No TDS u/s 194A on Interest Paid to NHAI: ITAT Delhi

By CA Vijayakumar Shetty Income Tax Judiciary October 7, 2026

TaxGuru Citation: 2026 taxguru.in 14951
Case Name: Welspun Aunta Simaria Project Pvt. Ltd. Vs DCIT (ITAT Delhi)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Related Assessment Year: 2019-20
Courts: All ITAT, ITAT Delhi

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Welspun Aunta Simaria Project Pvt. Ltd. Vs DCIT (ITAT Delhi)

No TDS Toll on NHAI Interest: ITAT Deletes ₹12.36 Lakh Demand

A specific exemption from tax deduction cannot be denied by importing conditions from a CBDT circular dealing with a different basis of relief. Applying this principle, the Delhi ITAT held that interest paid to the National Highways Authority of India (NHAI) on mobilisation advances was outside the TDS requirement under Section 194A.

In Welspun Aunta Simaria Project Pvt. Ltd. v. DCIT, ITA No. 6559/Del/2025, concerning Assessment Year 2019–20, the Tribunal deleted the demand under Sections 201(1) and 201(1A) aggregating to ₹12,36,385. The order was pronounced on 6 October 2026 by S. Rifaur Rahman, Accountant Member, and Raj Kumar Chauhan, Judicial Member.

The Background: Interest on Mobilisation Advances

The assessee was engaged in infrastructure development involving the four/six-laning of the Aunta–Simaria section of National Highway 31, including the Ganga Bridge and approach road, in Bihar.

During the relevant year, it paid ₹67,19,486 as interest to NHAI on mobilisation advances, without deducting tax at source.

The Assessing Officer held that the payment attracted Section 194A and treated the company as an assessee in default. A demand of ₹6,71,948 under Section 201(1) was raised, together with interest of ₹5,64,437 under Section 201(1A).

The first appellate authority upheld the demand, relying on CBDT Circular No. 18/2017 dated 29 May 2017. The assessee consequently approached the Tribunal.

The Assessee’s Case: A Specific Statutory Exception

The assessee relied principally on Section 194A(3)(iii)(f), read with Notification No. S.O. 3489 dated 22 October 1970.

Section 194A(3) provides exceptions to the obligation to deduct tax on interest. The relevant notification covers corporations established by a Central, State or Provincial Act.

NHAI, the assessee explained, was established under Section 3 of the National Highways Authority of India Act, 1988, a Central enactment. Accordingly, it fell within the notified category, and interest paid to it was excluded from the TDS requirement.

The assessee also advanced an alternative argument under Section 196 and placed on record an approval dated 13 February 2009 granting NHAI exemption under Section 10(23C)(iv). However, the Tribunal’s operative conclusion rested on the specific exclusion under Section 194A and the 1970 notification.

Revenue’s Reliance on Circular No. 18/2017

The Revenue maintained that NHAI did not qualify for relief from TDS under Circular No. 18/2017, which addresses entities whose income is unconditionally exempt under Section 10.

The assessee countered that the circular could not be interpreted as making unconditional income-tax exemption a prerequisite for every exemption from TDS.

Its argument was that the circular provided a separate basis of relief and had to be read harmoniously with the Act and existing notifications. It could not impose additional conditions upon an independently available exclusion.

Otherwise, the specific exemption granted by Notification No. 3489 would effectively become redundant.

Earlier Decisions Supporting the Exclusion

The Tribunal considered CIT v. Canara Bank, [2016] 386 ITR 504 (Allahabad), subsequently affirmed by the Supreme Court in [2018] 406 ITR 161.

That litigation concerned the application of the same notification to NOIDA, a corporation established by a State enactment. The decisions supported the exclusion of interest paid to the qualifying statutory corporation from the TDS obligation.

The Tribunal also relied on Punjab National Bank v. ACIT (TDS), [2023] 153 taxmann.com 280 (Mumbai Tribunal).

