TaxTMI 
TaxTMI 
2022 (5) TMI 282
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....levied by the Income Tax Department pursuant to the Annexure A order. (E) Your Lordships may be pleased to lay down a fixed procedure to deal with the TDS issue in the MACP cases across the state. (F) Your Lordships be pleased to pass such other and further orders may be deemed just and proper looking to the facts and circumstances of the case and in the interest of the justice." 2. The facts giving rise to this writ application may be summarized as under: 3. The writ applicant before us is an Insurance Company. One Motor Accident Claim Petition bearing No.518 of 1999 came to be filed in the City Civil Court at Ahmedabad. The said claim petition came to be allowed by the MACT (Aux.) Judge, City Civil Court, Ahmedabad, vide judgement and award dated 18th January 2017. 4. The operative part of the order passed by the Tribunal in the above referred MACP reads thus: "(a) The petitioners in MACP No. 518/1999 do recover Rs. 16.28,008/(Rs. Sixteen lacs twenty-eight thousand eight only) from the opponent 1, 2 and 3 jointly and/or severally, together with running interest at the rate of 8% p.a from the date of petition till realization of the amount along with proportionate costs o....
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....ut the Insurance Co. said amount has deposited the in the court. So, the said amount is required to be sent back to the insurance Co. for depositing the same with the Income Tax department and in my view it cannot be given to the applicants. So, considering the peculiar facts and circumstance on hand, this application is required to be partly allowed and in the interest of justice I pass the following order. ORDER The present application is hereby partly allowed. The Registry is hereby directed to send back the amount of Rs. 2,21,516/- deposited vide 'C' No.521, dated 18.05.2017, to the Oriental Insurance Co. Ltd. with a direction that the Insurance Co. shall deposit the said amount with the Income Tax department and then after would produce the necessary document regarding the same to this Court and supply the same to the applicants. The Insurance Co. Is further directed to follow the procedure regarding depositing the amount of TDS with the Income Tax department and issue the necessary certificate along with the relevant papers of depositing the amount to the applicants and the copy be send to this Court. Date : 04/08/2018. sd/- (Pratik J. Tamakuwala) MACT (Aux....
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....ich the interest is granted. It is only if the interest for any particular financial year exceeds Rs.50,000/-, the amount would be liable to be deducted at source and shall have to be deposited with the MACT. 18. Mr. Raval submitted that the Finance Act, 2015 has inserted new Section 194A(3) (ixa) with effect from 1st June 2015. The effect of the amendment is as under: "(1) No liability for TDS shall be attracted in respect of any income credited by way of interest on the compensation amount awarded by the MACT. (2) Such liability for deduction of tax in respect of interest on compensation will be attracted, only at the time of actual payment and only if the amount of such payment or aggregate amounts of such payments during a financial year exceeds Rs. 50,000/-." 19. Mr. Raval pointed out that in view of the aforesaid amendment to Section 194A, the TDS would have to be deducted out of the actual payment of interest on compensation. The rate would be 10% if the claimants had produced the PAN Card before the payment and 20% if the PAN Card had not been produced. Mr. Raval would submit that in spite of the aforesaid amendment, the Insurance Companies are being compelled to depo....
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.... Rs.50,000/. Thus, for exemption from provisions of Sub-section (1) of Section 194A, such income paid by way of interest on compensation amount awarded by Tribunal will not be liable for tax if aggregate amount of such interest income paid during financial year does not exceed Rs.50,000/-. * Relevant provisions are reproduced for ready reference: 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 [one crore rupees in case of business or fifty lakh rupees in case of profession] during the financial year immediately preceding the financial year in which such interest is credited or paid, sha....
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....surance Company Ltd. (Gujarat High Court (decision rendered on 04.10.2006) Hon'ble Gujarat High Court gave detailed guidelines for the cases arising out of motor vehicle accident claims (at para 14 of the judgment) held that in order to attract provisions of TDS on interest component on compensation awarded in motor vehicle accident claims; (a) first spread the interest amount over to 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, straightway, be paid over to the Income Tax Department. (c) produce before the Tribunal a statement of computation of interest by spreading the amount over the relevant years from the date of claim petition 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. 2 Commissioner of Income-tax vs. Orienta....
