TaxTMI 
TaxTMI 
2022 (8) TMI 457
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....ioner (in CR-527, 3442, 4687 and 7547-2019 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 aw....
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....ndings having been returned that it was a case of contributory negligence. 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....
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....d March 23, 2018, the order of the Commissioner, Employee's Compensation Act, 1923, Hisar Circle, was 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 depo....
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.... through its Commissioner, TDS Circle, Mumbai, Mr. Yogesh Putney, Advocate, puts in appearance and has supplied a copy of the judgment of a co-ordinate Bench of this 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 resul....
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....est 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 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 ....
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....e Company to obtain declaration 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 obligation of payment of TDS. The counsel has, thus, argued that it is the liability of the Insurance Company either 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 :- ....
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....n stands disposed of. 7. Since the main case has been decided, the pending civil miscellaneous application, if any, also stands disposed of." It is worth noticing to have a look as the view taken by the different High Courts on the subject matter with the help of law researchers of Court. The High Court of Madhya 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....
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....399, New India Assurance Company Limited Vs. Bhoyabhai Hirabhai Bharvag, has held as under :- "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 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 I....
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....tion is by way of reimbursement of the loss and cannot be treated as income. We, therefore, proceed on such basis. In the context of the nature of the interest awarded by the Claims Tribunal or the High Court on motor accident claim compensation or enhanced compensation, we have referred to the decisions of the Supreme Court including in cases of Abati Bezbaruah (supra), Kaushnuma 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 judgment....
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....ld not change on account of clause (b) of section 145A of the Act as it stood at the relevant time amended by Finance Act, 2009 which provision now finds place in subsection (1) of section 145B of the Act. Neither clause (b) of section 145A, as it stood at the relevant time, nor clause (viii) of sub-section (2) of section 56 of the Act make the interest chargeable to tax whether such interest 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....
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.... would fall in the bracket of interest income and would be exigible to tax under the normal provisions. 66. Before closing we would tie a few loose ends: (i) Learned Counsel for the petitioners had not made any submissions on the vires of the provisions of the Act, virtually giving up the challenge. We have therefore not examined the same. (ii) Though no serious opposition was raised to the petition on the 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 ....
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....of the considered opinion, that the Insurance Company is liable to deduct TDS on the interest paid by it as per the provisions of Section 194A (3)(ix)(ix-a) of the Income Tax Act, and if the assessee is of the view, that the tax has been deducted in excess, then he can always claim refund of the same from the Income Tax Department. 24. Accordingly, this Court is of the considered opinion that the Executing Claims Tribunal, committed material illegality by holding 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 i....
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....ss an appropriate order, upon consideration of the aforesaid facts in each case. 44. