the penalty may be applicable for A.Y. 2009-10 and not for A. Y. 2010-11, the Hon'ble IT A T may set aside the issue and also issue the necessary directions to the A.O. to examine the issue afresh for taking appropriate action for A.Y 2010-11 or A.Y. 2009-10, as applicabl .....

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T (TDS) Vs Canara Bank in I.T.A. No.1359/Del/2014 for A.Y. 206-07. Ld. A.R. submitted that the order dated 07.08.2015 by the Tribunal in the case of Canara Bank (supra) has been upheld by Hon ble Allahabad High Court reported in 69 Taxman.com 204. Ld. A.R. submitted that the decision of Hon ble Allahabad High Court relied upon by the Ld. D.R. in Civil Writ Tax No.1338/2005 in the case of NOIDA Vs Chief CIT decided on 28.02.2011 has been extensively considered by the Hon ble Allahabad High Court .....

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s been distinguished by Hon ble Allahabad High Court in the case of CIT Vs Canara Bank (supra), wherein the issue was definition of usage of term a corporation established by or under an Act. Hon ble Allahabad High Court has relied upon the decision of Hon ble Supreme Court in the case of Suikhdev Singh and others Vs Bhagat Ram Sardar Singh Raghuvanshi (1975) 01 SCC 421 wherein the Hon ble Supreme Court observed as under: A company incorporated under the Companies Act is not created by the Compa .....

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eversed by Hon ble Madras High Court in case of Falcom India Developers Pvt. Ltd. Vs ITO reported in 68 Taxman.com 95. He, therefore, submitted that the issue; whether the assessee is subject to TDS u/s 194A, stands squarely covered by the decision of Hon ble Allahabad High Court in case of CIT Vs Canara Bank (supra). 8. We have heard rival contentions and submissions advanced, perused the relevant pages of paper book referred and the judgements relied upon by both the parties. 8.1 The A.O. issu .....

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educted TDS u/s 1941 of the Income Tax Act. 8.2 Sub-Section (1) of Section 194A casts an obligation on the person responsible for paying interest to a resident to deduct TDS at the time of credit of such income to the income of the payee or at the time of payment, whichever is earlier:- 7 Sub-section (l) of section 194A casts an obligation on the person responsible for paying interest to a resident, to deduct tax at source at the time of credit of such income to the account of the payee or at th .....

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redited or paid to any banking company/financial corporation/LIC/UTI, etc. One of the items of beneficiaries given in such list, as per subclause (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 22.1 0.1970, as has been reproduced on page 1 of .....

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t a corporation established by a State Act." 8.3 Hon ble Allahabad High Court in the case of CITVs Canara Bank (supra) has held as under: 32. With regard to the decision of the Supreme Court in Dalco Engineering (P.) Ltd. (supra), which deals with the State Financial Corporation Act, 1951, learned Senior Counsel submitted that the Central Act in Section 3 provides that the State Government may, by notification in the Official Gazette, establish a Financial Corporation for the State under su .....

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rt while dealing with the tat 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 is, 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 it .....

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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 lot 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. 35. The Authority is a body corporate and consists of officers of the State Government. The objects and functions of the Authority have be .....

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sary, for maintaining or continuing any amenities in the industrial development area. The Authority has to maintain its own fund. The object of the Authority is to prepare in such form and at such time every year as the State Government may specify, a budget. Section 41 deals with the control of the State Government over the Authority. The dissolution of the Authority is also provided for in section 58. It can appropriately be gathered from the aforesaid provisions that NOIDA has been establishe .....

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or paid to the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1952 or the Unit Trust of India established under the Unit Trust of India Act, 1963 are empted from payment of tax at source. There is no doubt that Life Insurance Corporation of India and the Unit Trust of India are established by the Acts. The Act, therefore, does not place any emphasis on 'by' or 'under' the Act. 37. In this view of the matter, reference to the Financial Co .....

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f '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 243- .....

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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. 40. 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. The said notification provides that .....

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Supreme Court in S. S. Dhanoa (supra), NOIDA will owe its existence to an Act of the State. 41. We have, therefore, no manner of doubt from a reading of the provisions of the Industrial Area Development Act that 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. 42. The decision of the Division Bench of this Court in New Okhla Industrial Development Authority (supra), on which reliance has been pla .....

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NOIDA would be a local authority and is a corporation established by the State Act. Accordingly, Ground No.1 of the Revenue s appeal stands dismissed. Ground No.2: 9. In respect of Ground No.2, Ld. A.R. submitted that the assessee has neither credited nor paid any rent during the year under consideration. He submitted that the amount has been paid in the previous year relevant to A.Y. 2009-10, which has been shown as the opening WIP for the year under consideration. He thus submitted that the pr .....

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