1

AFR

Court No.39

Case :- INCOME TAX APPEAL No. - 64 of 2016

Appellant :- Commissioner Of Income Tax (Tds) And Another

Respondent :- Canara Bank

Counsel for Appellant :- Ashok Kumar,Praveen Kumar

Hon'ble Dilip Gupta, J.

Hon'ble Surya Prakash Kesarwani, J.

This appeal, which has been filed under section 260-A of

the Income Tax Act, 1961

1

at the instance of the Department, was

admitted on the following question of law :

“(A) Whether the ITAT as well as the

Commissioner of Income Tax (A) have erroneously

interpreted that NOIDA (New Okhla Industrial

Development Authority) is a corporation established

by U.P. Industrial Area Development Act, 1976 and

not a body established under the aforesaid Act.”

It transpires from the records of the appeal that the

Assessing Officer noticed that for the Assessment Years 2006-07

and 2007-08, M/s. Canara Bank

2

failed to deduct tax at source

under section 194-A(1) of the Act on the interest credited/paid on

the fixed deposit receipts purchased by the New Okhla Industrial

Development Authority

3

. In the present Appeal, we are concerned

with the Assessment Year 2006-07. Accordingly, a notice was

issued to the Bank. The contention of the Bank that NOIDA is a

Corporation established by a State Act and, therefore, exempted

1The Act

2The Bank

3NOIDA

…eutral(;itation(…ob(w(qDgU8G&;87UgDgwRz

2

from deduction of income tax at source in view of the notification

dated 22 October 1970 issued under section 194-A(3)(iii)(f) of

the Act was not accepted. The Assessing Officer also did not

accept that NOIDA was a local authority even after 1 April 2003

within the meaning of section 10(20) of the Act and, therefore,

entitled to exemption from payment of income-tax. The Bank was

held to be an assessee in default and an order under section

201(1)/201(1-A) of the Act was passed on 28 February 2013 . A

demand notice under section 156 was issued and penalty

proceedings under section 271-C of the Act were directed to be

initiated separately.

Feeling aggrieved, the Bank filed an appeal before the

Commissioner of Income Tax (Appeals). The Commissioner of

Income Tax (Appeals), however, after examination of the

provisions of Uttar Pradesh Industrial Area Development Act,

1976

4

held that the NOIDA was a corporation established by the

said Act and, therefore, entitled to the benefit of the notification

dated 22 October 1970. The appeal was, accordingly, allowed.

The department filed an appeal before the Income Tax Appellate

Tribunal which by order dated 7 August 2015 dismissed the

appeal filed by the department.

This appeal under section 260-A of the Act has,

accordingly, been filed by the department.

4Industrial Act

3

The issue that arises for consideration in this appeal is as to

whether NOIDA is a corporation entitled for exemption from

deduction of tax at source under the provisions of the notification

dated 22 October 1970 issued under section 194-A(3)(iii)(f) of

the Act. This notification provides that the provisions of sub-

section (1) of section 194-A of the Act shall not apply to any

corporation established by a Central, State or Provincial Act.

According to the appellants, the NOIDA is not a corporation that

has been established by Industrial Act and, therefore, would not

be entitled for exemption while according to the Bank, it is a

corporation established by the Industrial Act and, therefore,

entitled for exemption.

In order to appreciate the rival contentions, it will be

appropriate to refer to the provisions of the Acts involved and the

notification.

Section 194-A(1) of the Act provides that any person, not

being an individual or a Hindu undivided family, who is

responsible for paying to a resident any income by way of interest

other than income by way of interest on securities, shall, at the

time of credit of such income to the account of the payee or at the

time of payment thereof in cash or by issue of a cheque or draft or

by any other mode, whichever is earlier, deduct income-tax

thereon at the rates in force. However, sub-section (3) of section

194-A provides that the provisions of sub-section (1) shall not

apply in certain cases. In the present case, we are concerned with

4

sub-clause (iii)(f) of section 194-A(3) which exempts income

credited or paid to such other institution, association or body or

classes or class of institutions, association or bodies which the

Central Government may, for reasons to be recorded in writing,

notify in this behalf in the Official Gazette. It is under this

provision that the notification dated 22 October 1970 was issued

by the Central Government which reads as follows :

