Income Tax Act, 1961 – s.194A(3)(iii)(f) – Notification issued under – Payment of interest to State Industrial Development Authority – Exemption from deduction of tax at source – Benefit of, when available – New Okhla Industrial Development Authority (NOIDA) constituted under the 1976 Act – Respondent-Bank paid interest to NOIDA in form of FDs/Deposits, however, did not deduct tax at source – Assessing Officer holding that the respondent was assessee in default, issued demand notice – Bank filed appeal before Commissioner of Income Tax (Appeals) placing reliance upon notification dtd. 22.10.1970 issued u/s.194A(3)(iii)(f) – Plea of appellant-Revenue that NOIDA is not entitled for the benefit of notification dtd. 22.10.1970 as under the said notification only a Corporation established by Central, State or Provincial Act is entitled for the benefit, however, NOIDA is not established by the 1976 Act rather it is established under the 1976 Act – Held: Section 194A(3)(iii) uses both the expressions “by or under” – In Dalco Engineering case, Supreme Court held that the phrase established by or under the Act is a standard term used in several enactments to denote a statutory corporation established or brought into existence by or under the statute – Ratio laid down in Dalco Engineering case fully covers the present case – Further, the composition of NOIDA is statutorily provided by s.3 of 1976 Act itself, hence, it has been constituted by the Act itself and is covered by notification dtd. 22.10.1970 – High Court did not commit any error in dismissing the appeal filed by the appellant – Uttar Pradesh Industrial Area Development Act, 1976– s.3– State Financial Corporation Act,1951 – Interpretation of Statutes.
Words & Phrases – ‘Corporation’, ‘Statutory Corporations’ and ‘Non-Statutory Corporations’ – Meaning of.
Words & Phrases – Expression ‘by or under’ – Meaning of. Dismissing the appeals, the Court
HELD: 1.1 A Corporation is an artificial being which is a 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. Corporations which are instrumentalities of the Government are subject to the limitation as contained in the Constitution. Whereas the statutory corporations owe their existence from “by or under” statute, the non-statutory bodies and corporations are not created by or under statute rather are governed by a statute. [Paras 12, 17][875-F-G; 879-H; 880-B] “ESTABLISHED BY A CENTRAL,
PROVINCIAL ACT”
STATE OR
1.2 Section 194A(3)(iii) clauses (b), (c) and (d) of the Income Tax Act, 1961 refer to expression “established”. In sub-clause
(b) expression used is “established by or under a Central, State or Provincial Act”, in sub-clause (c) the expression used is “established under the Life Insurance Corporation Act” and in sub-clause (d) expression used is “established under the Unit Trust of India Act”. The Section thus uses both the expressions “by or under”. [Para 19][879-E-F]
1.3 In Dalco Engineering case Supreme Court held that the phrase established by or under the Act is a standard term used in several enactments to denote a statutory corporation established or brought into existence by or under the statute. Referring to provisions of The State Financial Corporations Act, 1951 which provides for establishment of various financial corporations under the Act, it was held that such Financial Corporations are established by an Act or under an Act. On comparing the provisions of Section 3 of Uttar Pradesh Industrial Area Development Act, 1976 with those of The State Financial Corporations Act, 1951, it is clear that the establishment of Corporation in both the enactments is by a notification by State Government. In the present case, notification has been issued in exercise of power of Section 3 of 1976 Act and the Authority (NOIDA) has been constituted. The ratio laid down in Dalco Engineering that establishment of various financial corporations under State Financial Corporation Act, 1951 is establishment of a Corporation by an Act or under an Act, fully covers the present case and there is no doubt that the Authority (NOIDA) have been established by the 1976 Act and it is clearly covered by the Notification dated 22.10.1970. The very preamble of the 1976 Act reads “an Act to provide for the Constitution of an Authority for the development of certain areas in the State into industrial and urban township and for masses connected through with”. Further, the composition of the Authority (NOIDA) is statutorily provided by Section 3 of 1976 Act itself, hence, there is no denying that Authority (NOIDA) has been constituted by the Act itself. The High Court did not commit any error in dismissing the appeal filed by the Revenue. [Paras 23, 25, 28 and 30][881-D-E; 883-G-H; 885-E; 887-D-E]
Sukhdev Singh and Others v. Bhagatram Sardar Singh Raghuvanshi and Another (1975) 1 SCC 421 : [1975]
3 SCR 619 – followed.
S.S. Dhanoa vs. Municipal Corporation, Delhi and Others (1981) 3 SCC 431 : [1981] 3 SCR 864;
Executive Committee of Vaish Degree College, Shamli and Others v. Lakshmi Narain and Others (1976) 2 SCC
58 : [1976] 2 SCR 1006; Dalco Engineering Private Limited v. Satish Prabhakar Padhye and Others (2010)
4 SCC 378 : [2010] 4 SCR 15 – relied on.
RBI vs. Peerless General Finance & Investment Co. Ltd. (1987) 1 SCC 424: [1987] 2 SCR 1; Dartmouth College v. Woodward, NH 4 Wheat 518, 636:4 L Ed 629 – referred to.
Halsbury’s Laws of England Fifth Edition, Vol. 24 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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