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....ompany to deduct the TDS from the entire interest component and deposit the same before the competent authority, which has been done in this case. A certificate to that effect has been issued to the respondent/claimants. The respondent/claimants have to make a claim for refund of the aforesaid amount before the competent authority. With these observations, writ petition is allowed. The order dated 15.9.2012 in Ex.Case No.80/2008 passed by the court below is hereby quashed. 5 New India Assurance Co. Ltd [2017] 80 taxmann.com 331 (Punjab and Haryana) (decision rendered on 30.11.2015) Whether Insurance Company can be called upon to pay the TDS /deduct TDS on the interest part upon the compensation awarded in motor vehicle accident claims? Relying on the above decision rendered in [2014] 52 taxmann.com 151 by Himachal Pradesh High Court, orders calling upon the Insurance Company to pay the TDS / deduct TDS on the interest component, were set aside. (para 9) An SLP is preferred against the judgment and is pending before Hon'ble Supreme Court. 6 New India Assurance Co. Limited vs. Bhoyabhai Haribhai Bharvad and Ors. (Gujarat High Court): (decision rendered on 08.08.2016) In thi....
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....e Assessing Officer to determine whether the land in question was agricultural land in question was agricultural land or not. Accordingly, it was made incumbent on Assessing Officer to ascertain whether refund of TDS can be made or not. 10 Iffco Tokio General Insurance Company Ltd vs. Krishnakumar Munshiram Agrawal and others (Gujarat High Court) (decision rendered on 10.11.2017) In this case, the petitioner - Insurance Company deducted TDS amount from the interest accrued on awarded amount and deposited the TDS amount with Income Tax Department as per amended section 194A deducted 20% TDS as the interest exceeded 50,000. The claimant - respondent No.1 filed Execution Application before the Tribunal wherein the learned Tribunal issued attachment warrant against the Insurance Company. Gujarat High Court held that the petitioner - Insurance Company was not justified in deducting at source in view of the guideline issued in Hansaguri's case. Therefore, it instructed Insurance Company to approach the Income Tax Dept for refund. 11 Oriental Insurance Co. Ltd. vs. Swaroopi Bai (MP HC) (decision rendered on 24.06.2019) In this case, the interest component of the compensati....
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....tor vehicle accident claim was raised before Hon'ble Rajasthan High Court. Taking cognizance of the decision rendered in 262 Taxman 253, Rajasthan High Court referred the present case to a large bench and is pending. * PRIMARY ANALYSIS: 24. Having regard to the important issues we are called upon to decide, we also took the assistance of the learned Senior Counsel Mr. Tushar Hemani and also the learned counsel Mr. Bandish Soparkar. 25. While the writ applicant - Insurance Company seeks a declaration from this Court with regard to the non-applicability of the decision of Hansaguri (supra); the issue is inherently linked with the question whether the interest awarded by the MACT is chargeable to the income tax in the first place. Only if it is found chargeable, then the question would arise as to in what manner should the writ applicant - Insurance Company deduct the tax and deposit with the Tribunal or the Income Tax Department. If the interest awarded by the MACT is not chargeable to income tax, then there would be no occasion for the Insurance Company to deduct the tax. 26. In view of the aforesaid, the following questions fall for our consideration: (i) Whether interest a....
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....ved by an assessee on any compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the previous year in which it is received. (2) Any claim for escalation of price in a contract or export incentives shall be deemed to be the income of the previous year in which reasonable certainty of its realisation is achieved. (3) The income referred to in sub-clause (xviii) of clause (24) of section-2 shall be deemed to be the income of the previous year in which it is received, if not charged to income-tax in any earlier previous year." 32. Section 171 of the Motor Vehicles Act, 1988 reads thus: "171. Award of interest where any claim is allowed.- Where any Claims Tribunal allows a claim for compensation made under this Act, such Tribunal may direct that in addition to the amount of compensation simple interest shall also be paid at such rate and from such date not earlier than the date of making the claim as it may specify in this behalf. 33. Section 28 and Section 34 reply of the Land Acquisition Act, 1894 read thus: "Section 28. Collector may be directed to pay interest on excess compensation. -If the sum which, in the opinion of the Court,....