“In pursuance of sub-clause (f) of clause (iii)

of sub-section (3) of section 194A of the Income-tax

Act, 1961 (43 of 1961), the Central Government

hereby notify the following for the purposes of the

said sub clause:-

(i)any corporation established by a

Central, State or Provincial Act;

(ii)any company in which all the shares are

held (whether singly or taken together) by the

Government or the Reserve Bank of India or a

Corporation owned by that Bank; and

(iii)any undertaking or body, including a

society registered under the Societies Registration

Act, 1860 (21 of 1860), financed wholly by the

Government.”

Sri Ashok Kumar and Sri Praveen Kumar, learned counsel

appearing for the appellants submit that NOIDA is not a “local

authority” within the meaning of section 10(20) of the Act after 1

April 2003 in view of a Division Bench judgment of this Court in

Writ-Tax No.1338 of 2005

5

and, therefore, it was required to file

return of income. It is also their submission that NOIDA is not a

'corporation' established by a State Act and, therefore, is also not

entitled for exemption under section 194-A of the Act from

5New Okhla Industrial Development Authority Vs. Chief Commissioner of Income Tax,

Meerut Camp & Ors., decided on 28.2.2011

5

deducting tax at source. In this connection learned counsel have

drawn a distinction between a corporation that is established by a

Central, State or Provincial Act and a corporation that established

under a Central, State or Provincial Act. In support of this

contention, learned counsel have placed reliance upon the

decision of the Supreme Court in Dalco Engineering Private

Limited Vs. Satish Prabhakar Padhye & Ors.

6

.

Sri Balbir Singh, learned Senior Counsel appearing for the

Bank assisted by Sri Abhinav Mehrotra and Sri Ankit

Vijaywargiya has, while relying upon the same decision of the

Supreme Court in Dalco Engineering Pvt. Ltd. (supra)

submitted that NOIDA is a corporation established by the

Industrial Act and, therefore, entitled for exemption from

deduction of income tax at source.

We have carefully considered the submissions advanced by

learned counsel for the parties.

In order to appreciate the contentions advanced by learned

counsel for the parties, it will be appropriate at this stage to refer

to the provisions of Industrial Act so as to determine whether

NOIDA is a corporation that has been established by a State Act

or it has been established under a State Act.

The State Act in issue is the Industrial Act. The preamble

to the said Act states that it is an Act to provide for the

constitution of an Authority for the development of certain areas

6(2010) 4 SCC 378

6

in the State into industrial and urban township and for matters

connected therewith. Section 3 provides that the State

Government may, by notification, constitute for the purposes of

the Act, an Authority to be called (Name of the area) Industrial

Development Authority, for any industrial development area.

Sub-section (2) of section 3 also provides that the Authority shall

be a body corporate, while sub-section (3) provides for the

constitution of the Authority. “Authority” has been defined under

section 2(b) to mean Authority constituted under section 3 of the

Act. The State Government by notification dated 17 April 1976

declared that the area comprising the villages mentioned in the

Schedule annexed with the notification shall be an “Industrial

Development Area” called “New Okhla Industrial Development

Authority”. The constitution of the Authority has also been

provided as also the list of 37 villages of Tehsil Sikandarabad of

District Bulandshahr. The constitution of the Authority is as

follows :

(i)Secretary to the Government,

Uttar Pradesh, Industries

Department, Ex-officio

Member

Chairman.

