caselaws
Supreme Court of India
M/S New Okhla Industrial … vs Commissioner Income Tax … on 2 July, 2018Author: ……………………..J.
Bench: A Bhushan, A Sikri
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.15613 OF 2017
M/S. NEW OKHLA INDUSTRIAL
DEVELOPMENT AUTHORITY … APPELLANT(S)
VERSUS
COMMISSIONER OF
INCOME TAX – APPEALS & ORS. … RESPONDENT(S)
WITH
CIVIL APPEAL NO.9365 OF 2017
GREATER NOIDA INDUSTRIAL
DEVELOPMENT AUTHORITY … APPELLANT(S)
VERSUS
ASSISTANT COMMISSIONER OF
INCOME TAX (TDS) & ORS. … RESPONDENT(S)
WITH
CIVIL APPEAL NO.12750 OF 2017
NEW OKHLA INDUSTRIAL
DEVELOPMENT AUTHORITY … APPELLANT(S)
VERSUS
UNION OF INDIA & ORS. … RESPONDENT(S)
WITH
CIVIL APPEAL NO.9199 OF 2017
NEW OKHLA INDUSTRIAL
DEVELOPMENT AUTHORITY … APPELLANT(S)
Signature Not Verified VERSUS
COMMISSIONER OF
Digitally signed by
ASHWANI KUMAR
Date: 2018.07.07
INCOME TAX (APPEALS) 41 & ORS. … RESPONDENT(S)
11:52:31 IST
Reason:
WITH
2
CIVIL APPEAL NO.15615 OF 2017
M/S. NEW OKHLA INDUSTRIAL
DEVELOPMENT AUTHORITY … APPELLANT(S)
VERSUS
COMMISSIONER OF
INCOME TAX – APPEALS & ORS. … RESPONDENT(S)
WITH
CIVIL APPEAL NO.15614 OF 2017
NEW OKHLA INDUSTRIAL
DEVELOPMENT AUTHORITY … APPELLANT(S)
VERSUS
INCOME TAX OFFICER & ORS. … RESPONDENT(S)
WITH
CIVIL APPEAL NO.15130 OF 2017
COMMISSIONER OF INCOME
TAX (TDS)II & ORS. … APPELLANT(S)
VERSUS
RAJESH PROJECTS (INDIA) PVT. LTD. & Anr. … RESPONDENT(S)
WITH
CIVIL APPEAL NO.51 OF 2018
INCOME TAX OFFICER & ORS. … APPELLANT(S)
VERSUS
UNITED BANK OF INDIA & ANR. … RESPONDENT(S)
WITH
CIVIL APPEAL NO.6115 OF 2018
(Diary No. 29273/2017)
COMMISSIONER OF INCOME
TAX (TDS)II & ORS. … APPELLANT(S)
3
VERSUS
RAJESH PROJECTS (INDIA) PVT. LTD. & Anr. … RESPONDENT(S)
AND
CIVIL APPEAL NO. 6113 OF 2018
(@ SLP NO.16703 2018 @ DIARY NO(S). 9061/2018)
COMMISSIONER OF INCOME TAX(TDS) ….APPELLANT (S)
KANPUR AND ANR
VERSUS
HDFC BANK LTD., GREATER NOIDA …..RESPONDENT
J U D G M E N T
ASHOK BHUSHAN, J.
Delay condoned.
2. These appeals have been filed against the common judgment
of Delhi High Court dated 16.02.2017 by which the Delhi High
Court has allowed the writ petitions filed by the private
respondents herein. The appeals have been filed by New Okhla
Industrial Development Authority, Greater Noida Industrial
Development Authority, Commissioner of Income Tax as well as
Income Tax Officer and others. The facts and issues in all
the appeals being common, it shall be sufficient to refer the
facts and pleadings in Civil Appeal No. 15130 of 2017 –
Commissioner of Income Tax (TDS) – II & Ors. Vs. Rajesh
Projects (India) Pvt. Ltd. & Anr. for deciding this batch of
appeals.
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3. The respondent Rajesh Projects (India) is a private
limited company engaged in the business of real estate
activities of constructing, selling residential units etc. On
03.11.2010, the respondentcompany entered into a longterm
lease for 90 years with the Greater Noida Industrial
Development Authority for Plot No. GH07A for development and
marketing of Group Flats. As per terms of the lease deed, the
company partially paid the consideration amount for the
acquisition of the plot to Greater Noida at the time of
execution of the lease deed and is also paying the balance
lease premium annually as per the terms and conditions of the
lease deed. Notice under Section 201/201(A) of the Income Tax
Act, 1961 was issued by the Income Tax department inquiring
regarding nondeduction of tax at source under Section 194I
of the Income Tax Act from the annual lease rent paid to
Greater Noida. The respondentcompany replied the notices.
