Sunday, 19 March 2017

Whether insurance company can deduct TDS in respect of interest payable on compensation granted under motor accident claim petition?

The Division Bench of this
Court in the case of Gauri Deepak Patel & Ors.(supra) has accepted
the interpretation of Section 194A as laid down in the decision of the
Gujarat High Court in the case of “Smt.Hansagauri Prafulchandra
Ladhani Vs. Oriental Insurance Co.Ltd.”7
and accordingly has laid
down   a   procedure   under   which   the   Insurance   companies   or   the
owners of the motor vehicles depositing the amount in compliance of
the Award of the Motor Accidents Claims Tribunal.These directions of
the Division Bench lay down a complete scheme which the Insurance
company is required to follow when the amount of compensation is
7 2007 ACJ 1897 (Gujarat)

deposited in pursuance of the Award of the Tribunal which include
the   interest   amount.     The   Division   Bench   issued   the   following
directions to be followed in all the cases arising  before the Tribunal:­
“6. Accordingly,   we   direct   that   the   following
procedure   as   laid   down   in   the   case   of   Hansaguri
Prafulchandra Ladhani, 2007 ACJ 1897 (Gujarat), shall
be followed in the present case and in all similar cases
arising   in   future   before   the   Motor   Accidents   Claims
Tribunal:
(i) The  insurance  companies or   the  owners  of   the
motor   vehicles   depositing   the   amounts   in   compliance
with the awards of the Motor Accidents Claims Tribunal
shall:
(a) first spread the interest amount over the
relevant financial years for the period from the
date of filing the claim petition till the date of
deposit.
(b) thereafter, if the interest for any particular
financial   year   exceeds   Rs.50,000/­,   separately
deposit before the Tribunal the amount liable to
be   deducted   at   source   under   the   provisions   of
section 194­A(3)(ix) of the Income Tax Act,1961.
Such amount shall not, however, straightaway be
paid over to Income Tax Department.
(c) produce   before   the   Claims   Tribunal   a
statement of computation of interest by spreading
the amount over the relevant years from the date
of claim application till the date of deposit if the
interest for any particular financial year exceeds

Rs.50,000 and also request the Tribunal to treat
the amount as a separate deposit.
(ii) The   Tribunal   shall   ensure   that   the   amount   of
interest accrued each year is apportioned amongst claims
on year to year basis.
(iii) If the interest payable to any claimant during any
particular   financial   year   exceeds   Rs.50,000,   Claims
Tribunal shall permit the insurance companies/owners to
pay   over  the   amount  liable   to  be  deducted  at   source
under   Section   194­A(3)(ix)   to   the   Income   Tax
Department in respect of that particular claimant for the
particular year, without prejudice to the claimant's case
that he is not liable to pay any income tax for that year.
(iv) For the financial year(s) for which the interest
payable   to   the   concerned   claimant   does   not   exceed
Rs.50,000, that Tribunal may permit such claimant to
withdraw the amount deposited as per direction (i)(b)
without   producing   the   certificate   from   the   concerned
income tax authority that there is no income tax liability
on the interest which has accrued on the compensation
awarded by the Tribunal.
(v) It   is   clarified   that   the   amount   other   than   the
amount liable to be deducted at source under Section
194­A(3)(ix) shall be invested/disbursed by the Tribunal.
(vi) When the claimants make applications before the
authority under the Income Tax Act,1961 for the refund
of the amount deducted under the provisions of Section
194­A(3)(ix) of the Act, the concerned authority shall
decide such applications with utmost expedition.”
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.1770 OF 2015
The New India Assurance Co.Ltd. 
 vs
Hussain Babulal Shaikh 
­­­
CORAM:      G.S.KULKARNI, J.