[Under clause (a)]

(ii)Secretary to the Government,

Uttar Pradesh, Public Works

Department, Ex-officio

Member

[Under clause (b)]

(iii)Secretary to the Government,

Uttar Pradesh, Local Self-

Government Department, Ex-

officio

Member

[Under clause (c)]

(iv)Secretary to the Government,

Uttar Pradesh, Finance

Department, Ex-officio

Member

[Under clause (d)]

(v)Managing Director, U.P. State

Industrial Development

Member

[Under clause (e)]

7

Corporation Ltd., Ex-officio

(vi)Chairman, U.P. State Electricity

Board, Ex-officio

Member

[Nominated under

clause (f)]

(vii)Managing Director, U.P. Jal

Nigam, Ex-officio

Member

[Nominated under

clause (f)]

(viii)Chief Engineer, Irrigation

Department, U.P. Ex-officio

Member

[Nominated under

clause (f)]

(ix)Chief Town and Country

Planner, U.P., Ex-officio

Member

[Nominated under

clause (f)]

(x)(District Magistrate), Secy.

Planning, Bulandshahr, Ex-

officio

Member

[Nominated under

clause (f)]

(xi)Chief Executive Officer Member-Secretary

[Under clause (g)]

Section 6 deals with the object and the functions of the

Authority. The object is to secure the planned development of the

Industrial Development Areas. The functions amongst others are :

(i) to acquire land in the industrial development area by

agreement or through proceedings under the Land Acquisition

Act for the purpose of the Act; (ii) to prepare a plan for the

development of the industrial area; and (iii) to provide amenities.

Section 11 deals with levy of tax. It provides that for the

purposes of providing, maintaining or continuing any amenities in

the industrial development area, the Authority may with the

previous approval of the State Government, levy such taxes as it

may consider necessary in respect of any site or building on the

transferee or occupier thereof, provided that the total incidence of

such tax shall not exceed twenty five per cent of the annual value

of such site or building.

8

Section 20 deals with the funds of the Authority and sub-

section (1) of section 20 is as follows :

“20. Fund of the Authority (1) The Authority

shall have and maintain its own fund to which shall

be credited –

(a)all moneys received by the Authority from the

State Government by way of grants, loans, advances

or otherwise;

(b)all moneys borrowed by the Authority from

securities other than the State Government by way of

loans or debentures;

(c)all fees, tolls and charges received by the

Authority under the Act,

(d)all moneys received by the Authority from the

deposit of lands, buildings and other properties

movable and immovable; and

(e)all moneys received by the Authority by way

of rents and profits or in any other manner or from

any other source.”

Section 21 deals with the budget of the Authority while

section 22 deals with the accounts and audit. These sections are

reproduced below :

“21. Budget of the Authority —The

Authority shall prepare in such form and at such

time every year as the State Government may

specify, a budget in respect of the financial year next

ensuing showing the estimated receipts and

expenditure of the Authority.

22.Accounts and Audit—(1) The

Authority shall maintain proper accounts and other

relevant records and prepare annual statement of

accounts including the Balance Sheet in such form as

the State Government may specify.

(2) The accounts of the Authority shall be

subject to audit by the examiner Local Fund

Accounts.

(3) …..............

(4) …..............

(5) …..............”

9

Section 23 provides that the Authority shall prepare for

every year a report of its activities during that year and submit the

report to the State Government in such form and on or before

such date as the State Government may specify and such report

shall be laid before both the Houses of the Legislature.

Section 41 deals with the control by the State Government

while section 58 deals with the dissolution of the Authority.

Section 58(1) provides that where the State Government is

satisfied that the purposes for which the Authority was

established under this Act have been substantially achieved so as

to render the continued existence of the Authority in the opinion

of the State Government unnecessary, the Government may by

notification in the Gazette declare that the authority shall be

dissolved with effect from such date as may be specified in the

notification and the Authority shall be deemed to be dissolved

accordingly.

The aforesaid provisions of the Industrial Act have to be

kept in mind while examining the provisions of section 194-A of

the Act in order to determine whether the Bank is exempted from

deduction of tax at source. The relevant provisions of section

194-A of the Act for the purpose of deciding the controversy

involved in this appeal, are reproduced below :

“194A - (1) Any person, not being an individual or a

Hindu undivided family, who is responsible for

paying to a resident any income by way of interest

other than income by way of interest on securities,

shall, at the time of credit of such income to the

10

account of the payee or at the time of payment

thereof in cash or by issue of a cheque or draft or by

any other mode, whichever is earlier, deduct income-

tax thereon at the rates in force:

…...................