The respondents case was that it did not deduct tax at source
as it was advised by Greater Noida that it is a Government
authority, hence the tax deduction at source provisions are
not applicable. The Assessing Officer passed the order dated
31.03.2014 for the Financial Year 20102011 and 20112012, the
respondent was held as “assesseeindefault” for
nondeduction/nondeposit of TDS on account of payment of
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lease rent and interest made to Greater Noida. Consequent
demand was raised against the respondents. Aggrieved by
assessment order, the respondentcompany filed an appeal
before the Commissioner of Income TaxAppeals. Respondents
prayed to stay the demand which was refused and recovery
proceedings were initiated. Aggrieved by assessment and
recovery proceedings emanating therefrom, the
respondentcompany filed a Writ Petition No. 8085 of 2014
praying for various reliefs including the relief that
respondentcompany be not treated as “assesseeindefault”
under the Income Tax Act for nondeduction/depositing the tax
at source in respect of payment of rent on lease land and in
respect of other charges paid to Greater Noida. Different
other entities also filed the writ petitions in the Delhi High
Court praying for more or less the same reliefs relating to
lease rent payment and for payment of interest to Greater
Noida. All the writ petitions involving common questions of
law and facts were heard together and were allowed by the
Delhi High Court by its judgment dated 16.02.2017. Before
the High Court, Greater Noida and the Noida authorities
contended that they are local authorities within the meaning
of Section 10(20) of the Income Tax Act, 1961, hence their
income is exempt from the Income Tax. It was further
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contended that the interest received by them is exempt under
Section 194A(3)(iii)(f) of the Income Tax Act and they are
exempted from payment of any tax on the interest.
4. The revenue refuted the contention of Greater Noida and
Noida contending that w.e.f. 01.04.2003, the Greater Noida
and Noida is not a local authority within the meaning of
Section 10(20) and further they are also not entitled for the
benefit of notification issued under Section 194A(3)(iii)(f).
It was further contended that with regard to payment of rent
to the Noida and Greater Noida, the respondentcompany was
liable to deduct the tax on payment of interest, no incometax
was deducted by the respondentcompany while paying rent to
Noida and Greater Noida, hence they are “assesseeindefault”.
The revenue also relied on Division Bench judgment of
Allahabad High Court in Writ Petition Tax No. 1338 of 2005
decided on 28.02.2011 where the Allahabad High Court has held
that Noida is not a local authority within the meaning of
Section 10(20) as amended by Finance Act, 2002. The Delhi
High Court after hearing all the parties allowed the writ
petitions. The Delhi High Court held that Noida and Greater
Noida are not local authorities within the meaning of Section
10(20) as amended w.e.f. 01.04.2003. Delhi High Court further
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held that interest income of the Noida and Greater Noida is
exempted under the notification dated 22.10.1970 issued under
Section 194A(3)(iii)(f) of the Income Tax Act. The High Court
further held that as far as payment of rent to the Noida and
Greater Noida, the respondentcompany was liable to deduct
income tax at source. The High Court recorded its conclusions
in Para 20 of the judgment, which is to the following effect:
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“20. In view of the above analysis, the court hereby
concludes as follows:(1) Amounts paid as part of the
lease premium in terms of the timeschedule(s) to
the Lease Deeds executed between the petitioners and
GNOIDA, or biannual or annual payments for a
limited/specific period towards acquisition of lease
hold rights are not subject to TDS, being capital
payments;
(2) Amounts constituting annual lease rent, expressed
in terms of percentage (e.g. 1%) of the total
premium for the duration of the lease, are rent, and
therefore subject to TDS. Since the petitioners
could not make the deductions due to the insistence
of GNOIDA, a direction is issued to the said
authority (GNOIDA) to comply with the provisions of
law and make all payments, which would have been
otherwise part of the deductions, for the periods,
in question, till end of the date of this judgment.
All payments to be made to it, henceforth, shall be
subject to TDS.
(3) Amounts which are payable towards interest on the
payment of lump sum lease premium, in terms of the
Lease which are covered by Section 194A are covered
by the exemption under Section 194A(3)(f) and
therefore, not subjected to TDS.
(4) For the reason mentioned in (3) above, any payment
of interest accrued in favour of GNOIDA by any
petitioner who is a bank to the GNOIDA, towards
fixed deposits, are also exempt from TDS.”