Dated:  15 November 2016
  Citation: 2017(2) MHLJ393

1. The Petitioner – New India Assurance Company Limited
has filed this petition challenging the order dated 21 November 2014
passed by the learned member of the Maharashtra Accident Claims
Tribunal, Mumbai (for short “the Tribunal”) whereby an application
of Respondent No.1 for issuance of warrant of attachment against the
Petitioner in execution of an award, for not depositing part of the
award amount, on the ground that the same has been deducted as
“tax deducted at source” (TDS), stands allowed.
2. Respondent No.1 is the original claimant who sustained
injuries in a motor vehicle accident occurred on 17 October 2005.
The Respondent No.1 had filed Claim Application No.1178 of 2006,
claiming compensation of Rs.50,00,000/­ from Respondent No.2 and
the Petitioner­Insurer.   The learned member of the Tribunal by his
judgment and order dated 30 July 2012 awarded compensation of

Rs.3,43,000/­ inclusive of no fault liability amount together with the
simple interest at the rate of 7.5% per annum from the date of filing
of the claim petition till realisation of the said amount.
3. The  case of the  Petitioner  is that it has satisfied the
Award   of   the   Tribunal   by   depositing   a   cheque   of   an   amount   of
Rs.3,23,502/­ towards the principal amount, after adjusting no fault
liability amount already paid and Rs.1,26,918/­ towards the interest
part, after deducting of tax at source (TDS) as per the provisions of
Section 194A(3)(ix) of the Income Tax Act,1961.  The TDS amount is
already   deposited   with   the   Income   Tax   Authority   and   the   TDS
certificate in the form No.16A is produced before the Tribunal.
4. The Respondent No.1 would contend before the Tribunal
that the Petitioner could not have deducted tax at source but ought to
have   deposited   the   full   award   amount.     Respondent   No.1   being
aggrieved   by   this   action   of   the   Petitioner   thus   moved   Execution
Application   No.38   of   2013   praying   for   issuance   of   warrant   of
attachment against the Petitioner.  According to Respondent No.1, the
Petitioner has defaulted in depositing the full amount as per the
Award   by   wrongly   deducting   TDS  of   Rs.40,034/­   which   was   the

balance amount liable to be paid by the Petitioner.
5. The   Petitioner   resisted   the   execution   application
interalia   contending   that   there   is   no  liability   to   deposit   the   said
amount, inasmuch as the Petitioner was under a legal obligation to
deduct the TDS as per the provisions of the Income Tax,1961 and the
same is deposited with the income tax authorities.  It is stated that
the TDS amount on interest paid as was deposited with the Income
Tax department, the Petitioner is not liable to pay any amount to
Respondent No.1.   The Petitioner produced a TDS certificate and
contended that in view of the TDS certificate, Respondent No.1 can
approach the Income Tax Authorities if so permissible and make a
claim for the said amount.
6. The   learned   member   of   the   Tribunal   relying   on   the
decision of the Division Bench of this Court in “Gauri Deepak Patel
& Ors. Vs. New India Assurance Co.Ltd. & Anr.”
1
 observed that the
Petitioner   has   not   followed   the   guidelines   as   contained   in   the
decision for depositing the TDS amount.   It is observed that the
Petitioner having knowledge of the provisions of the Income Tax Act
and the law laid down by the Division Bench ought not to have
1 2011 ACJ 1782

deducted a lumpsum TDS and deposited the same with the Income
Tax department.  It was observed that the Petitioner by deducting the
TDS amount has actually deprived Respondent No.1 from receiving
the award amount, and as the Petitioner was not ready to deposit the
amount, warrant of attachment was directed to be issued by passing
the following order:
“ ORDER
Application is allowed.
Issue attachment warrant under Order 21 rule 43
of CPC on process fee for attachment of three computers
in the office of the insurance company.  If the insurance
company   deposited   the   amount   before   issuance   of
attachment warrant then the warrant be stayed.”
7. On   the   above   conspectus,   learned   Counsel   for   the
Petitioner submits that the action of the Petitioner in depositing the
TDS amount was legal and valid in view of the provisions of Sections
194­A(3)(ix), 145A and 56(2)(viii) of the Income Tax Act,1961.  It is
submitted that the decision of the Division Bench of this Court in
Gauri Deepak Patel & Ors.(supra)  relied on behalf of Respondent
No.1 and referred in the impugned order, is clearly distinguishable,
as it does not take into consideration the said three provisions of the
Income   Tax   Act   which   are   required   to   be   read   conjointly.     It   is
submitted that even in terms of clause (vi) of the directions of the