…...................

(3) The provisions of sub-section (1) shall not apply-

…...................

…...................

(ii) …...............

(iii) to such income credited or paid to –

(a) any banking company to which the Banking

Regulation Act, 1949, applies or any co-operative

society engaged in carrying on the business of

banking; or

(b) any financial corporation established by or under

a Central, State or Provincial Act; or

(c) the Life Insurance Corporation of India

established under the Life Insurance Corporation

Act, 1956; or

(d) the Unit Trust of India established under the Unit

Trust of India Act, 1963; or

(e) any company or co-operative society carrying on

the business of insurance; or

(f) such other institution, association or body or class

of institutions, associations or bodies which the

Central Government may, for reasons to be recorded

in writing, notify in this behalf in the Official

Gazette.

….................

….................”

A perusal of section 194(1)(3)(iii) clearly indicates that the

provisions of sub-section (1) of section 194-A of the Act shall not

apply to such income credited or paid to banking company to

which the Banking Regulation Act, 1949 applies, or any co-

operative society engaged in the business of banking, financial

corporation established by or under a Central or State Act, Life

Insurance Corporation of India, Unit Trust of India or those

11

notified under section 194-A(1)(3)(iii)(f) of the Act. The

notification dated 22 October 1970 exempts any Corporation

established by a Central, State or Provincial Act.

The Bank asserts that NOIDA is a Corporation established

by a State Act and is, therefore, exempted from deduction of

income tax on the basis of the notification dated 22 October 1970

issued under section 194-A(3)(iii)(f) of the Act.

Learned counsel for the parties have relied upon the

decision of the Supreme Court in Dalco Engineering Pvt. Ltd.

(supra). Two Civil Appeals were decided. The first Civil Appeal

was filed by Dalco Engineering Pvt. Ltd., a Private Limited

Company incorporated under the provisions of Companies Act,

1956

7

. The respondent Satish Prabhakar Padhye claimed the

benefit of section 47 of the Persons with Disabilities (Equal

Opportunities, Protection of Rights and Full Participation) Act,

1995

8

and filed the writ petition in the Bombay High Court for

not only quashing the order dated 12 October 2001 issued by the

Disability Commissioner suggesting to the employer to undertake

the essential responsibility of re-employing the said respondent to

discharge any other work as he had acquired hearing impairment

during service but also for a direction upon the employer to

implement the provisions of the Disabilities Act by directing the

employer to reinstate the employee in service on a suitable post.

The Bombay High Court allowed the writ petition by judgment

7Companies Act

8Disabilities Act

12

dated 23 December 2005 and directed the employer to reinstate

the said respondent and shift him to a suitable post after holding

that though Dalco Engineering was a private limited company but

it was an “establishment” within the meaning of section 2(k) of

the Disabilities Act and consequently section 47 enjoined it not to

dispense with the services of its employee who had acquired a

disability.

Section 47 of the Disabilities Act which deals with non-

discrimination in government employment is reproduced below :

“(1) No establishment shall dispense with, or reduce

in rank, an employee who acquires a disability

during his service:

Provided that, if an employee, after acquiring

disability is not suitable for the post he was holding,

could be shifted to some other post with the same

pay scale and service benefits:

Provided further that if it is not possible to adjust the

employee against any post, he may be kept on a

supernumerary post until a suitable post is available

or he attains the age of superannuation, whichever is

earlier.

(2) No promotion shall be denied to a person merely

on the ground of his disability:

Provided that the appropriate Government may,

having regard to the type of work carried on in any

establishment, by notification and subject to such

conditions, if any, as may be specified in such

notification, exempt any establishment from the

provisions of this section.”

