TaxTMI 
TaxTMI 
TaxTMI 
2022 (8) TMI 457
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....19 and CR-634, 814 & 1382-2021). Mr. Sandeep Suri, Advocate for the petitioner (in CR-4389-2019) Mr. Rajesh K. Sharma, Advocate for the petitioner (in CR-6862-2019) Mr. Varun Sharma, Advocate for Mr. Satpal Dhamija, Advocate for the petitioner (in CR-1686-2021) Mr. Ashit Malik, Advocate for respondents No.3 and 4 (in CR-4687-2019) Mr. Lakhvir Kumar, Advocate for respondent No.6 (in CR-4687-2019) Mr. Vinod Bhardwaj, Advocate for respondents No.1 & 2 (in CR-814-2021) Mr. Yogesh Putney, Sr. Standing Counsel for respondent No.4-Income Tax Department (in CR-527-2019) Mr. Prashant Bansal, Advocate for respondent Nos.1 to 4 and 6 to 27. ORDER ARVIND SINGH SANGWAN, J. The common question involved in all the above-mentioned revision petitions arising out of the different orders passed by the Motor Accidents Claims Tribunal, is "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." It would be relevant to note the facts of all the revision petitions :- CR-527-2019 As per the MACT award dated 11.8.2015, the claimant met with an ac....
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....gligence. However, on appeal, this Court has enhanced the amount of compensation to Rs.52,15,000/-, along with interest @ 7.5% from the date of filing of the claim till its realisation, after setting aside the findings of contributory negligence vide order dated 17.5.2018. Challenge in this revision petition filed by the New India Assurance Company is to an order dated 26.7.2019, passed by the MACT, Moga, whereby application filed for depositing the amount of award after deducting TDS from interest accrued has been dismissed. CR-7547-2019 As per the MACT award dated 1.5.2017, the claimants were awarded compensation of Rs.7,27,900/-, along with interest @ 7.5% per annum from the date of filing of the petition till its realization. Challenge in this revision petition filed by the New India Assurance Company is to an order dated 19.1.2019, passed by the MACT/Executing Court, Yamuna Nagar at Jagadhri, whereby the Insurance Company was directed to deposit the deducted amount of TDS of Rs.24,978/- along with interest @7.5% to the claimants. CR-634-2021 As per the MACT award dated 30.1.2018, the claimants were awarded compensation of Rs.42,91,383/- along with interest @ 9% per annu....
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.... set aside and the claimants before that forum were given liberty to file their income tax returns and seek a refund of the tax deducted at source by the insurance company while paying compensation to them. The second judgment, dated 04.04.2018, passed in 4 petitions arising out of claims made before the Motor Accidents Claims Tribunals, however upheld the order passed by the Tribunal directing that compensation awarded by it (including the interest accruing upon that compensation), shall not be subject to TDS. Upon query to Mr. Kapoor, he submits that the Department of Income Tax as also the petitioners' company filed special leave petitions against the aforesaid orders of this Court, dated April 04, 2018, with both the SLPs having been dismissed, but with the question of law left open as per the order passed in SLP (Civil) Diary No (s) 29873/2018, i.e. the petition instituted by the Department of Income Tax. Having brought that to the notice of this Court, he submits that even so, the impugned order passed by the Tribunal, directing the petitioner to deposit with the Tribunal the tax deducted at source by the company on the compensation (plus interest thereupon) awarded....
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.... Court, in New India Assurance Company Ltd. vs. Rajbala and others (CR No. 5223 of 2016), decided on 23.03.2018, wherein it was held as follows:- "Secondly, in a case pertaining to interest on the compensation awarded by the Motor Accident Claims Tribunal, no tax is payable on the interest up to Rs. 50,000/- and beyond Rs. 50,000/- the tax is to be deducted at source on the aggregate of the amount of such income paid during the financial year." However, in another set of cases, the lead case being titled New India Assurance Co. Ltd. Vs. Savitri Devi and another (CR No. 6784 of 2016), decided on 04.04.2018, it has been held as follows:- "Considering the object of the Motor Vehicles Act, 1988, regarding grant of compensation to the victim, it will not only be unjust but cruel to ask the hapless victim to first pay the interest received along with compensation on account of delayed payment, for which he is not responsible, and then to file the income tax return and claim the refund. As a result of the foregoing discussion, it is held that the interest paid along with the compensation as a result of the order of the Tribunal or of the superior Court is not liable for TDS. ....