Division Bench in  Gauri Deepak Patel & Ors.(supra),  Respondent
No.1   can   claim   refund   from   the   Income   Tax   Authorities.     It   is
submitted that the effect of the impugned order is that the Petitioner
is again made to pay the said amount to Respondent No.1, when the
amount is already deposited with the Income Tax Department.  This
would amount to double payment.   It is thus contended that the
Petitioner has rightly deducted the TDS and deposited the sum with
the Income Tax department in the name of Respondent No.1.  
8. As regards the application of the above provisions of the
Income Tax Act, learned Counsel for the Petitioner would submit that
on a conjoint reading of these provisions, following interpretation is
available:­ (a) The interest on compensation granted by MACT is
chargeable to tax in the year in which it is received by the Assesseeclaimant
in terms of Sections 145A(b) & 56(2)(viii) of Income Tax
Act.; (b) As per Section 194A(3)(ix), the person making payment of
interest on compensation granted by MACT is liable to deduct tax at
prescribed   rates   at   the   time   of   Credit   (Book   Entry)   or   payment
(Actual) if interest exceeds Rs.50,000/­ per claimant.  The provision
nowhere   requires   bifurcation   of   interest   part   over   the   years.   It
requires deduction of TDS only at the time of Book Entry or Actual

Payment.; (c) Looking from another angle, the interest part cannot be
determined unless the Award is passed by the Tribunal hence there is
no question of its bifurcation over the years by the deductor for the
period necessarily prior to passing of Award; (d) Section 194A  has to
be considered from the point of view of Deductor and not Assessee.
It cannot be seen whether the Assessee is liable to pay tax or not.; (e)
The   Assesses­Claimant   can   always   claim   refund   of   amount   from
Income Tax department if he is not liable to pay tax.
9. In support of his submissions, the learned Counsel for
the   Petitioner   has   relied   on   the   decision   of   “The   New   India
Assurance Co.Ltd. Vs. Mani S.Nachimuthu, N.”
2
, decision of the
Supreme   Court   in   the   case   of   “Bikram   Singh   &   Ors.   Vs.   Land
Acquisition Collector”
3
and the decision of the learned Single Judge
of   Andhra   Pradesh   High   Court   in   the   case   of   “The   National
Insurance Company Ltd. Vs. Yeliminti Appanna & Anr.”
4
.
10. On the other hand, the learned Counsel for Respondent
No.1 has supported the impugned order of the Tribunal principally
on the ground that the impugned order is in consonance with the
2 270 ITR 394 Mad.
3 (1997)10 SCC 243
4 Civil Revn.Petition No.994/12 decided on 22.4.2014

decision of this Court in Gauri Deepak Patel & Ors. (supra) and the
decision of the Gujarat High Court in the case “New India Assurance
Co.Ltd. Vs. Bhoyabhai Haribhai Bharvad”
5
. It is submitted that the
Petitioner had completely overlooked the binding mandate of the
directions as contained in the decision of the Division Bench of this
Court in Gauri Deepak Patel & Ors. (supra).  It is submitted that the
TDS   ought   not   to   have   been   deducted   from   the   Award   amount
inasmuch as  such  deduction  as made  by the  Petitioner  is clearly
impermissible under Section 194A of the Act as observed by the
Division   Bench.     It   is   submitted   that   the   Division   Bench   has
interpreted Section 194A(3)(ix) of the Income Tax Act and has laid
down   a   detailed   guidelines   to   be   followed   by   the   Insurance
Companies for deduction of TDS in payment of the award amount,
and   the   effect   is   that   the   award   amount   stands   reduced.     It   is
submitted that the Petitioner who is a accident victim cannot be in a
situation where he is required to again pursue proceedings with the
Income Tax Authorities in raising a claim of the TDS amount.  Such
intention   cannot   be   gathered   from   the   provisions   of   the   Motor
Vehicles Act. In support of his submission, the learned Counsel has
also placed reliance on the judgment of the learned Single Judge of
Madras High Court in the case “Managing Director, Tamil Nadu
5 (2016)72 Taxmann.com335 (Gujarat)