The term “establishment” is defined in section 2(k) of the

Disabilities Act and is as follows :

13

“2. Definitions.--In this Act, unless the context

otherwise requires, -

(k) "establishment" means a corporation established

by or under a Central, Provincial or State Act, or an

authority or a body owned or controlled or aided by

the Government or a local authority or a Government

company as defined in Section 617 of the Companies

Act 1956 (1 of 1956) and includes Departments of a

Government;”

The issue that arose before the Supreme Court was whether

a Company incorporated under the Companies Act other than a

government Company, as defined in section 617 of the

Companies Act, was an “establishment” as defined in section 2(k)

of the Disabilities Act and as to whether the respondent was

entitled to claim any relief with reference to section 47 of the

Disabilities Act. It is in this context that the Supreme Court

observed that the words "a corporation established by or under a

Central, Provincial or State Act" is a standard term used in

several enactments to denote a statutory corporation established

or brought into existence by or under a statute. The Supreme

Court referred to the definition of “public property” contained in

the Prevention of Damage to Public Property Act, 1984 to mean

any property owned by, or in the possession of, or under the

control of - (i) the Central Government; or (ii) any State

Government; or (iii) any local authority; or (iv) any corporation

established by, or under, a Central, Provincial or State Act; or (v)

any company as defined in Section 617 of the Companies Act,

1956; or (vi) any institution, concern or undertaking which the

14

Central Government may, by notification in the Official Gazette,

specify in that behalf provided that the Central Government shall

not specify any institution, concern or undertaking under that sub-

clause unless such institution, concern or undertaking is financed

wholly or substantially by funds provided directly or indirectly by

the Central Government or by one or more State Governments, or

partly by the Central Government and partly by one or more State

Governments. The Supreme Court observed that the term is

always used to denote certain categories of authorities which are

“State” as contrasted from non-statutory companies which do not

fall under the ambit of “State”.

After considering the earlier judgments rendered in S.S.

Dhanoa Vs. Municipal Corporation, Delhi & Ors.

9

and Vaish

Degree College Vs. Lakshmi Narain

10

, the Supreme Court

further observed that a “company” is not “established” under the

Companies Act as an incorporated company formed by the act of

any seven or more persons (or two or more persons for a private

company) associated for any lawful purpose subscribing their

names to a memorandum of association and by complying with

the requirements of the Companies Act in respect of registration.

Therefore, a “company” is incorporated and registered under the

Companies Act and not established under the Companies Act. On

the contrary, the Companies Act itself establishes the National

Company Law Tribunal and the National Company Law

9AIR 1981 SC 1395

10(1976) 2 SCC 58

15

Appellate Tribunal and those two statutory authorities owe their

existence to the Companies Act.

In this context, it will be useful to reproduce paragraphs 21,

22 and 23 of the judgment which are as follows :

“21.Where the definition of “establishment”

uses the term “a corporation established by or

under an Act”, the emphasis should be on the

word “established” in addition to the words “by

or under”. The word “established” refers to

coming into existence by virtue of an enactment.

It does not refer to a company, which, when it comes

into existence, is governed in accordance with the

provisions of the Companies Act. But then, what is

the difference between “established by a Central

Act” and “established under a Central Act”?

22.The difference is best explained by some

illustrations. A corporation is established by an

Act, where the Act itself establishes the

corporation. For example, Section 3 of State Bank

of India Act, 1955 provides that a bank to be called

State Bank of India shall be constituted to carry on

the business of banking. Section 3 of the Life

Insurance Corporation Act, 1956 provides that

3. Establishment and incorporation of

Life Insurance Corporation of India.-- (1)

With effect from such date as the Central

Government may, by notification in the

Official Gazette, appoint, there shall be

established a Corporation called the Life

Insurance Corporation of India.”

State Bank of India and Life Insurance

Corporation of India are two examples of

corporations established by "a Central Act".

23.We may next refer to the State Financial

Corporation Act, 1951 which provides for

establishment of various financial corporations under

that Act. Section 3 of that Act relates to

establishment of State Financial Corporations and

provides that “the State Government may, by

notification in the Official Gazette, establish a

financial corporation for the State under such name

16

as may be specified in the notification” and such

financial corporation shall be a body corporate by

the name notified. Thus, a State Financial

Corporation is established under a Central Act.

