TaxTMI 
TaxTMI 
2014 (4) TMI 1173
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....sent revision petition and the relevant exposition of law, in brief, are as follows: The claim petition filed by the 1st respondent/claimant/Decree Holder was allowed by the Tribunal and compensation was awarded to the claimant. After the award had attained finality, the National Insurance Company/Judgment Debtor/Revision Petitioner herein had deposited certain amount towards part satisfaction of the awarded compensation amount along with interest and costs to the credit of the Original Petition before the Tribunal. However, while making such deposit, the Insurance Company had deducted certain sum towards Income Tax Deductible at Source (TDS for short). In fact, the Insurance Company in its calculation shown in the execution proceedings had admitted that a sum of Rs. 19,626/- was deducted towards TDS and that apart a balance amount of Rs. 13,898/- is still to be deposited by it towards the balance decree debt. However, the Decree Holder disputed inter alia such tax deduction at source as contrary to Law and not correct. The Tribunal having followed the Division Bench decision of the High Court of Gujarat in the case of Hansaguri Prafulchandra Ladhani and Others v. Oriental....
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....ction 194 A of the Income Tax Act (the I T Act, for short), which is admittedly the relevant provision of law, reads as follows: S.194A: Interest other than "Interest on securities". (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 cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force : Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this section. Explanation : For the purposes of this section, where any income by way of interest as aforesaid is credited to any account, whether called "Interest....
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.... or (b) any financial corporation established by or under a Central, State or Provincial Act, or (c) the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), or (d) the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), or (e) any company or co-operative society carrying on the business of insurance, or (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; (iv) to such income credited or paid by a firm to a partner of the firm; (v) to such income credited or paid by a co-operative society to a member thereof or to any other co-operative society; (vi) to such income credited or paid in respect of deposits under any scheme framed by the Central Government and notified by it in this behalf in the Official Gazette; (vii) to such income credited or paid in respect of deposits (other than time deposits made on or after the 1st day of July, 1995) with a bankin....
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....Act, the income tax is deductible at source not on the awarded compensation amount, but, on the amount of interest only that becomes payable in terms of the award on the compensation amount awarded by the Tribunal. It is also brought to the notice of this court that the circular number 7 of 2003, which explained some of the relevant provisions of the Finance Act, 2003 contains relevant guideline in regard to basic exemption limit of Rs. 50,000/-[Rupees Fifty Thousands only]. 5. (c) On an earnest consideration of the admitted facts and also the relevant provisions of Law, which are indisputably applicable, it emerges that the procedure and practice stated infra is the proper procedure and practice to be followed and resorted to in the matter of the tax-deductible at source in matters of this nature. > Section 194 A of the Act obligates a person responsible for paying to a resident any income by way of interest to deduct income tax from such payment of interest at the time of crediting of such amount to the account of the payee or at the time of payment thereof in cash or by cheque or draft or by any other mode. > Sub-clause (ix) of the said sub-section (3) provi....
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....However, such lump sum interest amount that had accrued up to the date of payment or deposit can be taken into consideration in case of each such claimant and such lump sum interest arrived at need not be spread over on annual basis even in cases interest accrued relates to more than one year. Thus in effect there are two filters to be applied by the person who is obligated under Law to deduct tax at source. And they are as under: First one is distributing such interest among each of the claimants, in case the claimants are more than one and there is apportionment of compensation in the award/decree. And, at the second stage the limit of Rs. 50,000/- prescribed under Law is to be applied. 5. (d) It is also settled legal position, as on today that in a case where the claimant is an income tax assessee and is having a PAN then, in case of such a claimant, the percentage of deduction of tax at source is 10%. But, where such claimant is not having a PAN, in his case, the deduction of tax at source shall be at the rate of 20%. Therefore, the payer like the insurance company shall, make a sincere effort to know from the claimant/payee as to whether he is hav....