State   Transport   Corporation   (Salem)   Ltd.,   Bharathipuram,
Dharmapuri Vs. Chinnadurai”
6
.  
11. I have heard the learned Counsel for the parties. With
their assistance, I have also perused the impugned order, relevant
documents as placed in the paper book as also the various decisions
as relied on behalf of the parties.
12. The issue which falls for consideration of the Court is
'whether the Petitioner would be justified in deducting tax at source
(TDS) in respect of the interest payment made under the award of
the   Tribunal.'     It   would   be   appropriate   to   consider   the   relevant
provisions   of   the   Income   Tax   under   which   the   Petitioner   has
deducted   TDS   in   payment   of   the   interest   component   under   the
Award.  The case of the Petitioner is that it has acted under Section
194A(3)(ix) of the Income Tax Act. The said provision reads thus:­
“Section 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 account of the payee or at
the time of payment thereof in cash or by issue of a
6 (2016)5 MLJ 105

cheque   or   draft   or   by   any   other   mode,   whichever   is
earlier, deduct income tax thereon at the rates in force:
(2) …..
(3) The provisions of sub­section (1) shall not apply­
(i) to (viii) … …. ….
(ix) to such income credited or paid by way of interest
on   the   compensation   amount   awarded   by   the   Motor
Accidents   Claims   Tribunal   where   the   amount   of   such
income   or,   as   the   case   may   be,   the   aggregate   of   the
amounts of such income paid during the financial year
does not exceed fifty thousand rupees.
(emphasis supplied)
A plain reading of the above provision would indicate that when any
person   not   being   an   individual   or   Hindu   undivided   family   who
becomes 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.     Sub­section   (3)   excludes   the
application   of   sub­section   (1)   and   sub­clause   (ix)   thereof   and
provides that the provisions of sub­section (1) shall not apply to such
income credited or paid by way of interest on the compensation
awarded by the Motor Accident Claims Tribunal, where the amount

of such income or, as the case may be, the aggregate of the amounts
of   such   income   paid   during   the   financial   year   does   not   exceed
Rs.50,000/­.  Thus for exemption from the provisions of sub­section
(1) of Section 194A, the requirement is that such income paid by way
of interest on the compensation amount awarded by the Tribunal will
not be liable for tax if the aggregate amount of such interest income
paid during the financial year does not exceed Rs.50,000/­. In view of
this   clear   stipulation,   the   contention   as   urged   on   behalf   of   the
Petitioner if is accepted, then, the provisions of Section 194A(3)(ix)
would be rendered meaningless which categorically provides that for
application of sub­section (1) such interest income paid during the
financial year should exceed Rs.50,000/­.  The Division Bench of this
Court in the case of Gauri Deepak Patel & Ors.(supra) has accepted
the interpretation of Section 194A as laid down in the decision of the
Gujarat High Court in the case of “Smt.Hansagauri Prafulchandra
Ladhani Vs. Oriental Insurance Co.Ltd.”7
and accordingly has laid
down   a   procedure   under   which   the   Insurance   companies   or   the
owners of the motor vehicles depositing the amount in compliance of
the Award of the Motor Accidents Claims Tribunal.These directions of
the Division Bench lay down a complete scheme which the Insurance
company is required to follow when the amount of compensation is
7 2007 ACJ 1897 (Gujarat)