Therefore, when the words "by and under an

Act" are preceded by the words "established", it

is clear that the reference is to a corporation

established, that it is brought into existence, by an

Act or under an Act. In short, the term refers to a

statutory corporation as contrasted from a non-

statutory corporation incorporated or registered

under the Companies Act.”

(emphasis supplied)

In S.S. Dhanoa (supra), on which reliance was placed in

the aforesaid judgment, the Supreme Court had observed :

“9.Corporation, in its widest sense, may mean

any association of individuals entitled to act as an

individual. But that certainly is not the sense in

which it is used here. Corporation established by or

under an Act of legislature can only mean a body

corporate which owes its existence, and not merely

its corporate status , to the Act. For example, a

Municipality, a Zilla Parishad or a Gram

Panchayat owes its existence and status to an Act

of legislature. On the other hand, an association of

persons constituting themselves into a Company

under the Companies Act or a Society under the

Societies Registration Act owes its existence not to

the Act of legislature but to acts of parties though, it

may owe its status as a body corporate to an Act of

legislature.

10.There is a distinction between a corporation

established by or under an Act and a body

incorporated under an Act. The distinction was

brought out by this Court in Sukhdev Singh and Ors.

v. Bhagatram Sardar Singh Raghuvanshi and Ors.,

(1975) 1 SCC 421. It was observed:

“25. A company incorporated under the

Companies Act is not created by the Companies Act

but comes into existence in accordance with the

provisions of the Act.”

There is thus a well-marked distinction

between a body created by a statute and a body

17

which, after coming into existence, is governed in

accordance with the provisions of a statute.”

(emphasis supplied)”

In Vaish Degree College (supra), the Supreme Court had

also observed as follows :

“10.….. In other words the position seems to be

that the institution concerned must owe its very

existence to a statute which would be the

fountainhead of its powers. The question in such

case to be asked is, if there is no statute, would the

institution have any legal existence. If the answer is

in the negative, then undoubtedly it is a statutory

body, but if the institution has a separate existence of

its own without any reference to the statute

concerned but is merely governed by the statutory

provisions it cannot be said to be a statutory body.

(emphasis supplied)”

The contention of Sri Ashok Kumar and Sri Praveen

Kumar, learned counsel for the appellants is that NOIDA has

been created under the provisions of Industrial Act and,

therefore, would not be exempted under section 194-A of the Act.

The submission of learned counsel is that it is only when the

corporation is established by an Act, as is contemplated under the

notification dated 22 October 1970, that it would be exempted

from deduction of tax at source under section 194-A(1) of the

Act. In this connection, learned counsel pointed out that NOIDA

has been constituted by the State Government by a notification

after identifying the areas. According to them, this is an example

of a corporation having been constituted under the State Act. In

order to draw a distinction from a corporation having been

established by a State Act, learned counsel referred to the

18

establishment of the State Bank of India under the provisions of

State Bank of India Act, 1955 as also the constitution of the Life

Insurance Corporation of India under the provisions of the Life

Insurance Corporation Act, 1956. Learned counsel pointed out

that these two corporations have been established by a Central

Act. The distinction that is sought to be made by learned counsel

for the appellants is that whereas the State Bank of India and Life

Insurance Corporation of India have been established by an Act

for the reason that they have been named in the Act but NOIDA

has neither been named nor its area has been determined. Learned

counsel for the appellants in fact have submitted that like

NOIDA, the State Financial Corporation has also been

established under the State Financial Corporation Act, 1951.

