The Supreme Court of India ruled that, TDS is not applicable under Section 194A of the Income Tax Act on Interest Payments to Agra Development Authority.
The Appellant Union Bank of India has approached the Supreme Court on appeals pertaining to assessment years 2012-2013 and 2013-2014. The issue which was raised in the appeals before the High Court is whether the appellant was required by the provisions of Section 194A of the Income Tax Act 1961 to deduct tax at source on payments of interest made to the Agra Development Authority. Agra Development Authority is a statutory body constituted under the provisions of the UP Urban Planning and Development Act 1973.
A two-judge bench of the Supreme Court comprising of Justice D.Y Chandrachud and Justice Surya Kanth has observed that, the issue which is raised in the present appeals is covered by the judgment of a two-Judge Bench of this Court in Commissioner of Income Tax (TDS) Kanpur and Another vs Canara Bank 1. In that case, the issue pertained to the applicability of the notification dated 22 October 1970 in relation to payments made by Canara Bank to the New Okhla Industrial Development Authority, an authority constituted under Section 3 of the Uttar Pradesh Industrial Area Development Act 1976. The Bank had not deducted tax at source under Section 194-A which led to notices being issued, resulting inconsequential action.
While relying on the precedent, the Court, after considering the terms of the notification held that NOIDA which has been established under the Act of 1976 is covered by the notification dated 22 October 1970. Though the statute under which the Agra Development Authority has been constituted is the UP Urban Planning and Development Act 1973, the same principle which has been laid down in the judgment of this Court in Canara Bank (supra), would govern the present case.
While allowing the appeal, the Supreme Court has set aside the High Court judgment and order of the Division Bench of the High Court of Judicature at Allahabad in Income Tax Appeal Nos 225 of 2017 and 230 of 2017. The orders impose penalties under Section 271C of the Income Tax Act 1961.
Union Bank of India Vs Additional Commissioner of Income Tax (TDS) Kanpur
CITATION: 2022 TAXSCAN (SC) 110
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