In that case, interest paid to the Mumbai Metropolitan Region Development Authority (MMRDA) was held covered by the notification because MMRDA had been established under the relevant statutory enactment. The demand for non-deduction and consequential interest were therefore deleted.

Tribunal’s Finding: The Circular Cannot Defeat the Notification

The Delhi ITAT found that NHAI fell within the category of corporations covered by Notification No. 3489.

It accepted the assessee’s contention that the Revenue’s interpretation of Circular No. 18/2017 would render the notification redundant, an interpretation that was not legally permissible.

Once the payment qualified for the specific exclusion, liability under Section 201(1) could not be imposed merely because NHAI might not satisfy the conditions referred to in the circular.

The Tribunal therefore held that no tax was deductible under Section 194A on the ₹67,19,486 interest payment. It deleted the principal demand of ₹6,71,948 and, consequently, the interest of ₹5,64,437. The assessee’s appeal was allowed.

Author’s Comments

The ruling draws a useful distinction between exemption of the recipient’s income and exclusion of a payment from TDS. These may arise through different provisions, and the conditions governing one route cannot automatically be imposed on another.

For practitioners, the decision highlights the importance of identifying the precise statutory provision and notification supporting non-deduction. The legal character of the recipient matters: the reasoning concerns a qualifying statutory corporation, rather than government ownership alone.

The central lesson is clear: a circular must be read alongside the applicable statutory exemption; it cannot be used to extinguish that exemption by adding a condition absent from it.

Cases Discussed

CIT Vs Canara Bank, [2018] 406 ITR 161 (Supreme Court) — Affirmed the Allahabad High Court decision concerning applicability of Notification No. 3489 to a statutory corporation.
CIT Vs Canara Bank, [2016] 386 ITR 504 (Allahabad High Court) — Relied upon; held that payment to a qualifying corporation established under a statutory enactment was outside the TDS obligation under Section 194A read with Notification No. 3489.
Punjab National Bank Vs ACIT (TDS), [2023] 153 taxmann.com 280 (Mumbai Tribunal) — Followed; held that MMRDA fell within Section 194A(3)(iii)(f) read with Notification No. S.O. 3489 dated 22.10.1970.

FULL TEXT OF THE ORDER OF ITAT DELHI

1. The appeal o f the assessee is directed against the order dated 18.08.2025 of ld . CIT(A)/Addl./JCIT(A)-10, Mumbai passed u/s 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’)arising out o f the order dated 24.03 .2025 passed u/s 201(1)/201(1A) of the Ac t wherein the assessee was treated as an assessee-in-default for non-deduction of tax at source on interest paid to the National Highways Authority of India (NHAI).

2. Brief facts as culled out from the orders o f the authorities below are that the assessee is engaged in infrastructure development o f Four/Six Laning of Aunta Simaria (Ganga Bridge with approach road) section of NH 31 from KM 197 .900 to 206.050 (Design Chainage) and KM 204 .741 to KM 209 .945 (existing chainage) (total design length 8.150 KM) in State o f Bihar. During the year under consideration, the assessee had paid interest o f Rs.67 ,19 ,486/- to NHAI on mobilization advances. The Assessing Officer/TDS Officer held that the assessee was liable to deduct tax at source u/s 194A of the Act and accordingly raised a demand of Rs.6,71 ,948/- u/s 201(1) of the Act. Consequential interest of Rs.5 ,64 ,437/- was also charged u/s 201(1A) o f the Act, resulting in total demand of Rs .12,36 ,385/- .

3. Aggrieved by the assessment order , the assessee preferred an appeal before the ld . CIT(A)who relying on CBDT Circular No . 18/2017 dated 29.05.2017 , upheld the action o f the AO and dismissed the appeal .