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...., then for that year to year, the TDS would be liable to be deducted. 37. In 2009, by Finance (No.2) Act, 2009, Section 145A(b) and Section 56(2)(viii) came to be amended and with the same, Rama Bai (supra) got diluted. Two sections came to be amended to provide that so far as the interest on delayed or enhanced compensation (under the Land Acquisition Act, 1894) was concerned, the same was taxable only in the year of receipt and would not be spread ov er the years. 38. The Finance Act, 2015 amended Section 194A(3) to divide it into two parts: (ix) said that in relation to only credit, no TDS is required. (ixa) said that in relation to payment, if it is less than 50,000/-, then no TDS. The aforesaid was done to rationalise Section 194A so as to give effect of the earlier amendment of 2009 which said that the taxability of interest would arise only in the year of receipt and therefore, in the years of its accrual there was no tax incidence. Therefore, to that extent the 194A( 3)( ix) was inconsistent and was accordingly corrected. 39. In 2016, one another judgement came to be delivered by this High Court in the case of New India Assurance Co. Limited vs. Bhoyabhai Haribhai ....
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....n 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 sub section (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 sub section (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 sub section (3) of Section 194A. In fact, it would prima facie appear that the ceiling of Rs. 50,000/- per annum for such exclusion....
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....nt in insertion of Section 145A(b) is very clear. According to the Revenue, the interest received on any compensation or enhanced compensation is deemed to be income of the assessee in the year of its receipt after the insertion of Section 145A(b). The ratio of Rama Bai (supra) stands overruled by Section 145A(b) and therefore, to that extent, even Hansaguri (supra) is not relevant after the insertion of Section 145A(b). According to the Revenue, the interest received as a part of the award is deemed to be income in the year of its receipt and is not to be accounted across many years under the accrual system. 42. According to the Revenue, such interest income is liable to the TDS under Section 194A(3)(ixa) if it exceeds Rs.50,000/- for any claimant at the time of its deposit by the Insurance Company with the Tribunal. 43. The stance of the Revenue is that Bhoyabhai (supra) failed to take notice of the amendment in Section 145A(b) and thereby ordered to spread over the ceiling of R s.50,000/- over years. 44. The stance of the Revenue is that whenever any Insurance Company would deposit the amount with the Tribunal, at that time, if the total sum deposited exceeds Rs.50,000/- for ....
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....f the Land Acquisition Act, 1894. Later in Ghanshyam (2009) 315 ITR 1 (SC), the Supreme Court drew this distinction and held that the interest under Section 28 of the Land Acquisition Act, 1894 would form part of the compensation itself and is taxable under the capital gain only. The amendment of Section 145A(b), Sections 56(2) (viii) and 194A reply would therefore not apply to the interest under Section 28 of the Land Acquisition Act, 1894, but would apply only to Section 34 interest as is held in the case of [2016] 388 ITR 343 (Gujarat) Movaliya Bhikhubhai Balabhai. Therefore, the implication of Sections 145A(b) is not absolute even with respect to the interest awarded under Section 28 of the Land Acquisition Act and cannot apply to the interest awarded by the MACT as well. 50. The term "income" is inclusively defined in Section 2(24). Such definition does not include the "interest" referred to in the Section 56(2) (viii) or interest received in the MACT award. 51. The words of Section 194A(3) are crucial i.e "income by way of interest" and not simply "interest". Therefore, even when interest is paid, if the same is received not in the name of "income", then Section 194A(3) wou....
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....ct, 2009 amended the provisions of Section 56 of the Act as well as substituted Section 145A of the Act to, inter alia, provide that interest income received on compensation or enhanced compensation shall be deemed to be the income of the year in which the same has been received. However, the existing provisions of Section 194A of the Act provide for deduction of tax from the interest paid or credited on compensation, whichever is earlier. Section 145A(b) of the Act provides an exception to the method of accounting contained in Section 145 of the Act and mandates for taxation of interest on compensation on receipt basis only. Therefore, deduction of tax on such interest on mercantile / accrual basis results into undue hardship and mismatch. It is, therefore, proposed to amend the provisions of Section 194A of the Income Tax Act, 1961 to provide that deduction of tax under Section 194A of the Act from the interest payment on the compensation amount awarded by the Motor Accident Claim Tribunal compensation shall be made only at the time of payment, if the amount of such payment or aggregate amount of such payments during a financial year exceeds Rs.50,000/-. These amendments will tak....
