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02-07-2018, CANARA BANK, Section 3, 194A, 10(20), 201, SUPREME COURT OF INDIA

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10 months 1 week ago #6414 by amit
Section - 3, 194A, 10(20), 201, 156, 194A(3)(iii)(f), 260A, 44AB, 21, 2K
Order Date - 02-07-2018
Favouring - Assessee
Court - SUPREME COURT OF INDIA
Appellant - CIT
Respondent - CANARA BANK
Justice - ASHOK BHUSHAN, J.
Citation - 718Taxpundit180
Appeal No. - CIVIL APPEAL NO.6020 OF 2018
Asstt. Year -

Order

PER : 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   2005­06.   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.

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