Their contention is that section 3 of the State Financial

Corporation Act relates to establishment of State Financial

Corporations and provides that the State Government may, like in

the case of an Authority under the provisions of the Industrial

Act, by a notification in the Official Gazette, establish a Financial

Corporation for the State under such name as may be specified in

the notification. According to him, there is no distinction between

the State Government establishing a Financial Corporation under

such name as may be specified in the notification and the State

Government constituting an Industrial Development Authority

under section 3(1) of the Industrial Act. Learned counsel,

therefore, submitted that the Commissioner of Income Tax

19

(Appeals) as also the Income Tax Appellate Tribunal committed

gross illegality in holding that the NOIDA has been established

by the State Act and, accordingly, granting exemption from

deduction of tax under section 194-A(1) of the Act.

Sri Balbir Singh, learned Senior Counsel appearing for the

Bank, however, submitted that there can be no doubt that the

NOIDA has been constituted by the Industrial Act. His contention

is that except for naming NOIDA or any other Industrial

Development Authority all matters have been specified in section

3(1) and the other provisions of the Industrial Act and, therefore,

it is not a case where NOIDA has been constituted under the

provisions of the Industrial Act. His submission is that even

otherwise it would not be appropriate to examine as to whether

NOIDA has been constituted by the State Act or under the State

Act having regard to the provisions of section 194-A(3)(iii)(c) of

the Act for the reason that even Life Insurance Corporation of

India is referred to in that section. According to him, there is no

need to meticulously examine the difference in using “by” or

“under” when the Legislature itself has not considered it

necessary to place such a fine distinction as is sought to be raised

by learned counsel for the appellants. His contention is that in

view of the exemptions granted under section 194-A(3)(iii)(f) of

the Act as also the notification dated 22 October 1970, NOIDA is

exempted from deduction of tax at source under section 194-A(1)

of the Act.

20

With regard to the decision of the Supreme Court in Dalco

Engineering Pvt. Ltd. (supra), which deals with the State

Financial Corporation Act, 1951, learned Senior Counsel

submitted that the Central Act in section 3 provides that the State

Government may, by notification in the Official Gazette,

establish a Financial Corporation for the State under such name

as may be specified in the notification, while in the case of

NOIDA, the State Act itself provides for constitution of an

Authority by issuance of a notification. His submission is that it is

for this reason that the Supreme Court in paragraph 23 of the

judgment rendered in Dalco Engineering Pvt. Ltd. (supra)

observed that the State Financial Corporation had been

established under a State Act.

What is important to notice is that in Dalco Engineering

Pvt. Ltd. (supra), the Supreme Court while dealing with the

State Financial Corporation, specifically observed that when the

words “by or under an Act” are preceded by the words

"established", it is clear that the reference is to a corporation that

it is brought into existence by an Act or under an Act.

It also needs to be noted is, as is also clear from the

preamble to the Industrial Act, that the Act provides for the

constitution of an Authority for the development of certain areas

in the State. Thus, the Act itself constitutes the Authority. Section

3(1) of the Act provides that the name of the area shall be added

before the Industrial Development Authority. In other words,

21

whether it be NOIDA or any other Authority that is to be

constituted under section 3(1) of the Act, the name of the

Authority has been indicated. So far as the NOIDA is concerned,

the name of the Authority is the New Okhla Industrial

Development Authority. Thus, except for naming a particular

Industrial Area Development Authority, since more than one

Authority could be constituted, the Authority has been constituted

by the Act and merely because the area of the Authority has not

been defined under the Act and has been left to the discretion of

the State Government, cannot, in our opinion, make any

difference for the purposes of determining whether it has been

established by an Act.

The Authority is a body corporate and consists of officers

of the State Government. The objects and functions of the

Authority have been clearly defined under section 6 of the

Industrial Act. The main functions are to acquire land in the

industrial development area by agreement or by acquisition under

the Land Acquisition Act; to prepare a plan for the development

of the industrial area and to provide amenities. The Authority has

also been empowered to levy tax as is clear from the provisions

of section 11. It empowers the Authority with the previous

approval of the State Government to levy such taxes, as it may

consider necessary, for maintaining or continuing any amenities

in the industrial development area. The Authority has to maintain

its own fund. The object of the Authority is to prepare in such

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form and at such time every year as the State Government may

specify, a budget. Section 41 deals with the control of the State

Government over the Authority. The dissolution of the Authority

is also provided for in section 58. It can appropriately be gathered

from the aforesaid provisions that NOIDA has been established

by the Industrial Act and otherwise also even by necessary

implications it is more than apparent that NOIDA has been

established by the State Industrial Act. There is, therefore, no

doubt that NOIDA owes its existence to a Statute which is the

fountainhead of its powers.