4. Aggrieved by the impugned order, the assessee is in appeal before us and has raised the following grounds of appeal:

“1 . The Addl ./Joint CIT(A) failed to appreciate that the appellant had not committed any de fault u/s 201(1)/201(1A), and hence, Addl ./Joint CIT(A) erred in upholding the order o f the AO holding the appellant as assessee-in-default for an amount of Rs.12 ,36 ,385/- .”

5. We have heard the ld . AR and the ld. DR. The ld . AR a t the very outset submitted that the issue is squarely covered by the provisions of section 194A(3)(iii)(f) o f the Ac t read with S.O ./Notification No .3489 dated 22 .10 .1970. It was submitted tha t the said Notification specifically covers “any corporation established by a Central, State or Provincial Act”. It was further submitted that NHAI is a corporation established under section 3 o f the National Highways Authority of India Ac t, 1988 , which is a Central Act. Therefore , the payment of interest to NHAI falls within the statutory exception contained in section 194A(3)(iii)( f) , and consequently no tax was deductible at source on such payment. The ld . AR further relied upon the decisions of the Hon’ble Allahabad High Court in CIT vs. Canara Bank , [2016] 386 ITR 504 (All.) , which was subsequently upheld by the Hon’ble Supreme Court in CIT vs. Canara Bank, [2018] 406 ITR 161 (SC), and the decision o f the co-ordinate Bench in Pun jab National Bank vs. ACIT (TDS) , [2023] 153 taxmann.com 280 (Mum.-Trib .).

6. The ld . AR further relied upon the order dated 13 .02.2009 of Director General of Income Tax (Exemptions) wherein the National Highways Authority of India has been approved for the purpose of exemption from Income-tax under sub-clause (iv) of clause (23C) of section 10 of the Act, extracted below as under:

DGIT(E)/10(23C)(iv)/2009
Government of India
Ministry of Finance
Department of Revenue
Director General of Income-tax (Exemptions)

New Delhi
13^th February, 2009

ORDER

In exercise of the powers conferred by the Sub-Clause (iv) of Clause (23C) of Section 10 of the Income-tax Act, 1961 (43 of 1961), National Highways Authority of India (Ministry of Shipping, Road Transport & Highways), G-5 & 6, Sector-10, Dwarka, New Delhi – 110075 is hereby approved for the purpose of the said sub-clause subject to the following conditions namely:-

(a) The assessee will apply its income, or accumulate for application, wholly and exclusively to the objects for which it is established and in a case where more than fifteen per cent of its income is accumulated on or after 1st day of April, 2002, the period of the accumulation of the amount exceeding fifteen per cent of its income shall in no case exceed five years;

(b) The assessee will not invest or deposit its funds (other than voluntary contributions received and maintained in the form of jewellery, furniture etc.) for any period during the previous years relevant to the assessment years mentioned above otherwise than in any one or more of the forms or modes specified in sub-section (5) of Section 11;

(d) This order will not apply in relation to any income being profits and gains of business unless the business is incidental to the attainment of the objectives of the assessee and separate books of accounts are maintained in respect of such business;

(e) The assessee will regularly file its return of income before the Income-tax authority in accordance with the provisions of the Income-tax Act, 1961;

(f) That in the event of dissolution, its surplus and the asset will be given to a charitable organization with similar objectives and no part of the same will go to any of the trustees of the society.

(g) The assessee will get its accounts audited by an accountant as defined in explanation below sub section (2) of section 288 and furnish them along with the return of income. The report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.

2. Taxability or otherwise of the income of the Institution would be separately considered as per the provisions of the Income-tax Act, 1961.

3. This order is applicable for Asstt. Year 2008-09 and onwards.

4. The above order is liable to be withdrawn by the prescribed authority, if it is subsequently found that the activities of the assessee are not genuine or if they are not carried out in accordance with all or any of the conditions subject to which it was approved.

Sd/-
(NARINDAR SINGH)
Director General of Income-tax
(Exemptions), New Delhi.

