1 REPORTABLE IN 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 common judgment of Delhi High Court dated 16.02.2017 by which Delhi High Court has allowed writ petitions filed by private respondents herein. 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. facts and issues in all appeals being common, it shall be sufficient to refer 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. 4 3. respondent Rajesh Projects (India) is private limited company engaged in business of real estate activities of constructing, selling residential units etc. On 03.11.2010, respondent company entered into long term lease for 90 years with Greater Noida Industrial Development Authority for Plot No. GH 07A for development and marketing of Group Flats. As per terms of lease deed, company partially paid consideration amount for acquisition of plot to Greater Noida at time of execution of lease deed and is also paying balance lease premium annually as per terms and conditions of lease deed. Notice under Section 201/201(A) of Income Tax Act, 1961 was issued by Income Tax department inquiring regarding non deduction of tax at source under Section 194 I of Income Tax Act from annual lease rent paid to Greater Noida. respondent company replied notices. respondents case was that it did not deduct tax at source as it was advised by Greater Noida that it is Government authority, hence tax deduction at source provisions are not applicable. Assessing Officer passed order dated 31.03.2014 for Financial Year 2010 2011 and 2011 2012, respondent was held as assessee in default for non deduction/non deposit of TDS on account of payment of 5 lease rent and interest made to Greater Noida. Consequent demand was raised against respondents. Aggrieved by assessment order, respondent company filed appeal before Commissioner of Income Tax Appeals. Respondents prayed to stay demand which was refused and recovery proceedings were initiated. Aggrieved by assessment and recovery proceedings emanating therefrom, respondent company filed Writ Petition No. 8085 of 2014 praying for various reliefs including relief that respondent company be not treated as assessee in default under Income Tax Act for non deduction/depositing 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 writ petitions in Delhi High Court praying for more or less same reliefs relating to lease rent payment and for payment of interest to Greater Noida. All writ petitions involving common questions of law and facts were heard together and were allowed by Delhi High Court by its judgment dated 16.02.2017. Before High Court, Greater Noida and Noida authorities contended that they are local authorities within meaning of Section 10(20) of Income Tax Act, 1961, hence their income is exempt from Income Tax. It was further 6 contended that interest received by them is exempt under Section 194A(3)(iii)(f) of Income Tax Act and they are exempted from payment of any tax on interest. 4. revenue refuted contention of Greater Noida and Noida contending that w.e.f. 01.04.2003, Greater Noida and Noida is not local authority within meaning of Section 10(20) and further they are also not entitled for benefit of notification issued under Section 194A(3)(iii)(f). It was further contended that with regard to payment of rent to Noida and Greater Noida, respondent company was liable to deduct tax on payment of interest, no income tax was deducted by respondent company while paying rent to Noida and Greater Noida, hence they are assessee in default . 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 Allahabad High Court has held that Noida is not local authority within meaning of Section 10(20) as amended by Finance Act, 2002. Delhi High Court after hearing all parties allowed writ petitions. Delhi High Court held that Noida and Greater Noida are not local authorities within meaning of Section 10(20) as amended w.e.f. 01.04.2003. Delhi High Court further 7 held that interest income of Noida and Greater Noida is exempted under notification dated 22.10.1970 issued under Section 194A(3)(iii)(f) of Income Tax Act. High Court further held that as far as payment of rent to Noida and Greater Noida, respondent company was liable to deduct income tax at source. High Court recorded its conclusions in Para 20 of judgment, which is to following effect: 8 20. In view of above analysis, court hereby concludes as follows:(1) Amounts paid as part of lease premium in terms of time schedule(s) to Lease Deeds executed between petitioners and GNOIDA, or bi annual or annual payments for 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 total premium for duration of lease, are rent, and therefore subject to TDS. Since petitioners could not make deductions due to insistence of GNOIDA, direction is issued to said authority (GNOIDA) to comply with provisions of law and make all payments, which would have been otherwise part of deductions, for periods, in question, till end of 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 payment of lump sum lease premium, in terms of Lease which are covered by Section 194 are covered by exemption under Section 194A(3)(f) and therefore, not subjected to TDS. (4) For reason mentioned in (3) above, any payment of interest accrued in favour of GNOIDA by any petitioner who is bank to GNOIDA, towards fixed deposits, are also exempt from TDS. 5. Aggrieved by aforesaid judgment of Delhi High Court, Greater Noida, Noida as well as Revenue has filed these appeals. 6. Learned counsel appearing for Noida and Greater Noida contended that Noida and Greater Noida have been constituted under Section 3 of Uttar Pradesh Industrial Area 9 Development Act, 1976 and is local authority within meaning of Section 10(20) of Income Tax Act, 1961. Reliance on notification dated 24.12.2001 issued by Governor of State of Uttar Pradesh under 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 local authorities as explained under explanation to Section 10(20) of Income Tax Act. It is further contended that interest income of authorities is exempted under 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 194 I of Income Tax Act, 1961 on lump sum lease premium paid for acquisition of long term lands is not applicable. 7. It is further submitted that question as to whether Noida/Greater Noida is local authority is engaging attention of this Court in Civil Appeal No. 792 793 of 2014, in which judgment has already been reserved. On tax deduction at source, it is further submitted that said issue is also pending consideration of this Court in Special Leave Petition (Civil) No. 33260 of 2016, in which judgment has also been 10 reserved. With regard to tax deduction at source on payment of lease rent, reliance has been placed on Circular dated 30.01.1995. 