Even otherwise, the fine distinction sought to be made by

learned counsel for the appellants losses significance when the

provisions of section 194-A(3)(iii)(c) and (d) are examined. They

provide that the income credited or paid to the Life Insurance

Corporation of India established under the Life Insurance

Corporation Act, 1952 or the Unit Trust of India established

under the Unit Trust of India Act, 1963 are exempted from

payment of tax at source. There is no doubt that Life Insurance

Corporation of India and the Unit Trust of India are established

by the Acts. The Act, therefore, does not place any emphasis on

'by' or 'under' the Act.

In this view of the matter, reference to the Financial

Corporation Act by learned counsel for the appellants to

substantiate that NOIDA has been established under a State Act is

not of significance. This apart, as has been pointed out by learned

23

Senior Counsel for the respondent-Bank, the said Central Act

authorised the State Government to issue the notification whereas

the Industrial Act authorises the State Government to issue the

notification.

In this connection, we need to remind ourselves by

observations made in paragraph 9 in the judgment of S.S.

Dhanoa (supra). The Supreme Court pointed out that a

Corporation established “by” or “under” an Act of Legislature

can only mean a body corporate which owes its existence and not

merely its corporate status to the Act and in this connection the

Supreme Court referred to : a municipality; a zila parishad; or a

gram panchayat which owe their existence and status to an Act of

Legislature.

NOIDA has been granted a status of a Municipality under

Article 243-Q of the Constitution of India which deals with the

constitution of a Municipality. The said Article provides that

there shall be constituted in every State, – (a) a Nagar Panchayat

for a transitional area, that is to say, an area in transition from a

rural area to an urban area; (b) a Municipal Council for a smaller

urban area; and (c) a Municipal Corporation for a larger urban

area. The proviso to Article 243-Q, however, stipulates that a

Municipality under this clause may not be constituted in such

urban area or part thereof as the Governor may, having regard to

the size of the area and the municipal services being provided or

proposed to be provided by an industrial establishment in that

24

area and such other factors as he may deem fit, specify to be an

industrial township.

The State Government has issued a notification dated 24

December 2001 in exercise of the powers conferred under the

proviso to clause (1) of Article 243-Q of the Constitution. The

said notification provides that having regard to the size of

NOIDA which has been declared to be an Industrial Development

Area by a notification dated 17 April 1976 and the municipal

services being provided by NOIDA, the Governor is pleased to

specify that NOIDA would be an “Industrial Township” with

effect from the date of publication of the notification. This clearly

means that instead of Municipal Corporation providing services,

NOIDA would provide the said services and if that be so, then as

observed by the Supreme Court in S.S. Dhanoa (supra), NOIDA

will owe its existence to an Act of the State.

We have, therefore, no manner of doubt from a reading of

the provisions of the Industrial Area Development Act that the

NOIDA has been constituted by the State Act and, therefore,

entitled to exemption of payment of tax at source under section

194-A(1) of the Act.

The decision of the Division Bench of this Court in New

Okhla Industrial Development Authority (supra), on which

reliance has been placed by learned counsel for the appellants,

would, therefore, not come to the aid of the appellants as it was

restricted to the issue as to whether NOIDA would be a local

25

authority or not and did not deal with the issue involved in this

appeal as to whether the NOIDA is a Corporation established by a

State Act.

We, therefore, answer the question of law framed by us in

negative and hold that NOIDA is a Corporation established by the

Uttar Pradesh Industrial Area Development Act, 1976.

The appeal is, accordingly, dismissed.

Order Date :- 04.04.2016

GS

(Dilip Gupta, J.)

(Surya Prakash Kesarwani, J.)