7. The ld. AR has also filed written submissions in support of his above arguments, extracted below as under:

“4. The submission of the Appellant is that the Appellant was not required to deduct tax at source on the above payment to NHAI. The legal basis for the same is as follows:

I. Payment of interest to NHAI is covered in the exception contained in Section 194A(3)(iii)(f)

i. Sub-section (3) of Sec. 194A provides that the obligation to deduct tax at source u/s 194A(1) shall not apply to income credited or paid to such other institution which the Central Government may notify in this behalf.

ii. For the purpose of sec. 194A(3)(iii)(f), the Govt. has issued S.O./Notification No. 3489 dated 22.10.1970 (pg. 26 of Assessee Paperbook). In the said Notification, the Government has notified “any corporation established by a Central, State or Provincial Act”.

iii. The CBDT has also issued Notification dated 16.05.2023 (pg. 27 of Assessee Paperbook) notifying institutions under section 194A(3)(iii)(f). The said Notification consolidates all such Standing Orders/Notifications issued by the Govt., and also refers to the abovementioned Notification No. 3489 dated 22.10.1970 @ pg. 28 of Assessee Paperbook (second-last entry @ Pg-29).

iv. NHAI is a corporation established under Section 3 of the National Highways Authority of India Act, 1988 (the “NHAI Act”) which is a Central Act viz. an Act of the Parliament (Bare Act @ pg. 46 of Assessee Paperbook).

II. Even as per Section 196(iii), no tax was required to be deducted at source as NHAI is “a corporation established by or under a Central Act”

i. Sec. 196(iii) provides that a person is not required to deduct tax at source from payments made to a corporation established by or under a Central Act.

ii. Since NHAI is a corporation established under section 3 of the NHAI Act as stated above, even sec. 196 exempted the Appellant from deducting tax on the payment to NHAI.

5. Therefore, the Appellant was not required by law to deduct tax at source on interest paid to NHAI.

Judgements relied on by the Appellant

6. The ratio of the following judgements is squarely applicable to the present case:

i. CIT v. Canara Bank [2016] 386 ITR 504 (All.) (HC) – Pg. 67 of Assessee Paperbook New Okhla Industrial Development Authority (NOIDA) was a corporation established by a State Act and was therefore entitled to exemption of payment of tax at source under Section 194A. This judgement also relies on S.O./Notification No. 3489 dated 22.10.1970 relied on by the present Appellant (Para 20, 21, 41 & 42).

ii. The above judgement has been upheld by the Supreme Court in CIT v. Canara Bank [2018] 406 ITR 161 (SC) – Pg. 79 of Assessee Paperbook – Relevant paragraph #31.

iii. Punjab National Bank v. ACIT (TDS) [2023] 153 taxmann.com 280 (Mum.) (Trib.) – Pg. 61 of Assessee Paperbook Mumbai Metropolitan Region Development Authority (MMRDA), established under the Mumbai Metropolitan Region Development Authority Act, 1974 falls under the exclusion provided under Section 194A(3) by virtue of S.O./Notification No. 3489 dated 22.10.1970, and thus, it was held that the assessee could not be treated as an assessee-in-default for non-deduction of tax on payment of interest to MMRDA (Para 15 & 16).

Reliance on Circular No. 18/2017 by the Ld. DR is incorrect

7. During the course of the hearing, the Ld. DR placed reliance on the findings on the last page of CIT(A) order and more particularly on Circular No. 18/2017 dated 29.05.2017 (Pg. 23 of Assessee Paperbook) to contend that the exemption from the requirement to deduct tax at source is available only to entities whose income is unconditionally exempt under Section 10, and NHAI is not such an entity.

