Facts of the Case

The petitioner, Punjab and Sind Bank, challenged an order dated 28.02.2013 passed under Sections 201(1)/201(1A) of the Income Tax Act for Assessment Year 2005–06.

The dispute arose regarding non-deduction of TDS on interest payments made to NOIDA (New Okhla Industrial Development Authority). The Revenue treated the bank as an assessee in default and raised a demand.

Subsequently, a rectification order under Section 154 reduced the demand from ₹1,36,04,250 to ₹50,89,894. However, the petitioner failed to pursue remedies for several years.

Meanwhile, the issue had already been settled by the Supreme Court in Commissioner of Income Tax (TDS) Kanpur vs Canara Bank (2018) 9 SCC 322, where it was held that no TDS is required on such payments to NOIDA.

Issues Involved

  1. Whether the petitioner bank was liable to deduct TDS under Section 194A on interest payments made to NOIDA.
  2. Whether relief could be granted despite significant delay and laches by the petitioner.
  3. Whether retention of tax by the Revenue without authority violates Article 265 of the Constitution.

Petitioner’s Arguments

  • The issue of TDS liability on payments to NOIDA is already settled by the Supreme Court in the Canara Bank case.
  • The petitioner itself was a party in the batch of appeals before the Supreme Court (for AY 2011–12).
  • Since the legal position is settled, the demand raised under Sections 201(1)/201(1A) is unsustainable.
  • Public funds are involved; hence, refund should be granted.

Respondent’s Arguments

  • The petitioner approached the Court after an inordinate delay, and thus the petition is barred by delay and laches.
  • No additional factual pleadings were necessary; the defence was primarily based on delay.
  • Relief should be denied on procedural grounds despite the settled legal position.

Court’s Findings

  • The Court acknowledged that the legal issue is squarely covered by the Supreme Court judgment in Canara Bank’s case.
  • Although the petitioner was guilty of delay, the Court emphasized that:
    • The affected entity (NOIDA) is a State instrumentality and is blameless.
    • Public funds are involved.
  • Retention of tax by the Revenue would violate Article 265, as it would amount to collection of tax without authority of law.
  • The Court held that justice should prevail over procedural delay in such circumstances.

Court Order / Final Decision

  • The impugned order dated 28.02.2013 under Sections 201(1)/201(1A) read with Section 194A was quashed.
  • The Revenue was directed to refund ₹1,36,04,250 within three weeks.
  • The petitioner bank was directed to deposit ₹50,000 as costs with the Juvenile Justice Fund.
  • NOIDA was given liberty to recover compensatory interest from the petitioner bank.

Important Clarifications

  • Even in cases of delay, courts may grant relief where:
    • Public funds are involved, and
    • The legal issue is conclusively settled.
  • Article 265 acts as a constitutional safeguard against unlawful tax collection.
  • The judgment reinforces that substantive justice prevails over procedural lapses in exceptional cases.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS01082023CW512023_114627.pdf

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