New Delhi: The Income Tax department requested the Supreme Court of India to scrutinize whether the North Okhla Industrial Development Authority (NOIDA) is a company formed by the Uttar Pradesh government under the UP law or not. The SC has assured that it will look into the plea filed by the I-T department against the Allahabad High Court which alleged that NOIDA is an organization established under the Act.
The apex court has also refused to grant any stay on the high court direction to the I-T department and asked the banks to file their counter affidavit in four weeks.
Appearing for Punjab National Bank, counsel Pankaj Garg, assisted by another lawyer Milind Garg, told the bench that the appeal of the I-T department is not maintainable as NOIDA is a corporation established by the state law and banks are 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.
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Against the decision to levy tax, the banks preferred an appeal before the Commissioner of Income Tax (Appeals) (CIT-A), saying the NOIDA is a corporation.
The appeal was decided in favor of the banks and, thereafter, the department preferred a petition before the Income Tax Appellate Tribunal (ITAT), which again decided in the favor 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 IT 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 assessed banks are not liable to deduct tax at source on interest paid to the NOIDA on its FDRs.