5. Aggrieved by the aforesaid judgment of Delhi High Court,
Greater Noida, Noida as well as Revenue has filed these
appeals.
6. Learned counsel appearing for the Noida and Greater Noida
contended that Noida and Greater Noida have been constituted
under Section 3 of the Uttar Pradesh Industrial Area
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Development Act, 1976 and is a local authority within the
meaning of Section 10(20) of the Income Tax Act, 1961.
Reliance on notification dated 24.12.2001 issued by the
Governor of the State of Uttar Pradesh under the proviso to
Article 243Q(1) has also been placed to contend that by virtue
of said notification both Greater Noida and Noida are
municipalities and are covered by the local authorities as
explained under the explanation to Section 10(20) of the
Income Tax Act. It is further contended that interest income
of the authorities is exempted under the notification issued
under Section 194A(3)(iii)(f). Further reliance has been
placed on Circular No. 35/2016 dated 13.10.2016 wherein it has
been clarified that provision of Section 194I of the Income
Tax Act, 1961 on lumpsum lease premium paid for acquisition
of longterm lands is not applicable.
7. It is further submitted that the question as to whether
Noida/Greater Noida is local authority is engaging attention
of this Court in Civil Appeal No. 792793 of 2014, in which
judgment has already been reserved. On tax deduction at
source, it is further submitted that the said issue is also
pending consideration of this Court in Special Leave Petition
(Civil) No. 33260 of 2016, in which judgment has also been
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reserved. With regard to tax deduction at source on the
payment of lease rent, reliance has been placed on Circular
dated 30.01.1995.
8. Learned counsel for the revenue in support of its appeal
submits that Noida and Greater Noida are not covered by the
definition of local authority as contained under Section
10(20) and their income is not exempted under Section 10(20).
Judgment of Allahabad High Court dated 28.02.2011 in Writ
Petition Tax No. 1338 of 2005 was also relied by the revenue
against which appeal has already been filed by Noida and has
been heard. With regard to income tax deduction at source
under Section 194A, the revenue has referred to its appeal in
Special Leave Petition (C) No.34530 of 2016 Commissioner of
Income Tax – TDS – Kanpur Vs. Central Bank of India, where the
arguments has already been concluded and judgment is reserved.
9. Learned counsel for the revenue submits that
Noida/Greater Noida is not entitled for the benefit of Section
194A(3)(iii)(f).
10. We have considered the submissions of the learned counsel
for the parties and perused the records.
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11. Insofar as the appeals filed by Noida/Greater Noida are
concerned, the principal submission raised by the appellant is
applicability of Section 10(20) of the Income Tax Act.
Learned counsel for the Noida has submitted that the said
issue has already been addressed in detail in Civil Appeal No.
792793 of 2014. By our judgment of the date in Civil Appeal
No. 792793 of 2014 New Okhla Industrial Development Authority
Vs. Commissioner of Income Tax Appeals & Ors., we have held
that Noida is not a “local authority” within the meaning of
Section 10(20) of the Income Tax Act as amended by the Finance
Act, 2002 w.e.f. 01.04.2003. For the reasons given by our
judgment of the date in the above appeals, this submission has
to be rejected.
12. Now coming to the appeals filed by the revenue, insofar
as the question relating to exemption under Section 194A(3)
(iii)(f) by virtue of notification dated 24.10.1970, i.e. the
exemption of interest income of the Noida, we have already
decided the said controversy in CIVIL APPEAL NO._________ OF
2018 (arising out of SLP (C) No. 3168 of 2017) Commissioner
of Income Tax(TDS) Kanpur and Anr. Vs. Canara Bank. Having
held that Noida is covered by the notification dated
22.10.1970, the judgment of the Delhi High Court holding that
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Noida/Greater Noida is entitled for the benefit of Section
194A(3)(iii)(f) has to be approved.