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....t, whether called "Interest payable account" or "Suspense account" or by any other name, in the books of account of the person liable to pay such income such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly." xxxx xxxx xxxx xxx xxxx xxx (ix) to such income credited by way of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal; (ixa) to such income paid by way of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal where the amount of such income or as the case may be the aggregate of the amounts of such income paid during the financial year does not exceed fifty thousand rupees." It is also argued that Section 56 regarding income from other sources reads as under :- Income from other sources 56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income tax under the head "Income from other sources", if it is not chargeable to income tax under any of the heads specified in section 14 items A to E. (2) In particular and without prejudice to the generalit....
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....her to deduct the TDS over and above the payable amount of interest exceeding Rs.50,000/- per claimant or in the alternative obtained a declaration in Form-15G of Rule 29C of the Income Tax Rules from the claimant at the time of payment of compensation in order to get relieved of the responsibility or obligation of payment of TDS to Income Tax Department. It is also submitted that vide amendment with effect from 1.4.2010, Section 56(2) of the Act was incorporated. Counsel for the claimants have relied upon the order dated 4.4.2018 passed in Civil Revision No.678-2016, which is referred to in the previous order, as noticed above. Learned counsel for the appellant-Insurance Company has referred to an order dated 27.11.2019 passed in CWP-8951 of 2019, titled as Baldai Vs. The Chief Commissioner, Income Tax Department and others, wherein a Division Bench of this Court has made the following observations :- "1. This petition has been filed under Articles 226/227 directing the respondents to re-pay/refund of TDS amount of Rs.1,27,633/- which has been illegally deducted vide Form No.16A dated 18.02.2016 (Annexure P-3) from the compensation amount awarded by the Motor Accident Claims Tr....
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....hya Pradesh in 2010 SCC OnLine M.P. 567, United India Insurance Company Limited Vs. Ram Lal and others, has observed as under :- "14. Keeping in view the principles laid down in various cases mentioned herein above which would apply with equal force to the claim cases, this court is of the view that the interest awarded has to be spread over in number of years from the date of filing of claim petition till the date of payment because the right to receive compensation arises immediately on occurrence of accident and the interest is awarded by the Tribunal or the courts for the delay that occurs due to the delay in determination of compensation and if interest for the financial year payable to each individual claimant exceeds Rs. 50,000/- then only question of TDS will arise. So far as obligation of petitioner insurance company responsible for the payment is concerned, it is made clear that before releasing the amount of interest claimant shall be required to submit an affidavit to the effect that claimant has furnished a declaration in Form 15-G of rule 29-C of the Income Tax Rules in terms of section 197A (1-A) of the Income Tax Act for each financial year in the office of insura....
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.... 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 is now done away with in case of crediting of interest on compensation awarded by the Claims Tribunal while retaining such limit in cases of payment of interest on such compensation. However, we need not thresh out this last part of the issue since admittedly, in the present case, for none of the years under consideration, the interest income exceeded Rs.50,000/-. In fact, this Court in case of Smt. Hansagauri Prafulchandra Ladhani and ors v. The Oriental Insurance Company Ltd., 2007 ACJ 1897 (Gujarat) (supra) provided for further splitting up of this ceiling of Rs. 50,000/- per claimant basis. Looked from any angle, the insurance company was not justified in deducting tax at source while depositing the compensation in favour of the claimants. It therefore, cannot avoid liability of depositing such amount wit....