deposited in pursuance of the Award of the Tribunal which include
the   interest   amount.     The   Division   Bench   issued   the   following
directions to be followed in all the cases arising  before the Tribunal:­
“6. Accordingly,   we   direct   that   the   following
procedure   as   laid   down   in   the   case   of   Hansaguri
Prafulchandra Ladhani, 2007 ACJ 1897 (Gujarat), shall
be followed in the present case and in all similar cases
arising   in   future   before   the   Motor   Accidents   Claims
Tribunal:
(i) The  insurance  companies or   the  owners  of   the
motor   vehicles   depositing   the   amounts   in   compliance
with the awards of the Motor Accidents Claims Tribunal
shall:
(a) first spread the interest amount over the
relevant financial years for the period from the
date of filing the claim petition till the date of
deposit.
(b) thereafter, if the interest for any particular
financial   year   exceeds   Rs.50,000/­,   separately
deposit before the Tribunal the amount liable to
be   deducted   at   source   under   the   provisions   of
section 194­A(3)(ix) of the Income Tax Act,1961.
Such amount shall not, however, straightaway be
paid over to Income Tax Department.
(c) produce   before   the   Claims   Tribunal   a
statement of computation of interest by spreading
the amount over the relevant years from the date
of claim application till the date of deposit if the
interest for any particular financial year exceeds

Rs.50,000 and also request the Tribunal to treat
the amount as a separate deposit.
(ii) The   Tribunal   shall   ensure   that   the   amount   of
interest accrued each year is apportioned amongst claims
on year to year basis.
(iii) If the interest payable to any claimant during any
particular   financial   year   exceeds   Rs.50,000,   Claims
Tribunal shall permit the insurance companies/owners to
pay   over  the   amount  liable   to  be  deducted  at   source
under   Section   194­A(3)(ix)   to   the   Income   Tax
Department in respect of that particular claimant for the
particular year, without prejudice to the claimant's case
that he is not liable to pay any income tax for that year.
(iv) For the financial year(s) for which the interest
payable   to   the   concerned   claimant   does   not   exceed
Rs.50,000, that Tribunal may permit such claimant to
withdraw the amount deposited as per direction (i)(b)
without   producing   the   certificate   from   the   concerned
income tax authority that there is no income tax liability
on the interest which has accrued on the compensation
awarded by the Tribunal.
(v) It   is   clarified   that   the   amount   other   than   the
amount liable to be deducted at source under Section
194­A(3)(ix) shall be invested/disbursed by the Tribunal.
(vi) When the claimants make applications before the
authority under the Income Tax Act,1961 for the refund
of the amount deducted under the provisions of Section
194­A(3)(ix) of the Act, the concerned authority shall
decide such applications with utmost expedition.”

13. The learned Counsel for Respondent No.1 also relies on
a recent judgment of the Division Bench of Gujarat High Court in the
case   “New   India   Assurance   Co.Ltd.   Vs.   Bhoyabhai   Haribhai
Bharvad”(supra) wherein though the Insurance Company tried to
assert the proposition on clause (ix) and (ixa) of sub­section (3) of
Section   194A   of   the   Income   Tax   Act   (inserted   with   effect   from
1.6.2015 by Finance Act,2015 substituting clause (ix)), the Division
Bench   however   following   the   law   laid   down   in   the   case   of
Smt.Hansagauri   Prafulchandra   Ladhani  (supra)   and   confirming
the interpretation as held therein wherein in a similar situation the
law laid down in the case Smt.Hansagauri Prafulchandra Ladhani
(supra) was not followed by the insurance company, it was directed
that it was open to the Insurance company to approach the Income
Tax Department for refund of tax.    In the present case there is no
application of clause (ix) and (ixa) of sub­section (3) of Section 194A
as inserted with effect from 1 June 2015.  It would be profitable to
note the observations of the Division Bench in paragraphs 11 and 12
which read thus:­
“11. Under Clause (ix) to sub­section (3) of Section
194A of the Act, as it originally stood, requirement of
deducting tax at source under sub section (1) would not
apply in a case where any income is credited or paid by
way of interest on compensation amount awarded by