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.... each case the payments are made in such a way as to constitute what is paid the money of the recipient at all or whether the payments themselves are not merely a series of casual payments or windfalls. But there seems to me to be another class of cases altogether in which in particular circumstances payments may be made by one person to another which can only be explained on the ground that the giver intends to give, and the recipient expects to receive, with regularity or expected regularity and from a source the nature of which is to produce such a payment, an "income" which is in the income-tax sense his own. I can find nothing in the Indian Income-tax Act to warrant any general conclusion that it is only in a case in which, if the payment is discontinued, the recipient will have an immediate right of action against the payer, that it will be income in his hands in the Indian income-tax sense. That is to put too limited a construction on the word "income." If the payments are such as to come within the category of payments which are casual and nonrecurring, then it is to be observed that the Act itself has taken them out of the category of "income". The very fact that the frame....
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....Orissa, AIR 1943 Privy Council 153, it was observed:- "Income is not necessarily the recurrent return from a definite source, though it is generally of that character. Income again may consist of a series of separate receipts, as it generally does in the case of professional earnings. The multiplicity of forms which "income" may assume is beyond enumeration. Generally, however, the mere fact that the income flows from some capital assets, of which the simplest illustration is the purchase of an annuity for a lump sum, does not prevent it from being income, though in some analogous cases the true view may be that the payments, though spread over a period, are not income, but instalments payable at specified future dates of a purchase price. Such a case is illustrated by (1903) A.C.299. But, in their Lordships' judgment, the royalties here are clearly income and not capital. They are periodical payments for the continuous enjoyment of the various benefits under the leases. The actual acquisition of the property in a particular ton of coal at the moment when the lessees have cut and taken away the coal is only the final stage." 61. In Navinchandra Mafatlal, Bombay Vs. Commissio....
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....sessee." 63. In Navnit Lal C. Javeri Vs. K K. Sen AIR 1965 SC 1375, it was observ ed:- "16. The question which now arises is, if the impugned section treats the loan received by a shareholder as a dividend paid to him by the company, has the legislature in enacting the section exceeded the limits of the legislative field prescribed by the present Entry 82 in List I? As we have already noticed, the word "income" in the context must receive a wide interpretation; how wide it should be it is unnecessary to consider, because such an enquiry would be hypothetical. The question must be decided on the facts of each case. There must no doubt be some rational connection between the item taxed and the concept of income liberally construed. If the legislature realises that the private controlled companies generally adopt the device of making advances or giving loans to their shareholders with the object of evading the payment of tax, it can step in to meet this mischief, and in that connection, it has created a fiction by which the amount ostensibly and nominally advanced to a shareholder, as a loan is treated in reality for tax purposes as the payment of dividend to him. We have already e....
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....e to the Government of India Act, 1935. The Bombay High Court repelled the attack. The matter was brought to this Court. After rejecting the argument on behalf of the assessee that the word 'income' has acquired, by legislative practice, a restricted meaning - and after affirming that the entries in the Seventh Schedule should receive the most liberal construction - the Court observed thus: "What, then, is the ordinary, natural and grammatical meaning of the word 'income'? According to the dictionary it means 'a thing that comes in'. (See Oxford Dictionary, Vol. V, p. 162; Stroud, Vol. II, pp. 14-16). In the United States of America and in Australia both of which also are English speaking countries the word 'income' is understood in a wide sense so as to include a capital gain. Reference may be made to Eisner v. Macomber, 252 US 189; Merchants' Loan and Trust Co. v. Smietunka, 255 US 209 and United States v. Stewart, 311 US 60 and Resch v. Federal Commissioner of Taxation, 66 CLR 198 (1943). In each of these cases very wide meaning was ascribed to the word 'income' as its natural meaning. The relevant observations of learned Judges deciding those cases which have been quoted in t....
