SC to check if Noida was established under UP law

The Supreme Court (SC) has agreed to examine a plea by the Income-Tax Department, which has sought to know whether the North Okhla Industrial Development Authority (Noida) is a corporation established by the Uttar Pradesh (UP) government under the state industrial development law or not.

The I-T Department filed the appeal against an Allahabad High Court (HC) order, which held that Noida was a corporation established under the Act and, therefore, banks were not liable to deduct income tax at source on fixed deposits.

A Bench of Justices R K Aggarwal and A M Sapre stated that it will look into the appeal. The Apex Court also refused to grant any stay on the HC direction to the I-T department and asked the banks to file their counter affidavit within four weeks.

Appearing for the Punjab National Bank, Counsel Pankaj Garg, assisted by lawyer Milind Garg, told the Bench that the I-T Department appeal was not maintainable as Noida was a corporation established under the state law and banks were not under the statutory obligation to deduct and pay income tax.

The I-T department has stated before the Apex Court that the issue for consideration is whether Noida is entitled for exemption from deduction of income tax at source under the provisions of a notification issued in 1970 under the Income Tax Act.

Commenting on the issue, Noida Authority Finance Controller Manmohan Mishra said: "The Allahabad HC order brought big relief to Noida Authority, as it will not be under any liability to pay Rs 10,000 crore to the I-T Department. The Authority will produce facts before the Apex Court in its support."