Against the order of the Allahabad High Court deleting proceedings against the banks for non -deduction of TDS on the interest income on fixed deposit receipts (FDRs) of NOIDA, the Supreme Court will decide the core issue i.e, “whether NOIDA is a Corporation or not”.
Earlier in 2013, the Income Tax Department treated both Punjab National bank and Dena Bank as assessee-in-default on ground that it failed to deduct tax from source.
Allahabad High Court held that the assessee-Banks cannot be treated as assesse-in-default for non-deduction of TDS on the interest earned on FDs of NOIDA.
Dissatisfied by the High Court order, the department knocked the doors of the Apex Court stating 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.
The Supreme Court refused to grant stay on the High Court order and has said it will examine a plea of the income tax department on whether NOIDA is a corporation established by the Uttar Pradesh government under the state industrial development law. A bench of Justices R K Aggarwal and A M Sapre has listed the matter for final disposal on October 24.
Appearing for Punjab National Bank and Dena Bank, counsels Pankaj Garg and Milind Garg said that the appeal of the department was not maintainable as NOIDA was a corporation established by the state law and that banks were not under the statutory obligation to deduct and pay the income tax.
The dispute on the issue first arose in 2013, when the Income Tax department imposed a tax liability on the banks for non -deduction of TDS on the interest income on fixed deposit receipts (FDRs) of NOIDA.
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 banks are not liable to deduct tax at source on interest paid to the NOIDA on its FDRs.
