TMI Blog2017 (9) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee wishes to take benefit of the proviso to section 201 of the income tax act, then it is for the assessee to furnish necessary detail, so that assessee cannot be treated as assessee in default with respect to the amount of tax deductible. As the proviso added to section 201 is for mitigating any hardship therefore we set aside the issue to the file of the assessing officer with a direction to the assessee to furnish necessary detail is provided therein and to deposit necessary interest under section 201(1A) of the act in accordance with the law.- Decided in favor of revenue and partly in favor of assessee. TDS u/s 194A - payment of interest on deferred payment of EDC lease premium - payment of interest to YEIDA - Held that:- As decided in CIT (TDS) Vs. Canara Bank [2016 (5) TMI 570 - ALLAHABAD HIGH COURT] while deciding the issue on payment of interest to Noida has held that authorities constituted by the State Act are entitled to exemption of payment of tax at source u/s 194A of the Act.Therefore ,TDS u/s 194A is not required to be deducted on interest payment to Yamuna Development Authority - Decided in favor of assessee. TDS u/s 194H - deduction of tax at source o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e within the meaning of section 1941 of the I.T.Act,1961. 5. Ld. CIT (A)-l Noida has erred in law and on facts in deleting the demand on account of payment of interest on deferred payment of EDC lease premium u/s 194A ignoring the fact that the payment made by the assessee to YEIDA under the head interest cannot be merely nomenclature of EDC (External Development Charges) owing to the fact that these are uniformly and periodically made payments. 6. Ld. CIT(A)-1, Noida has erred in law and on fact in deleting the demand on account of payments of Bank gurantee commission ignoring the fact that notification no. 56/2012[F.No. 275/53/2012-IT(B)], dated 31.12.2012 which provides that no TDS shall be done on payment like Bank guarantee commission is effect from 01.01.2013 while in the case of the assessee the payment of Bank guarantee commission was done before 01.01.2013. 4. The revenue has raised the following grounds of appeal in ITA No. 4281/Del/2015:- 7. Ld. CIT (A)-l, Noida has erred in law and on facts in deleting the demand on account of payment of lease rent ignoring the fact that the clauses recorded in the lease deed clearly prove that the assessee is a les ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of interest on deferred payment of EDC lease premium u/s 194A ignoring the fact that the payment made by the assessee to YEIDA under the head interest cannot be merely nomenclature of EDC (External Development Charges) owing to the fact that these are uniformly and periodically made payments. 3. Ld. CIT(A)-1, Noida has erred in law and on fact in deleting the demand on account of payments of interest on non-convertible debentures ignoring the fact that the provisions of section 19 applicable on payment of interest on non-convertible debentures. 7. The revenue has raised the following grounds of appeal in ITA No. 4286/Del/2015:- 1. Ld. CIT(A)-1, Noida has erred in law and on facts in deleting the demand on account of payment of lease rent ignoring the fact that the clauses recorded in the lease deed clearly prove that the assessee is a lessee within the meaning of section 1941 of the I.T.Act,1961. 2. Ld. CIT(A)-1 Noida has erred in law and on facts in deleting the demand on account of payment of interest on deferred payment of EDC lease premium u/s 194A ignoring the fact that the payment made by the assessee to YEIDA under the head interest cannot be merel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction of tax at source from lease rent payments to Yamuna Expressway Industrial Development Authority (YEIDA) and further holding it liable for interest u/s 201(1A) of ₹ 9,663/- and the Learned CIT (Appeals) [Ld. CIT(A)] has erred in sustaining the same. 2. That the order involved of the Ld. AO is unlawful and against principles of natural justice without providing sufficient and proper lawful opportunity to the appellant and the Ld. CIT(A) has erred in not quashing the same. 3. That the order of Ld. CIT(A) holding the appellant as assessee in default u/s 201(1) for ₹ 43,948/- and further holding it liable for interest u/s 201(1A) of ₹ 9,663/- are based on erroneous views, non appreciation of facts and law contrary to binding case laws in the appellant's favour, without proper consideration and rebuttal of filings and submissions on record. 4. That the Ld. AO has erred on the fact and in law in holding the appellant as assessee-in-default u/s 201 of the Act for non deduction of tax at source (in the sum of ₹ 43,948/-) from lease rent payments to the YEIDA in respect of the 90 year leases of land. The Ld. CIT(A) has erred in upholding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at source on the bank guarantee he relied upon the order of the Ld. assessing officer. 15. Ld. authorised representative submitted that on the ground No. 1. The issue is squarely covered in favour of the revenue by the decision of the Hon ble Delhi High Court and on ground No. 2 the issue is squarely covered in favour of the assessee by the decision of the Hon ble allowable High Court. On the issue of the bank guarantee commission, he submitted that it is a principle-to-principle transaction to provisions of section 194H of the act does not apply. 16. We have carefully considered the rival contention and perused the orders of the lower authorities. 