13. Now coming to the direction of the High Court regarding
deduction of tax at source on the payment of lease rent as per
Section 194I of the Income Tax Act, 1961, the authority has
relied on Circular dated 30.01.1995. Section 194I of the
Income Tax Act provides as follows:
“Section 194I : Rent
2[Any person, not being an individual or a
Hindu undivided family, who is responsible for
paying to a resident] any income by way of
rent, 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 the
issue of a cheque or draft or by any other
mode, whichever is earlier, deduct incometax
thereon at the rate of
4[(a) two per cent. for the use of any
machinery or plant or equipment; and
(b) ten per cent. for the use of any land or
building (including factory building) or land
appurtenant to a building (including factory
building) or furniture or fittings:]
Provided that no deduction shall be made under
this section where the amount of such income
or, as the case may be, the aggregate of the
amounts of such income credited or paid or
likely to be credited or paid during the
financial year by the aforesaid person to the
account of, or to, the payee, does not exceed
5[one hundred eighty thousand rupees] :
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6[Provided further that an individual or a
Hindu undivided family, whose total sales,
gross receipts or turnover from the business
or profession carried on by him exceed the
monetary limits specified under clause (a) or
clause (b) of section 44AB during the
financial year immediately preceding the
financial year in which such income by way of
rent is credited or paid, shall be liable to
deduct incometax under this section.]
1[Provided also that no deduction shall be
made under this section where the income by
way of rent is credited or paid to a business
trust, being a real estate investment trust,
in respect of any real estate asset, referred
to in clause (23FCA) of section 10, owned
directly by such business trust.]
Explanation : For the purposes of this
section,
2[(i) “rent” means any payment, by whatever
name called, under any lease, sublease,
tenancy or any other agreement or arrangement
for the use of (either separately or together)
any,
(a) land; or
(b) building (including factory building); or
(c) land appurtenant to a building (including
factory building); or
(d) machinery; or
(e) plant; or
(f) equipment; or
(g) furniture; or
(h) fittings,
whether or not any or all of the above are
owned by the payee;]
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(ii) where any income is credited to any
account, whether called “Suspense account” or
by any other name, in the books of account of
the person liable to pay such income, such
crediting shall be deemed to be credit of such
income to the account of the payee and the
provisions of this section shall apply
accordingly.”
14. The definition of rent as contained in the explanation is
a very wide definition. Explanation states that “rent” means
any payment, by whatever name called, under any lease,
sublease, tenancy or any other agreement or arrangement for
the use of any land. The High Court has read the relevant
clauses of the lease deed and has rightly come to the
conclusion that payment which is to be made as annual rent is
rent within the meaning of Section 194I, we do not find any
infirmity in the aforesaid conclusion of the High Court. The
High Court has rightly held that TDS shall be deducted on the
payment of the lease rent to the Greater Noida as per Section
194I. Reliance on circular dated 30.01.1995 has been placed
by the Noida/Greater Noida. A perusal of the circular dated
30.01.1995 indicate that the query which has been answered in
the above circular is “Whether requirement of deduction of
incometax at source under Section 194I applies in case of
payment by way of rent to Government, statutory authorities
referred to in Section 10(20A) and local authorities whose
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income under the head “Income from house property” or “Income
from other sources” is exempt from incometax.”
15. In Paragraph 3 of the circular, it was stated that income
of an authority constituted in India by or under any law
enacted either for the purpose of dealing with and satisfying
the need for housing accommodation or for the purpose of
planning, development or improvement of cities, towns and
villages, is exempt from incometax under Section 10(20A). In
view of the aforesaid, in Paragraph 4 of the circular,
following was stated:
“In view of the aforesaid, there is no
requirement to deduct incometax at source on
income by way of ‘rent’ if the payee is the
Government. In the case of the local
authorities and the statutory authorities
referred to in para 3 of this circular, there
will be no requirement to deduct incometax at
source from income by way of rent if the
person responsible for paying it is satisfied
about their taxexempt status under clause(20)
or (20A) of Section 10 on the basis of a
certificate to this effect given by the said
authorities.”
16. A perusal of the above circular indicate that circular
was issued on the strength of Section 10(20A) and Section
10(20) as it existed at the relevant time. Section 10(20) has
been amended by Finance Act, 2002 by adding an explanation and
further Section 10(20A) has been omitted w.e.f. 01.04.2003.
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The very basis of the circular has been knocked out by the
amendments made by Finance Act, 2002. Thus, the Circular
cannot be relied by Noida/Greater Noida to contend that there
is no requirement of deduction of tax at source under Section
194I. Thus, deduction at source is on payment of rent under
Section 194I, which is clearly the statutory liability of the
respondentcompany. The High Court has adjusted the equities
by recording its conclusion in Paragraph 20 and issuing a
direction in Paragraph 21.
17. In view of what has been stated above, we do not find any
error in the judgment of the High Court dated 16.02.2017. In
result, all the appeals are dismissed.
……………………..J.
( A.K. SIKRI )
……………………..J.
( ASHOK BHUSHAN )
NEW DELHI,
JULY 02, 2018.
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