TaxTMI 
TaxTMI 
TaxTMI 
2004 (7) TMI 85
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....ation for the permanent disability, said to have been sustained by him, in the road accident. After contest, on September 8, 1999, compensation was ordered, directing some of the respondents, including the insurance company, to pay a sum of Rs. 75,000 with interest thereon at 12 per cent, per annum from the date of the petition till the date of payment. The claimant, not satisfied with the amount awarded, had preferred an appeal before this court in A.A.O. No. 211 of 2000 and this court had enhanced the compensation to Rs. 1,50,000, thereby the claim had come to an end. The insurance company, which is liable to pay the compensation amount as per the contract of insurance, has not paid the amount and therefore, execution petition was filed, ....
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....rance company is not payable during the financial year, in which, the deposit has been made and in this view, the interest shall not exceed Rs. 50,000 and therefore, the insurance company is not entitled to deduct the tax at source, as did in this case. A plain reading of section 194A of the Income-tax Act, would indicate that the insurance company is bound to deduct the income-tax amount on interest, treating it as revenue, if the amounts paid during the financial year exceeds Rs. 50,000. In this case, admittedly, when the compensation amount has been deposited during the financial year, including interest, the interest amount alone exceeded Rs. 50,000 and therefore, the insurance company has no other option, except to deduct the income-t....
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....ench of the Delhi High Court has held thus Bhika Ram v. Union of India [1999] 238 ITR 113: "the petitioner was liable to be taxed on the interest on delayed payment of compensation for compulsory acquisition of land. However, the petitioner was at liberty to have the income on account of interest assessed by seeking spread over." The same view was once again reiterated by another Division Bench of the Delhi High Court in Shankar v. Union of India [2003] 260 ITR 284. Thus, it is made clear that the compensation amount which earned interest, because of the delayed payment, is liable to be taxed and because of the amended provision, when the interest amount exceeding Rs. 50,000 has been paid by the insurance company, during the financial ye....