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.... Bank of India Vs. Ravindra and others [AIR 2001 SC 30 95], the question was whether the interest component of the principal sum could carry further interest. It was observed:- "44. We are of the opinion that the meaning assigned to the expression 'the principal sum adjudged' should continue to be assigned to "principal sum" at such other places in Section 34(1) where the expression has been used qualified by the adjective "such", that is to say, as "such principal sum". Recognition of the method of capitalisation of interest so as to make it a part of the principal consistently with the contract between the parties or established banking practice does not offend the sense of reason, justice and equity. As we have noticed such a system has a long established practice and a series of judicial precedents upholding the same. Secondly, the underlying principle as noticed in several decided cases is that when interest is debited to the account of the borrower on periodical rests, it is debited because of its having fallen due on that day. Nothing prevents the borrower from paying the amount of interest on the date it falls due. If the amount of interest is paid there will be n....
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....ing the claim as it may specify in this behalf." 24. In the context of compensation under the provisions of Land Acquisition Act, 1894, the Hon'ble Supreme Court in Commissioner of Income-Tax Vs. Ghanshyam (HUF), (2009) 315 ITR 1 SC held that interest paid by the Collector under Section 34 of the said Act was part of compensation and was treated to be at par with the compensation for purposes of taxability. The relevant observations therein are:- "...Section 28 of the 1894 Act applies only in respect of the excess amount determined by the Court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under Section 34 which depends on undue delay in making the award. It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the ....
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....however, we are dealing with a situation in which the interest is awarded by Hon'ble Supreme Court in its complete and somewhat unfettered discretion. An interest of this nature is essentially a compensation in the sense it accounts for a fall in value of money itself at the point of time when compensation became payable vis-a-vis the point of time when it was actually paid, or, for the shrinkage of, what can be termed as, a measuring rod of value of compensation. If the money was given on the date of presenting the claim before the MACT, it would have been Rs 15 lacs but since there is an inordinate, though partial, delay in payment of this amount, interest payment is to factor for fall in value of money in the meantime. The transaction thus remains the same, i.e. compensation for disability, and the interest rate, on a rather notional basis, is taken into account to compute the present value of the compensation which was lawfully due to the assessee in a somewhat distant past. Viewed thus, the amount of compensation received at this point of time, whichever way is it computed, has the same character. If compensation itself is not taxable, the interest on account of delay in payme....
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....o service to bring this income to tax, were provisions meant to give relief to the assessee. When these provisions were introduced, the Memorandum Explaining the Provisions of the Finance Bill 2009 had this to say: Rationalization of provisions for taxation of interest received on delayed compensation or enhanced compensation The existing provisions of Income-tax Act provide that income chargeable under the head "Profits and gains of business or profession" or "Income from other sources", shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Further, the Hon'ble Supreme Court, in the case of Rama Bai Vs. CIT (181 ITR 400) has held that arrears of interest computed on delayed or enhanced compensation shall be taxable on accrual basis. This has caused undue hardship to tax payers. With a view to mitigating the hardship, it is proposed to amend section 145A to provide that the interest received by an assessee on compensation or enhanced compensation shall be deemed to be his income for the year in which it is received, irrespective of the method of accounting followed by the assessee. Further, it is proposed to inse....
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....is taxable under the mercantile method of accounting, i.e. on accrual basis, is made taxable on cash basis of accounting, i.e. at the point of time when interest is actually received. Nothing else needs to read into this provision, and the memorandum explaining the provision of Finance Bill 2009, as reproduced earlier, makes that amply clear. As for the provisions of Section 56(2)(viii), it is only an enabling provision, as unambiguously made clear in the above memorandum as well, to bring interest income to tax in the year of receipt rather than in the year of accrual. Section 56(2)(viii) provides that......"incomes, shall be chargeable to income tax under the head 'income from other sources', namely ....(viii) income by way of interest received on compensation or enhanced compensation referred to in clause (b) of Section 145A". The starting point of this exercise is income, and it is only when the receipt is in the nature of an income, that the classification of income under a particular category arises. In other words, when interest received by the assessee is in the nature of income, such interest can be taxed under section 56 (2)(viii). Section 56(1) makes this aspect even mor....