8. Learned counsel for revenue in support of its appeal submits that Noida and Greater Noida are not covered by 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 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, 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 arguments has already been concluded and judgment is reserved. 9. Learned counsel for revenue submits that Noida/Greater Noida is not entitled for benefit of Section 194A(3)(iii)(f). 10. We have considered submissions of learned counsel for parties and perused records. 11 11. Insofar as appeals filed by Noida/Greater Noida are concerned, principal submission raised by appellant is applicability of Section 10(20) of Income Tax Act. Learned counsel for Noida has submitted that said issue has already been addressed in detail in Civil Appeal No. 792 793 of 2014. By our judgment of date in Civil Appeal No. 792 793 of 2014 New Okhla Industrial Development Authority Vs. Commissioner of Income Tax Appeals & Ors., we have held that Noida is not local authority within meaning of Section 10(20) of Income Tax Act as amended by Finance Act, 2002 w.e.f. 01.04.2003. For reasons given by our judgment of date in above appeals, this submission has to be rejected. 12. Now coming to appeals filed by revenue, insofar as question relating to exemption under Section 194A(3) (iii)(f) by virtue of notification dated 24.10.1970, i.e. exemption of interest income of Noida, we have already decided 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 notification dated 22.10.1970, judgment of Delhi High Court holding that 12 Noida/Greater Noida is entitled for benefit of Section 194A(3)(iii)(f) has to be approved. 13. Now coming to direction of High Court regarding deduction of tax at source on payment of lease rent as per Section 194 I of Income Tax Act, 1961, authority has relied on Circular dated 30.01.1995. Section 194 I of Income Tax Act provides as follows: Section 194 I : Rent 2[Any person, not being individual or Hindu undivided family, who is responsible for paying to resident] any income by way of rent, shall, at time of credit of such income to account of payee or at time of payment thereof in cash or by issue of cheque or draft or by any other mode, whichever is earlier, deduct income tax thereon at rate of 4[(a) two per cent. for use of any machinery or plant or equipment; and (b) ten per cent. for use of any land or building (including factory building) or land appurtenant to building (including factory building) or furniture or fittings:] Provided that no deduction shall be made under this section where amount of such income or, as case may be, aggregate of amounts of such income credited or paid or likely to be credited or paid during financial year by aforesaid person to account of, or to, payee, does not exceed 5[one hundred eighty thousand rupees] : 13 6[Provided further that individual or Hindu undivided family, whose total sales, gross receipts or turnover from business or profession carried on by him exceed monetary limits specified under clause (a) or clause (b) of section 44AB during financial year immediately preceding financial year in which such income by way of rent is credited or paid, shall be liable to deduct income tax under this section.] 1[Provided also that no deduction shall be made under this section where income by way of rent is credited or paid to business trust, being 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 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 use of (either separately or together) any, (a) land; or (b) building (including factory building); or (c) land appurtenant to 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 above are owned by payee;] 14 (ii) where any income is credited to any account, whether called Suspense account or by any other name, in books of account of person liable to pay such income, such crediting shall be deemed to be credit of such income to account of payee and provisions of this section shall apply accordingly. 14. definition of rent as contained in explanation is 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 use of any land. High Court has read relevant clauses of lease deed and has rightly come to conclusion that payment which is to be made as annual rent is rent within meaning of Section 194 I, we do not find any infirmity in aforesaid conclusion of High Court. High Court has rightly held that TDS shall be deducted on payment of lease rent to Greater Noida as per Section 194 I. Reliance on circular dated 30.01.1995 has been placed by Noida/Greater Noida. perusal of circular dated 30.01.1995 indicate that query which has been answered in above circular is Whether requirement of deduction of income tax at source under Section 194 I applies in case of payment by way of rent to Government, statutory authorities referred to in Section 10(20A) and local authorities whose 15 income under head Income from house property or Income from other sources is exempt from income tax. 15. In Paragraph 3 of circular, it was stated that income of authority constituted in India by or under any law enacted either for purpose of dealing with and satisfying need for housing accommodation or for purpose of planning, development or improvement of cities, towns and villages, is exempt from income tax under Section 10(20A). In view of aforesaid, in Paragraph 4 of circular, following was stated: "In view of aforesaid, there is no requirement to deduct income tax at source on income by way of 'rent' if payee is Government. In case of local authorities and statutory authorities referred to in para 3 of this circular, there will be no requirement to deduct income tax at source from income by way of rent if person responsible for paying it is satisfied about their tax exempt status under clause(20) or (20A) of Section 10 on basis of certificate to this effect given by said authorities. 16. perusal of above circular indicate that circular was issued on strength of Section 10(20A) and Section 10(20) as it existed at relevant time. Section 10(20) has been amended by Finance Act, 2002 by adding explanation and further Section 10(20A) has been omitted w.e.f. 01.04.2003. 16 very basis of circular has been knocked out by amendments made by Finance Act, 2002. Thus, Circular cannot be relied by Noida/Greater Noida to contend that there is no requirement of deduction of tax at source under Section 194 I. Thus, deduction at source is on payment of rent under Section 194 I, which is clearly statutory liability of respondent company. High Court has adjusted equities by recording its conclusion in Paragraph 20 and issuing direction in Paragraph 21. 17. In view of what has been stated above, we do not find any error in judgment of High Court dated 16.02.2017. In result, all appeals are dismissed. J. ( A.K. SIKRI ) J. ( ASHOK BHUSHAN ) NEW DELHI, JULY 02, 2018. NewOkhlaIndustrial DevelopmentAuthority v. Commissionerof Income-tax-Appeals&Or