17. On the issue of deduction of tax at source on annual maintenance charges paid by the assessee to Yamuna development express authority limited under section 194I of the income tax act is now squarely covered in favour of the revenue by the decision of Hon ble Delhi High Court [2017] 78 taxmann.com 263 (Delhi) Rajesh Projects (India) (P.) Ltd. v. Commissioner of Income-tax (TDS)-II* where in it has been held that amounts constituting annual lease rent, expressed in terms of percentage (e.g. 1%) of the total premium for the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct 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 194A 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 194A(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 provision that the notification dated October 22, 1970, was issued by the Central Government which reads as follows : 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 Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 April 17, 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 Industrial Development Authority . The constitution of the Authority has also been provided as also the list of 37 villages of Tehsil Sikandarabad of District Bulandshahr. The constitution of the Authority is as follows : (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 15. 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 Govern ment by way of grants, loans, advances or otherwise ; (b) all moneys borrowed by the Authority from source 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 disposal of lands, buildings and other properties movable and immovable ; and (e) all moneys received by the Authority by way of rents and pro fits or in any other manner or from any other source. 16. Section 21 deals with the budget of the Authority while section 22 deals with the acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eon at the rates in force... (3) The provisions of sub-section (1) shall not apply-... (iii) to such income credited or paid to- (a) any banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies, or any co-operative society engaged in car rying on the business of banking (including a co-operative land mort gage bank), 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 (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 busi ness of insurance, or (f) such other institution, association or body or class of insti tutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Offi cial Gazette ; 20. A perusal of section 194A(1), (3)(iii) clearly indicates that the provisions of sub-section (1) of section 194A of the Act shall not apply to such income credited or paid to banking com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring his service : Provided that, if an employee, after acquiring disability is not suit able 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 noti fication, exempt any establishment from the provisions of this sec tion. 24. 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 otherwise requires,-... (k) 'establishment' means a corporation established by or under a Central, Provincial or State Act, or an authority or a body owned or controlled or aided by the Government or a local aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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. 27. 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 cor poration 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, is governed in accordance with the provisions of the Companies Act. But then, what is the difference between 'established by a C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a Gram Panchayat owes its exist ence and status to an Act of Legislature. On the other hand, an asso ciation 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 v. Bhagatram Sardar Singh Raghuvanshi [1975] 45 Comp Cas 285 (SC) ; [1975] 1 SCC 421. It was observed : '25. A company incorporated under the Companies Act is not cre ated 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) 29. In Vaish Degree College (supra), the Supreme Court had also observed as follows : 10..In other words the position seems to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay, 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 194A(1) of the Act. 31. 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 Industrial Act and, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment 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. 35. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 243Q 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 243Q, 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. 40. The State Government has issued a notification dated December 24, 2001, in exercise of the powers conferred under the proviso to clause (1) of article 243Q of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee is acting not as an agent but on principle-to-principle basis. 21. We have carefully considered the rival contentions and we are of the opinion that the bank guarantee commission is not subject to withholding tax u/s 194H of the Act as it does not fall into Clause (i) of the Explanation of Section 194H. In view of this Ground No. 3 of the appeal of the Revenue is dismissed. 22. In the result all the three appeals of the revenue are partly allowed. 23. Now coming to the appeal of Jaypee Infratech Ltd for Assessment Year 2011-12 to 2013-14. 24. The facts of the case is that assessee has paid the rent where tax is required to be deducted u/s 194I and also interest their tax was required to be deducted u/s 194A of the Act and payment of interest for non convertible debentures which are subject to TDS u/s 194A of the Act. For Assessment Year 2011-12 to 2012-13 the Revenue is in appeal on all these three issues. 25. Ground No. 1 of the appeal of the Revenue is covered by ground No. 1 of the appeal of the Revenue in case of Jaypee Sports International ltd wherein relying upon the decision of the Hon'ble Delhi High Court we have held that TDS u/s 194I is r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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