No Adverse Action Permissible for Non-Deduction of TDS on Lease Rent Paid to GNOIDA

By | August 22, 2026
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No Adverse Action Permissible for Non-Deduction of TDS on Lease Rent Paid to GNOIDA
Issue
Whether an assessee can be subjected to adverse action under Section 201 for non-deduction of tax at source (TDS) under Section 194-I of the Income-tax Act, 1961 (Section 393 / Section 398 of the Income-tax Act, 2025) on annual lease rent paid to Greater Noida Industrial Development Authority (GNOIDA) for AY 2012-13, given binding jurisdictional judicial precedents protecting assessees where non-deduction occurred at GNOIDA’s insistence.
Facts
  • Transaction: The assessee paid annual lease rent to GNOIDA during Assessment Year 2012-13.
  • TDS Non-Deduction: The assessee did not deduct 1% tax at source under Section 194-I from the annual lease rent payments.
  • Non-Deduction Context: The non-deduction of tax was at the explicit insistence/demand of GNOIDA, which held out that it was not subject to TDS.
  • Judicial Precedent (Rajesh Projects): The Delhi High Court in Rajesh Projects (India) (P.) Ltd. v. CIT (TDS) held that GNOIDA is not “Government” for TDS exemption purposes, thereby mandating 1% TDS under Section 194-I.
  • Protective Direction in Precedent: In the same decision, the High Court expressly directed that no adverse action be taken against assessees where tax was not deducted due to GNOIDA’s insistence, and directed the Assessing Officer to grant a hearing to all similarly situated assessees.
Decision
  • Protection Under Precedent Applicable: Following the binding ruling in Rajesh Projects (India) (P.) Ltd., the Court held that the assessee falls within the protective scope of the judgment.
  • No Adverse Action: The respondent-assessee could not be subjected to any adverse proceedings or penalties under Section 201 for failure to deduct tax at source on annual lease rent paid to GNOIDA.
  • Outcome: The issue was decided in favor of the assessee.
Key Takeaways
  • Protection Against Conflicting Authority Demands: Assessees are protected from penalty/interest liability when non-deduction of tax occurs due to explicit directives or insistence by statutory authorities like GNOIDA.
  • Scope of GNOIDA TDS Status: While GNOIDA does not enjoy the status of “Government” for automatic TDS exemption under Section 194-I, historical defaults driven by GNOIDA’s directives cannot be penalized retrievably.
  • Uniformity in Judicial Relief: Directions issued by High Courts providing relief to a class of “similarly situated assessees” apply directly to bar recovery or adverse proceedings under Section 201 for corresponding assessment years.
HIGH COURT OF DELHI
Commissioner of Income-tax (TDS)-2
v.
Sikka Infrastructure (P.) Ltd.*
Dinesh Mehta and Rajneesh Kumar Gupta, JJ.
IT Appeal No. 384 of 2025†
AUGUST  4, 2026
Anurag Ojha, Sr. Standing Counsel, V.K. Saksena and Ms. Hemlata Rawat, Junior Standing Counsels for the Appellant. Siddarth Malhotra, Adv. for the Respondent.
ORDER
1. By way of the present appeal, which is filed under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’), the Department has challenged the order dated 28.03.2025 passed by the Income Tax Appellate Tribunal, Delhi Bench, ‘G’, New Delhi (hereinafter referred to as ‘ITAT’) for the Assessment Year 2012-13 (hereinafter referred to ‘AY’) in ITA No. 2495/Del/2022.
2. Mr. Anurag Ojha, learned Senior Standing Counsel for the Department submitted that the Tribunal has dismissed the appeal filed by the Commissioner of Income Tax against the order dated 25.07.2022, passed by the Commissioner of Income Tax (Appeals), while relying upon the judgment of this Court in the case of Rajesh Projects (India) (P.) Ltd. v. CIT (TDS) 392 ITR 483 (Delhi) decided on 16.02.2017 as well as Mahagun (India) (P.) Ltd. v. ACIT 209 ITD 236 (Delhi – Trib.) decided by the ITAT, Delhi Bench E on 04.09.2024.
3. Mr. Ojha, learned Senior Standing Counsel for the Department submitted that the judgment in the case of Rajesh Projects (supra) was passed in peculiar facts and since the present assessee was not before this Court and thus, what has been held by this Court in its judgment dated 16.02.2017, passed in the case of Rajesh Projects (supra) cannot decide respondent’s fate.
4. He further invited Court’s attention towards paragraph No. 20(2) of the judgment and submitted that it cannot be presumed that the respondent/ assessee was also insisted by the Greater Noida Industrial Development Authority (hereinafter referred to as ‘GNOIDA’) not to deduct tax from the payment being made to it.
5. Learned counsel for the respondent, on the other hand, invited Court’s attention towards paragraph No. 21 of the aforesaid judgment and pointed out that the High Court in unambiguous terms, had directed the Revenue to provide opportunity of hearing not only to the petitioner but also to all those who were likely to be affected by such judgment.
6. He submitted that no opportunity of hearing was accorded to the respondent/assessee, who was also made to believe by the GNOIDA that, it being a Government authority, no tax is required to be deducted.
7. Heard learned counsel for the parties.
8. A perusal of the judgment passed in the case of Rajesh Projects (supra), makes it abundantly clear that this Court had clearly held that GNOIDA does not fall within the ambit of expression ‘Government’ and thus, one percent tax is required to be deducted from the annual lease rent being paid to it. But while holding so, this Court had observed that since it was at the insistence of the authority that the concerned assessee could not and did not deduct tax, it was held that no adverse action shall be taken against the assessees because of the non-deduction of tax.
9. The period in question is indisputably covered by the judgment inasmuch as the impugned Assessment Order relates to AY 2012-13, whereas the case of Rajesh Projects (supra) related to Financial Years (FY) 2010-11 to 2012-13 (AY 2011-12 to 2013-14). True it is that the respondent/assessee was not a part of the batch of petitioners in whose cases above referred order was passed by this Court on 16.02.2017. But in para 21 of the judgment, the High Court directed the AO to hear all the similarly situated assessees. Since the respondent was not heard, it could not lead evidence that it was also insisted by GNOIDA that no tax be deducted.
10. We are not much convinced with the arguments of Mr. Ojha, learned Senior Standing Counsel, respondent/assessee has failed to prove that it was also persuaded by the GNOIDA not to deduct tax from the payment being made to it.
11. It cannot be believed that the authority would ask Rajesh Projects (supra) and other petitioners (who had filed the writ petitions) not to deduct tax from the payment being made to it, while not saying so to the respondent/ assessee. A stand of an authority would naturally be similar qua all the similarly situated persons dealing with it.
12. Had it not been so, nothing prevented the respondent/assessee from making deduction of applicable tax from the payments being made to the authority.
13. In any event, what is under challenge is the respondent’s responsibility or liability to deduct tax at source, and that too from GNOIDA. The assessment year in question is 2012-13, assessment of such authority (if any) must have been finalised by now. We are, therefore, not inclined to interfere with the order passed by the Tribunal and authorities below.
14. The present appeal, therefore, fails.