The Supreme Court has said it will examine a plea of the income tax department on whether NOIDA -- New Okhla Industrial Development Authority -- is a corporation established by the Uttar Pradesh government under the state industrial development law.
The Supreme Court has said it will examine a plea of the income tax department on whether NOIDA — New Okhla Industrial Development Authority — is a corporation established by the Uttar Pradesh government under the state industrial development law. A bench of Justices R K Aggarwal and A M Sapre has listed the matter for final disposal on October 24. The bench has said that it will look into the appeal filed by the I-T department against an order of the Allahabad High Court which held that NOIDA is a corporation established under the UP Industrial Area Development Act and, therefore, banks are not liable to deduct income tax at source on fixed deposits. Earlier, the apex court had refused to grant any stay on the high court direction to the I-T department. Appearing for Punjab National Bank and Dena Bank, counsels Pankaj Garg and Milind Garg said that the appeal of the I-T department was not maintainable as NOIDA was a corporation established by the state law and that banks were not under the statutory obligation to deduct and pay the income tax.
The dispute on the issue first arose in 2013, when the I-T department imposed a tax liability on the banks for non – deduction of TDS on the interest income on fixed deposit receipts (FDRs) of NOIDA. Against the decision to levy tax, the banks preferred an appeal before the Commissioner of Income Tax (Appeals), saying NOIDA was a corporation.
The appeal was decided in favour of the banks and, thereafter, the department preferred a petition before the Income Tax Appellate Tribunal (ITAT), which again decided in the favour of the banks. The department then moved the Allahabad High Court against the order of the ITAT, but once again the appeal was decided against it.
The I-T department appeal before the apex court has said that the issue for consideration is whether NOIDA is a corporation entitled for exemption from deduction of income tax at source under the provisions of a notification issued in 1970 under the Income Tax Act.
It has said that the high court erred in holding that NOIDA is covered under exemption from TDS under the Income Tax Act and the banks are not liable to deduct tax at source on interest paid to the NOIDA on its FDRs.