2022 (8) TMI 457 - HC - Income Tax

Interest on Pre-2015 Compensation Not Subject to TDS Over 50k

New India Assurance Company Limited Versus Ravinder Kumar @ Vickey and others

The court ruled that for interest on compensation paid before 1.6.2015, no TDS is deductible even if it exceeds Rs. 50,000 in a financial year. However, ... TDS u/s 194A - Motor Accidents Claims - Can the directions be issued to Judgment Debtor-Insurance Company to deduct TDS at source on the amount of interest paid on the compensation under the Income Tax Act, 1961 read with Motor Vehicles Act, 1988? - HELD THAT:- CR dismissed and the others are disposed of by setting aside the impugned orders and the cases are remanded back to the concerned Motor Accident Claims Tribunal with a direction that if the interest on compensation is paid prior to 1.6.2015, then the Insurance Company will pay the amount of tax deducted at source to claimants and the Insurance Company may seek refund from the Income Tax Authorities by filing a revised income tax return. Where the interest on the compensation is actually paid after 1.6.2015, which is exceeding Rs.50,000/- per claimant per financial year, the Insurance Company will pay on securing the ‘Form 15-G’ of Rule 29-C of the Income Tax Act/Rules. The parties will appear before the Motor Accident Claims Tribunal, concerned on 31.8.2022 and fresh orders will be passed within a period of one month, thereafter. Issues Involved:1. Deduction of TDS on interest paid on compensation awarded by the Motor Accidents Claims Tribunal.2. Applicability of Section 194A of the Income Tax Act, 1961.3. Interpretation of statutory provisions related to TDS on compensation interest.4. Jurisdiction and authority of the Motor Accidents Claims Tribunal regarding TDS.5. Compliance with previous judgments and legal precedents.Detailed Analysis:1. Deduction of TDS on Interest Paid on Compensation:The primary issue addressed in the judgment is whether the Insurance Company can deduct TDS on the interest paid on compensation awarded by the Motor Accidents Claims Tribunal under the Income Tax Act, 1961. The court examined various cases where the Insurance Companies were directed to deposit the deducted TDS amounts back to the claimants as per the orders of the Motor Accidents Claims Tribunal.2. Applicability of Section 194A of the Income Tax Act, 1961:The judgment delves into Section 194A(1) and 194A(3)(ix) of the Income Tax Act, which deal with the deduction of income tax on interest other than interest on securities. Section 194A(3)(ix) specifies that no TDS is required on interest on compensation awarded by the Motor Accidents Claims Tribunal if the amount does not exceed Rs. 50,000 in a financial year. The court discussed the implications of this provision and its amendments.3. Interpretation of Statutory Provisions Related to TDS on Compensation Interest:The court referred to multiple judgments from various High Courts, including the Himachal Pradesh High Court, Madhya Pradesh High Court, Gujarat High Court, and Bombay High Court. These judgments provided differing interpretations of whether interest on compensation should be subject to TDS. The court noted the consistent view that interest exceeding Rs. 50,000 per claimant per financial year is subject to TDS unless a declaration in Form-15G is obtained from the claimant.4. Jurisdiction and Authority of the Motor Accidents Claims Tribunal Regarding TDS:The court highlighted the role of the Motor Accidents Claims Tribunal in directing the Insurance Companies to deposit the deducted TDS amounts back to the claimants. The Tribunal's authority to issue such directions was affirmed, provided the interest on compensation was paid prior to the amendment of Section 194A(3)(ix) effective from 1.6.2015.5. Compliance with Previous Judgments and Legal Precedents:The judgment emphasized the need to follow consistent legal precedents. The court referred to previous judgments, including those by coordinate benches and other High Courts, which held that interest on compensation is not liable for TDS if it does not exceed Rs. 50,000 per financial year. The court also acknowledged the conflicting views and provided clarity on the interpretation of the law.Conclusion:The court concluded that:- For interest on compensation paid prior to 1.6.2015, no TDS is deductible even if the interest exceeds Rs. 50,000 in a financial year.- For interest paid after 1.6.2015, TDS is deductible if it exceeds Rs. 50,000 per claimant per financial year, unless a declaration in Form-15G is obtained.- The Insurance Companies must comply with the directions of the Motor Accidents Claims Tribunal regarding the deposit of TDS amounts and may seek refunds from the Income Tax Department by filing revised returns.The parties were directed to appear before the respective Motor Accidents Claims Tribunal, which will pass fresh orders within one month based on the court's directives.