By the Court.—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.”

2. 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 Bank (The Bank) failed to deduct tax at source under Section 194-A(1) of the Act on the interest credited/paid on the fixed deposit receipts purchased by the New Okhla Industrial Development Authority (NOIDA). In the present Appeal, we are concerned with the Assessment Year 2006-07. Accordingly, a notice was issued to the Bank. The contention of the Bank that NOIDA is a Corporation established by a State Act and, therefore, exempted from deduction of income tax at source in view of the notification dated 22 October 1970 issued under Section 194-A(3)(iii)(f) of the Act was not accepted. The Assessing Officer also did not accept that NOIDA was a local authority even after 1 April 2003 within the meaning of Section 10(20) of the Act and, therefore, entitled to exemption from payment of income-tax. The Bank was held to be an assessee in default and an order under Section 201(1)/201(1-A) of the Act was passed on 28 February 2013. A demand notice under Section 156 was issued and penalty proceedings under Section 271-C of the Act were directed to be initiated separately.

3. Feeling aggrieved, the Bank filed an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals), however, after examination of the provisions of Uttar Pradesh Industrial Area Development Act, 1976 (Industrial Act) held that the NOIDA was a corporation established by the said Act and, therefore, entitled to the benefit of the notification dated 22 October 1970. The appeal was, accordingly, allowed. The department filed an appeal before the Income Tax Appellate Tribunal which by order dated 7 August 2015 dismissed the appeal filed by the department.

4. This appeal under Section 260-A of the Act has, accordingly, been filed by the department.

5. The issue that arises for consideration in this appeal is as to whether NOIDA is a corporation entitled for exemption from deduction of tax at source under the provisions of the notification dated 22 October 1970 issued under Section 194-A(3)(iii)(f) of the Act. This notification provides that the provisions of sub-section (1) of Section 194-A of the Act shall not apply to any corporation established by a Central, State or Provincial Act. According to the appellants, the NOIDA is not a corporation that has been established by Industrial Act and, therefore, would not be entitled for exemption while according to the Bank, it is a corporation established by the Industrial Act and, therefore, entitled for exemption.

6. In order to appreciate the rival contentions, it will be appropriate to refer to the provisions of the Acts involved and the notification.

7. 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 conce