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....further compounded, and that's the least that a responsive tax administration, like the one we fortunately have at present, can do. We must also place on record that fact that despite smallness of amount involved, learned representatives have rendered valuable assistance in this case, and that we deeply appreciate their assistance." 70. In the case of Managing Director, Tamil Nadu State Transport Corpn. (Salem) Ltd vs. Chinnadurai reported in [2016] 70 taxmann.com 53 (Madras), the Madras High Court held as under: "13. The question is whether the provisions of the Income Tax Act 1961, and more specifically, whether the compensation awarded by the Motor Accident Claims Tribunal to the victim can be classified as a taxable income under the Income Tax law?. The answer to this question in the opinion of this Court is in the negative. Compensation cannot be categorized or even described as income as it has already been stated that the intention of the legislature in awarding compensation to the victims of Motor Accident cases is to restitute them and rehabilitate them. 14. The Income Tax Department appears to have issued a circular dated 14.10.2011 whereby deduction of Income Tax ha....
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....jab 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 t....
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....the delayed payment of compensation awarded under Land Acquisition Act. The award under Land Acquisition Act and the award under Motor Vehicle Act cannot be equated for the simple reason that in land acquisition cases, the payment is made regarding the price of the land and on such price, the provisions of Capital Gain Tax are attracted, while in the motor accidents claims, the payment is made to the legal representatives of the deceased for loss of life of their bread earner. In most of the cases under motor vehicle accidents claims, the recipients of awards are poor and illiterate persons who even do not come within the ambit of Income Tax Act. The amount of compensation under Motor Vehicle Act, also do not come within the definition of "income". Therefore, the analogy of compensation under land acquisition cannot be applied to the motor vehicle accidents claims. 36. The word "interest" as defined under Section 2(28A) has to be construed strictly. We may refer to Polestar Electronic (Pvt.) Ltd. Vs. Addl. CST (1978) 41 STC 409, in which hon'ble the Apex Court has held as under:- "if there is one principle of interpretation more well settled than any other, it is that statu....
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....ties, shall at the time of credit of such income to the account of the payee deduct income tax thereon at the rates in force. 41. To our opinion, the award of compensation under motor accidents claims cannot be regarded as income. The award is in the form of compensation to the legal heirs for the loss of life of their bread earner. Hence the interest on such award also cannot be termed as income to the legal heirs of the deceased or the victim himself. 42. Learned Commissioner of Income Tax (Appeals)-I, Agra in his order dated 28.3.2003 has discussed most of the cases relating to interest on land acquisition cases which have also been cited by learned counsel for the revenue before us. But as mentioned above, the award under land acquisition can not be equated in any way with the award under motor accidents claims. 43. The award under the Motor Vehicle Act is like a decree of the court. It do not come within the definition of income as mentioned in Section 194A(1) read with Section 2(28A) of the Income Tax Act. Proceedings regarding claim under Motor Vehicle Act are in the nature of a garnishee proceedings under which the MACT has a right to attach the judgment debt payable ....
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....rstwhile clause (ix) of sub-section (3) of section 194A or the newly amended clauses (ix) and (ixa) thereof substituting original clause (ix) w.e.f. 1.6.2015 by Finance Act, 2015. Subsection (1) of section 194A provides for deduction of tax at source upon payment of any income by way of interest. Sub-section (3) of section 194A contains exclusion clauses from the purview of sub-section (1). Clause (ix) contained in sub- section (3) prior to amendment pertained to income credited or paid by way of interest on the compensation amount awarded by the Motor Accident Claims Tribunal where such amount did not exceed Rs.50,000/-. In substitution of this provision, clause (ix) now provides that the provision of sub-section (1) will not apply to such income credited by way of interest on the compensation awarded by the Motor Accident Claims Tribunal. Clause (ixa) virtually retains the original provision of unamended clause (ix). The learned ASG would, therefore, contend that by virtue of these provisions, requirement of deducting tax at source on interest income would not arise only if the same does not exceed Rs.50,000/- in a financial year or where such income is merely credited. In other ....