8. The submission of the Ld. DR is incorrect due to the following reasons:

i. The statutory provisions of section 194A(3)(iii)(f) and section 196 are unambiguous and Circular No. 18/2017 cannot be interpreted to impose additional conditions which even the statutory provisions do not impose;

ii. Circular No. 18/2017 deals only with all “entities whose income is exempted under section 10”. It cannot be interpreted to mean that unless an entity’s income is unconditionally exempt under Section 10, then payments made to it have to be mandatorily subjected to TDS notwithstanding other statutory provisions and Notifications;

iii. Circular No. 18/2017 only lays down an additional relaxation/exemption from TDS provisions if the payee’s income is unconditionally exempt under Section 10. It ought to be read harmoniously with the statutory provisions and other Notifications;

iv. If the interpretation of the Ld. DR is accepted, then it would render S.O./Notification No. 3489 dated 22.10.1970 completely otiose. Hence, such an interpretation must be avoided;

v. The submission of the Ld. DR amounts to stating that a circular can override or restrict the unambiguous language of statutory provisions (sec. 196), which is contrary to the basic principles of interpretation.”

8. The ld. DR, on the other hand, relying upon the orders of the lower authorities and CBDT Circular No.18/2017 dated 29.05.2017, submitted that NHAI was not eligible for exemption from TDS and, therefore, the assessee was liable to deduct tax u/s 194A and was rightly treated as an assessee-in-default u/s 201(1) of the Act.

9. We have considered the rival submissions and perused the material available on record. The undisputed fact is that the assessee has paid interest of Rs.67,19,486/- to NHAI on mobilization advances. The controversy before us is whether the said payment was liable for deduction of tax at source u/s 194A of the Act and consequently whether the assessee could be treated as an assessee-in-default u/s 201(1) of the Act. However, section 194A(3) provides specific exceptions to the applicability of the said provision. Clause (iii)(f) of section 194A(3) reads as under:

“194A……………

(3)……………

(iii)……………

(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;”

10. In the present case, NHAI has been established under section 3 of the National Highways Authority of India Act, 1988, which is a Central Act enacted by Parliament. Therefore, NHAI falls within the description of a corporation established by a Central Act and consequently falls within the ambit of Notification No.3489 dated 22.10.1970. For the sake of brevity and ready reference, the said notification is reproduced as under:

Income Tax Department
Ministry of Finance, Government of India

S.O. 3489 : Notification: S.O.3489 Date of Issue: 22/10/1970

Particulars	Details
Notification No.	S.O. 3489
Notification Date	22/10/1970
Upload Date	22/10/1970

SECTION 194A(3)(iii)(f) OF THE INCOME-TAX ACT, 1961 – DEDUCTION OF TAX AT SOURCE – INTEREST OTHER THAN “INTEREST ON SECURITIES” – NOTIFIED INSTITUTION

NOTIFICATION S.O. 3489 [NO. 170 (F.NO. 12/164/68-ITCC/ITJ)], DATED 22-10-1970

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 notifies 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.

11. We also find substantial force in the contention of the ld. AR that reliance placed by the authorities below upon CBDT Circular No.18/2017 dated 29.05.2017 is incorrect. For the sake of brevity and ready reference, the said circular is reproduced as under:

CIRCULAR NO. 18/2017

F. No. 385/01/2015-IT(B)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

North Block, New Delhi
29^th May, 2017

Subject: Requirement of tax deduction at source in case of entities whose income is exempted under Section 10 of the Income-tax Act, 1961 – Exemption thereof.

1. The Central Board of Direct Taxes (the Board) had earlier issued Circular No. 4/2002 dated 16.07.2002 and Circular No. 7/2015 dated 23.04.2015 which laid down that in case of such entities, whose income is unconditionally exempt under Section 10 of the Income-tax Act (the Act) and who are also statutorily not required to file return of income as per Section 139 of the Act, there would be no requirement for tax deduction at source (TDS) from the payments made to them since their income is anyway exempted from tax under the Act. The issue of whether exemption from TDS can be extended to more entities on these principles and whether the exemption is needed to be withdrawn in respect of some of the exempted entities was examined by the Board.