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....ma Begum (supra), Patricia G. Mahajan (supra) and Dharampal (supra). These decisions suggest that the interest is awarded for delayed computation of compensation. Right to award interest flows from section 170 of the Motor Vehicles Act, 1988. As is well settled, the authority of the Court to award interest must be traced to a statutory provision or in agreement between the parties. In absence of section 170 of the Motor Vehicles Act, perhaps it would not be lawful for the Tribunal and for that matter, the High Court in Appeal, to award interest on compensation. The Supreme Court in the cases of Abati Bezbaruah (supra), Kaushnuma Begum (supra), Patricia G. Mahajan (supra) and Dharampal (supra), explained the nature of interest awarded in motor accident claims cases. Culmination of discussion in these judgments would be that such interest is compensatory in nature and will thus, form part of the compensation itself. Compensation is computed with reference to the date of accident. All calculations of multiplicand and multiplier are based on such reference point. But computation by the Tribunal takes time. If compensation is revised by the High Court it takes further time. Interest is ....
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....st is income of the recipient or not. Section 194A of the Act is only a provision for deduction of tax at source. Any provision for deduction of tax at source in the said section would not govern the taxability of the receipt. The question of deduction of tax at source would arise only if the payment is in the nature of income of the payee. 62. We are not oblivion to erstwhile clause (ix) of subsection (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 subsection (1). Clause (ix) contained in subsection (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 Acc....
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....e ground of availability of statutory appeal, we think it is our duty to explain why this petition was entertained. In the present case, only question was of charging interest on compensation/enhanced compensation of motor accident to tax. This was a pure question of law. No facts were to be ascertained. It was otherwise important that such a question is decided by the High Court. We had, therefore, entertained the petition. (iii)The Assessing Officer has passed the order of assessment. He has made a bonafide assessment. With his approach, there can be no criticism. But when it comes to issuing notice for penalty, it defies logic. The petitioner despite his stand that the interest is not taxable, filed the return, offered the interest to tax and also deposited such tax under protest. What was the purpose of issuing notice for penalty is difficult to understand. 67. In the result, we find that the Assessing Officer had committed an error in levying tax on the interest component of the compensation awarded to the petitioner till the date of the judgment of the High Court. On any interest paid to him post the judgment, tax had to be collected as income from other sources. We, th....
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....lding that the Insurance Company is not liable to deduct the TDS. 25. Resultantly, the order dated 1-11-2018 passed by 6th Additional Motor Accident Claims Tribunal, Gwalior in Execution Claim Case No. 107/2018 is hereby set aside." In 2019 SCC OnLine P&H 1381 Insurance Company Limited Vs. Janki, this Court has held as under :- "36. Thus, if the judgment of the Division Bench of this court in Drawing & Disbursing Officers' case (supra) is to be strictly followed, as this Bench is bound to do in any case till 01.06.2015, i.e. till the amendment of clause (ix) and insertion of clause (ixa) in section 194A(3) of the Income Tax Act, 1961, no interest would be deductible at source at all, even if such interest is beyond Rs. 50,000/- in a particular year. Hence, honouring the ratio of the said judgment of the Division Bench, no tax would be deductible at source uptil 01.06.2015, even if such interest exceeds Rs. 50,000/- in the financial year 2014-15, and upto 01.06.2015 in the financial year 2015-16. 37. Therefore, if the petitioner company has paid the interest on compensation to the claimants prior to 01.06.2015, and deposited TDS with the income tax authorities at that t....
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....e Division Benches of Bombay High Court and of Gujarat High Court and Single Benches of Andhra Pradesh High Court, Himachal Pradesh High Court and Madhya Pradesh High Court and of this Court are consistent on the points as noted above, whereas the view taken by a Division Bench of this Court in CWP-8951 of 2019 titled as 'Baldai Vs. The Chief Commissioner, Income Tax Department and others' decided on 27.11.2019 is not consistent with the aforesaid judgments of different High Courts referred to above and, therefore, by following the consistent view it is directed as under :- (A) As per interpretation of Section 194-A(1) read with erstwhile clause (IX) and substituted Clause (IX and IX-A) of sub-Section (3), it is clear that the interest on 'income' is chargeable to tax, if it otherwise is not as the provision for deduction of tax at source is not a charging provision. In view of the judgment of a Division Bench of the Gujarat High Court in Bhoyabhai Hirabhai Bharvag's case (supra); Anadhra Pradesh High Court judgment in Yaliminti Appanna's case (supra); Himachal Pradesh High Court judgment in Viyasan Devi's case (supra), Madhya Pradesh High Court judgment in Ram Khiloni's case (s....