Decretal interest is not subject to TDS under Section 195, as the amount must be paid under the decree as awarded.

Tax deduction at source under Section 195 was treated as inapplicable to interest payable under a decree in execution proceedings, because the amount was characterised as a decretal debt rather than ordinary interest paid in the usual course. The text states that a decree must be executed as it stands and that no provision authorises the judgment debtor to deduct tax from the decretal amount; Section 2(28A) was also said not to cover such decretal interest. Deduction of TDS from the interest component was therefore not permissible, and the challenge to the payment direction failed.

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Issues: Whether tax deduction at source was deductible under Section 195 of the Income-tax Act, 1961 from interest payable to a decree holder under a decree in execution proceedings.

Analysis: The Court treated the amount payable under the decree as a decretal debt and not as ordinary interest payable in the usual course. Relying on the settled position that a decree has to be executed as it stands and that no provision authorises the judgment debtor to deduct tax at source from the decretal amount, the Court held that Section 195 does not extend to interest payable under a decree. The definition of interest under Section 2(28A) was also considered and found not to cover such decretal interest.

Conclusion: Deduction of TDS from the interest component payable under the decree was not permissible, and the challenge to the order directing payment of the deducted amount failed.

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