IMPORTANT POINTS
Statutory and non-statutory corporations distinguished.
Corporations constituted ‘by or under’ and Act discussed.
NOIDA is established by the 1976 Act.

Headnote:(a) Words and Phrases – Corporation – It is an artificial being and legal person – It is a body/corporate established by an Act of Parliament or a Royal Charter – It possesses properties and rights which are conferred by the Charter constituting it expressly or incidentally – Statutory corporations owe their existence from “by or under” statute – On the other hand, non-statutory bodies and corporations are not created by or under statute – Rather they are governed by a statute. (Para 12, 17)
       (1981) 3 SCC 431; (1987) 1 SCC 424; (1975) 1 SCC 421 – Relied upon
       NH 4 Wheat 518, 636:4 L Ed 629 – Referred
       (b) Income Tax Act, 1961 – Section 194A r/w Notification dated 22.10.1970 issued under Section 194A(3)(iii)(f) – Expression “established by or under a Central, State or Provincial Act” – ‘By or under’ – Distinction – Emphasis should be on the word “established” in addition to the words “by or under” – Statutory Corporations are established ‘by’ the Act, whereas non-statutory Corporations are established under the Act. (Para 18, 24, 27)
       (1975) 1 SCC 421; (1976) 2 SCC 58; (1981) 3 SCC 431; (2010) 4 SCC 378 – Relied upon
       (c) Uttar Pradesh Industrial Area Development Act, 1976 – Section 2(b) and 3 – Act providing for constitution of Authority – Establishment of Corporation by notification by State Government – Instantly notification issued constituting NOIDA – Held, NOIDA established by the 1976 Act and covered by Notification dated 22.10.1970. (Para 29, 30, 31)
       Facts of the case:
       The Canara Bank, respondent No. 3 – banker of NOIDA – made a payment of Rupees Twenty Crores Ten Lakhs as interest to NOIDA in form of FDs/Deposits for the financial year 2005-06. The Canara Bank, however, did not deduct tax at source.
       Notices were issued by the appellant Revenue to Canara Bank asking for information pertaining to interest paid to the Authority on its deposits. Notices were also issued by the appellant to the Bank for showing cause for not deducting tax at source. A writ petition was filed by the NOIDA challenging the notices issued to the Authority as well as its bankers which was ultimately dismissed by the High Court. The Assessing Officer thereafter proceeded to pass an order under Section 201(1)/201(1A) read with Section 194A of the IT Act, 1961 dated 28.02.2013.
       Demand notice as per Section 156 of the IT Act, 1961 was issued. Penalty proceeding was also separately initiated.
       The Canara Bank filed an appeal before the Commissioner of Income Tax (Appeals) which was allowed.
       The Income Tax Appellate Tribunal also held that payment of interests by the banks to the State Industrial Development Authority does not require any deduction at source in terms of Section 194A(3)(iii)(f).
       The Revenue filed an appeal before the High Court which has been dismissed.
       Finding of the Court:
       There is no infirmity in the impugned judgment.
       Result: Appeals dismissed.

JUDGMENT :

ASHOK BHUSHAN, J.

Leave granted.

2. These appeals question the Division Bench judgment dated 04.04.2016 of the Allahabad High Court, by which judgment Income Tax Appeals filed by the Revenue has been dismissed affirming the order of the Income Tax Appellate Tribunal. The common questions of facts and law are involved in these appeals and it is sufficient to refer the facts and pleadings in Civil Appeal No.... 2018 arising out of SLP(C) 3168 of 2017, Commissioner of Income Tax(TDS), Kanpur and Anr. vs. Canara Bank wherein the judgment of the High Court dated 04.04.2016 in ITA No. 64 of 2016 has been questioned.

3. The New Okhla Industrial Development Authority (NOIDA), hereinafter referred to as “Authority” has been constituted by Notification dated 17.04.1976 issued under Section 3 of the Uttar Pradesh Industrial Area Development Act, 1976 hereinafter referred to as “1976 Act”. The Canara Bank, respondent No. 3 is the banker of the Authority. The respondent Bank made a payment of Rupees Twenty Crores Ten Lakhs as interest to Authority in form of FDs/Deposits for the financial year 2005-06. The Canara Bank, however, did not deduct tax at source under Section 194A of the Income Tax Act, 1961 hereinafter referred to as “IT Act, 1961”.

4. Notices were issued by the appellant to Canara Bank asking for information pertaining to interest paid to the Authority on its deposits. Notices were also issued by the appellant to the Bank for showing cause for not deducting tax at source. A writ petition had been filed by the NOIDA being Writ Petition No.1338/2005 challenging the notices issued to the Authority as well as its bankers. Assessment proceeding could not proceed due to certain interim directions passed by the High Court in the above writ petition. The writ petition was ultimately dismissed by the High Court on 28.02.2011 holding that the Authority is not a local authority within the meaning of Section 10(20) of IT Act, 1961 and its income is not exempt from tax. The Assessing Officer thereafter proceeded to pass an order under Section 201(1)/201(1A) read with Section 194A of the IT Act, 1961 dated 28.02.2013.

5. Income Tax Authority held that the respondent Bank is assessee in default. The default was computed and demand notice as per Section 156 of the IT Act, 1961 was issued. Penalty proceeding was also separately initiated. The Canara Bank aggrieved by the order of the Assessing Officer dated 28.02.2013 filed an appeal before the Commissioner of Income Tax (Appeals). Before the Commissioner, the bank relied on Notification dated 22.10.1970 issued under Section 194A(3) (iii)(f) of the IT Act, 1961. The Appellate Authority vide its judgment dated 02.12.2013 allowed the appeal setting aside the order of the Assessing Officer. The Revenue aggrieved by the judgment of the Appellate Authority filed an appeal before the Income Tax Appellate Tribunal. The Tribunal also held that payment of interests by the banks to the State Industrial Development Authority does not require any deduction at source in terms of Section 194A(3)(iii)(f).

6. The Revenue aggrieved by the order of the Tribunal filed an appeal under Section 260A of the Act before the High Court. The Division Bench of the High Court vide its judgment dated 04.04.2016 has dismissed the appeal. The Division Bench came to the following conclusions while dismissing the appeal:

"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 194A( 1) of the Act.

The decision of the Division Bench of this Court in New Okhla Industrial Development Authority (supra), on which reliance has been placed by learned counsel for the appellants, would, therefore, not come to the aid of the appellants as it was

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2018 Supreme(SC) 708

IMPORTANT POINTSStatutory and non-statutory corporations distinguished. Corporations constituted ‘by or under’ and Act discussed.NOIDA is established by the 1976 Act.

Cases Referred (5)

IMPORTANT POINTS
Statutory and non-statutory corporations distinguished.
Corporations constituted ‘by or under’ and Act discussed.
NOIDA is established by the 1976 Act.