2. Examination of the eligibility of entities for exemption from TDS on the principle of unconditional exemption and no requirement to file return revealed that Circulars No. 4/2002 and 7/2015 are required to be updated to make the following changes:

- Entities that meet both the above mentioned conditions but are not mentioned in the aforesaid Circulars need to be included in the list of exempted entities.
- Entities that are mentioned in Circular No. 4/2002 but their exemption from income tax has since been withdrawn need to be removed from the list of exempted entities.
- Entities that are mentioned in Circular No. 4/2002 but because of subsequent amendment they are now required to mandatorily file their returns of income u/s 139 need to be removed from the list of exempted entities.

3. In view of the above, a revised list of entities exempted from TDS has been drawn by adding entities in the first category listed above to the entities mentioned in Circular No. 4/2002 and Circular No. 7/2015 and removing entities in second and third categories from the list of existing entities eligible for exemption from TDS.

4. Accordingly, it has been decided that in case of below mentioned funds or authorities or Boards or bodies, by whatever name called, referred to in section 10 of the Income-tax Act, whose income is unconditionally exempt under that section and who are also statutorily not required to file return of income as per section 139 of the Income-tax Act, there would be no requirement for tax deduction at source, since their income is anyway exempt under the Income-tax Act –

(i) “local authority”, as referred to in the Explanation to clause (20);

(ii) Regimental Fund or Non-public Fund established by the armed forces of the Union referred to in clause (23AA);

(iii) Fund, by whatever name called, set up by the Life Insurance Corporation of India on or after 1st August, 1996, or by any other insurer referred to in clause (23AAB);

(iv) Authority (whether known as the Khadi and Village Industries Board or by any other name) referred to in clause (23BB);

(v) Body or authority referred to in clause (23BBA);

(vi) SAARC Fund for Regional Projects set up by Colombo Declaration referred to in clause (23BBC);

(vii) Insurance Regulatory and Development Authority referred to in clause (23BBE);

(viii) Central Electricity Regulatory Commission referred to in clause (23BBG);

(ix) Prasar Bharati referred to in clause (23BBH);

(x) Prime Minister’s National Relief Fund referred to in sub-clause (i), Prime Minister’s Fund (Promotion of Folk Art) referred to in sub-clause (ii), Prime Minister’s Aid to Students Fund referred to in sub-clause (iii), National Foundation for Communal Harmony referred to in sub-clause (iiia), Swachh Bharat Kosh referred to in sub-clause (iiiaa), Clean Ganga Fund referred to in sub-clause (iiiaaa) of clause (23C);

(xi) Provident fund to which the Provident Funds Act, 1925 (19 of 1925) referred to in sub-clause (i), recognized provident fund referred to in sub-clause (ii), approved superannuation funds referred to in sub-clause (iii), approved gratuity fund referred to in sub-clause (iv) and funds referred to in sub-clause (v) of clause (25);

(xii) Employees’ State Insurance Fund referred to in clause (25A);

(xiii) Agricultural Produce Marketing Committee referred to in clause (26AAB);

(xiv) Corporation, body, institution or association established for promoting interests of members of Scheduled Castes or Scheduled Tribes or backward classes referred to in clause (26B);

(xv) Corporation established for promoting interests of members of a minority community referred to in clause (26BB);

(xvi) Corporation established for welfare and economic upliftment of ex-servicemen referred to in clause (26BBB);

(xvii) New Pension System Trust referred to in clause (44).

4. This circular supersedes earlier Circulars on this issue e.g. Circular No. 4/2002 dated 16.07.2002 and Circular No. 7/2015 dated 23.04.2015 with effect from the date of issue of this Circular.