Motor Accident Claims Tribunal where the amount of
such income or, the aggregate amounts of such income
credited or paid during the financial year does not exceed
fifty thousand rupees. This provision of   Clause (ix) is
now divide into two parts and is replaced by Clauses (ix)
and (ixa).  Clause (ix), in the present form, refers to such
income credited by way of interest on the compensation
amount awarded by the Claims Tribunal. The case of
crediting of interest on compensation therefore, would
fall in Clause (ix) as it stands currently.  Under Clause
(ixa)   would   fall,   any   payment   of   interest   on
compensation awarded by the Claims Tribunal where the
amount of such income or the aggregate paid during the
financial year does not exceed fifty thousand rupees.
12. It would, therefore, be wholly incorrect to read the
current provision of sub­section (3) of Section 194A to
argue that the cases of income credited by way of interest
on compensation awarded by the Claims Tribunal is no
longer part of sub section (3) for exclusion from purview
of   sub­section   (1)   of   Section   194A.     In   other   words,
worded slightly differently.  The case of credit of interest
on   compensation   awarded   by   the   Claims   Tribunal
continues to find place in the exclusion clause contained
in sub­section (3) of Section 194A.   In fact, it would
prima facie appear that the ceiling of Rs.50,000/­ per
annum for such exclusion is now down away with in case
of crediting of interest on compensation awarded by the
Claims Tribunal while retaining such limit in cases of
payment of interest on such compensation. However, we
need   not   thresh   out   this   last   part   of   the   issue   since

admittedly, in the present case, for none of the years
under   consideration,   the   interest   income   exceeded
Rs.50,000/­.     In   fact,   this   Court   in   case   of
Smt.Hansagauri   Prafulchandra   Ladhani   (supra)
provided   for   further   splitting   up   of   this   ceiling   of
Rs.50,000/­ per claimant basis.  Looked from any angle,
the insurance company was not justified in deducting tax
at source while depositing the compensation in favour of
the   claimants.   It   therefore,   cannot   avoid   liability   of
depositing such amount with the Claims Tribunal.  The
Claims Tribunal had committed no error in insisting on
the insurance company in making good the shortfall.”
14. Learned Counsel for Respondent No.1 has then placed
reliance  on a recent decision  of the  learned Single Judge of the
Madras   High   Court   in   “Managing   Director,   Tamil   Nadu   State
Transport   Corporation   (Salem)   Ltd.,   Bharathipuram,
Dharmapuri Vs. Chinnadurai” (supra). Though this decision does
not consider the decision of the Division Bench in “Gauri Deepak
Patel” (supra), the Court has held that the Motor Vehicles Act is a
social welfare legislation and if there is conflict between the social
welfare   legislation   and   a   tax   legislation,   in   that   case   the   social
welfare   legislation   will   prevail,   since   it   sub­serves   larger   public
interest.  The learned Judge coming to this conclusion has followed
the decision of the Division Bench of the Himachal Pradesh High

Court in the “Court on its Motion vs. H.P.State Co­operative Bank
Ltd. & Ors”
8
  wherein the Division Bench of the Himachal Pradesh
quashed the circular dated 14 October 2011 issued by the Income
Tax Department which had directed deduction of income tax on the
award amount and interest accrued on the deposit made under the
order of the Court in Motor Accident Cases. The observations of the
learned Single Judge read thus:­
“15. Following the Division Bench Judgment, a learned
Single Judge of the Punjab and Haryana High Court, in a
recent decision, in New India Assurance Company Ltd.
Vs.   Sudesh   Chawla   and   others,   CR.No.430   of   2015
(O&M), reiterating the reasoning given by the Division
Bench of Himachal Pradesh High Court, has opined that
award of compensation is on the principle of restitution
to place the claimant in the same position in which he
would   have   been   loss   of   life   or   injury   has   not   been
suffered   and   accordingly   held   that   the   orders   calling
upon the Insurance Company to pay TDS/deduct TDS on
the interest part are not sustainable.
16.  If  we look at other jurisdictions like Australia,
Unites   States   and   United   Kingdom,   even   there,   the
matters where a person has suffered an injury or there
has been a loss of life and a compensation has been paid
in lieu of that, then it has been held by the Courts that
there   cannot   be   any   Tax   deduction   on   such
compensation. The underlying basis behind this is that a
person who suffers a loss cannot be asked to part with
the solatium he receives since it is the only remedy he has
been provided with by the law.
17.  If   there   is   a   conflict   between   a   social   welfare
legislation and a taxation legislation, then, this Court is
of the view that a social welfare legislation should prevail
since it subserves larger public interest. The Motor Vehicle
Act is one such legislation which has been passed with a
8 2014 SCC Online HP 4273

benevolent   intention   for   compensating   the   accident
victims who have suffered bodily disablement or loss of
life and the Income Tax Act which is primarily intended
for Tax collection by the State cannot put spokes in the
effective   and   efficacious   enforcement   of   the   Motor
Vehicles Act. In fact, if one might deeply analyse, it could
be   seen   that   there   is   no   direct   conflict   between   any
provisions of the Income Tax Act and the Motor Vehicles
Act and it is only by the interpretation of the provisions
the concept of compulsory payment of TDS has crept into
the   realm  of   compensation   payment  in  Motor   Vehicle
Accident cases.
18.  Hence, with due respect I am unable to concur
with   the   findings   of   the   Karnataka   High   Court,   the
Chattisgarh   High   Court   and   this   Court   cited   by   the
Revision Petitioner. This Court is of the view that the
Division Bench judgment of the Himachal Pradesh high
Court and the judgment of the Single Judge of the Punjab
and Haryana High Court lay down the right law and
hence,   this   Court   arrives   at   the   conclusion   that   the
compensation awarded or the interest accruing therein
from the compensation that has been awarded by the
Motor Accident Claims Tribunal cannot be subjected to
TDS and the same cannot be insisted to be paid to the
Tax Authorities since the compensation and the interest
awarded therein does not fall under the term ‘income’ as
defined under the Income Tax Act, 1961.
19.  Therefore, this Court directs that the Petitioner
Corporation   cannot   deduct   any   amount   towards   TDS
and the same shall also be deposited in addition to the
amount that has already been deposited to the credit of
M.C.O.P.No.879   of   2006,   on   the   file   of   the   Motor
Accident Claims Tribunal, Additional District Judge, Fast
Track Court, Dharmapuri, within a period of four weeks
from the date of receipt of a copy of this order and the
Respondent   is   entitled   to   take   appropriate   steps   in   a
manner known to law to withdraw the amount.”
Thus the above decision of the learned Single Judge of
Madras High Court reflects a different perspective,  as also what has

been held by the Division Bench of the Himachal Pradesh High Court,
is   to   apply   then,   surely,   it   is   an   issue   to   be   considered   by   the
appropriate authorities. 
15. The submissions on behalf of the Petitioner relying on a
cumulative reading of Sections 56, 145A and 194A(3)(ix) of the Act
cannot   be   accepted   for   two   reasons,   firstly   there   cannot   be   any
dispute in the context what Section 56 and 145A would provide in
respect of tax to be paid on interest directed to be paid on the
compensation awarded by the Tribunal, as these provisions would
stipulate and secondly, in view of the above clear position in law as
laid down by the Division Bench of this Court in Gauri Deepak Patel
& Ors. (supra) as also reiterated in the decision of the Division Bench
of the Gujarat High Court in the this Court in “New India Assurance
Co.Ltd.   Vs.   Bhoyabhai   Haribhai   Bharvad”   (supra)   interpreting
Section 194(3)(ix) of the Act, relevant in the present context. Thus,
the reliance on behalf of the Petitioner on the decision of the learned
Single Judge of the Madras High Court in “The New India Assurance
Co.Ltd. Vs. Mani S.Nachimuthu, N.”  and the decision in the case
“Bikram Singh & Ors. Vs. Land Acquisition Collector & Ors.”
9
 may
not assist the Petitioner.
9 JT 1996(8) SC 678

16. Resultantly the  action of the Petitioner deducting tax at
source on the interest awarded by the Tribunal, without following the
mandate of the Division Bench of this Court in  Gauri Deepak Patel
& Ors. Vs. New India Assurance Co.Ltd. & Anr. (supra) was wholly
unjustified and illegal.  The Petitioner should have properly advised
itself   before   deducting   the   tax   at   source   on   the   interest   amount
following the law laid down in the case of  Gauri Deepak Patel &
Ors. Vs. New India Assurance Co.Ltd. & Anr. (supra) 
17. The Writ Petition is without any merit and is accordingly
rejected.  No costs.
(G.S.Kulkarni,J.)

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