5. Hindi version shall follow.

(Sandeep Singh)
Under Secretary to the Govt. of India

12. The Hon’ble Allahabad High Court in CIT vs. Canara Bank (supra) had considered the applicability of Notification No.3489 dated 22.10.1970 in the context of a corporation established under a statutory enactment and held that the payment made to such corporation was outside the purview of the TDS obligation under section 194A. The said decision was subsequently affirmed by the Hon’ble Supreme Court. The co-ordinate Bench of the Tribunal in Punjab National Bank vs. ACIT (TDS) (supra) has also followed the same principle in respect of a statutory authority established under an Act. Relevant portion of the order as contained in para 15 & 16, extracted below as under:

“15. As regards the deduction of tax at source under section 194-A of the Act on the interest paid by the assessee on delayed payment of additional premium, we find that section 194A(3)(iii)(f) of the Act reads as under:—

“(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: Provided that no notification under this sub-clause shall be issued on or after the 1st day of April, 2020;”

16. We further find that in the exercise of the power conferred by the aforesaid provision, the Central Government vide Notification No. S.O.3489 dated 22/10/1970, inter-alia, notified any corporation established by a Central, State, or Provincial Act for the purpose of section 194A(3)(iii)(f) of the Act. Since MMRDA has been established under the Mumbai Metropolitan Region Development Authority Act, 1974, therefore we are of the considered view that the payment made to MMRDA will fall under the exclusion provided under sub-section (3) of section 194-A of the Act. Thus, the assessee cannot be held to be ‘assessee in default’ for non-deduction of tax on the payment of interest on delayed payment of additional premium. Accordingly, the demand raised by the AO under section 201(1) for non-deduction of tax under section 194-A of the Act and interest levied under section 201(1A) of the Act for the assessment year 2008-09 is deleted. As a result, the appeal by the assessee for the assessment year 2008-09 is allowed.”

13. With regard to the reliance of ld. DR as well as ld. CIT(A) in his order on Circular No. 18/2017 (supra), the ld. AR has made the following written submission stating that the said finding of the ld. CIT(A) and submissions of ld. DR are not correct for the following reasons:

iv. If the interpretation of the Ld. DR is accepted, then it would render S.O./Notification No. 3489 dated 22.10.1970 completely otiose. Hence, such an interpretation must be avoided;

14. We have considered the above rival submissions. In the given facts and circumstances while relying upon the co-ordinate bench of Mumbai Tribunal in case of Punjab National Bank Vs. ACIT (supra), we are of the considered opinion that the submissions made by the ld. AR with respect to non-application of Circular No. 18/2017 dated 29.05.2017 (supra) are cogent and forceful. We are in agreement with the ld. AR that in case the Circular No. 18/2017 dated 29.05.2017 (supra) is to be made applicable in the case of the applicant, then the notification No. 3489 dated 22.10.1970 would become completely redundant and such interpretation in our opinion is not legally permissible about the said notification and we are convinced that the arguments made on behalf of the Revenue by the ld. DR with respect to applicability of Circular No.18/2017 (supra) are not legally sustainable and accordingly rejected.

15. In our considered opinion, once NHAI falls within the specific category of corporations covered by Notification No.3489 dated 22.10.1970 issued under section 194A(3)(iii)(f), the assessee cannot be fastened with liability u/s 201(1) merely on the basis that NHAI may not satisfy the conditions referred to in CBDT Circular No.18/2017. Accordingly, we hold that the interest payment of Rs.67,19,486/- made by the assessee to NHAI was not liable for deduction of tax at source u/s 194A of the Act. Consequently, the assessee could not have been treated as an assessee-in-default u/s 201(1) of the Act. In view of the above finding, the demand of Rs.6,71,948/- raised u/s 201(1) is not sustainable and is directed to be deleted. Since the demand u/s 201(1) itself does not survive, the consequential interest charged u/s 201(1A) amounting to Rs.5,64,437/- also cannot survive and the same is accordingly directed to be deleted.

16. In the result, the appeal of the assessee is allowed.

Order Pronounced in the Open Court on 06/10/2026.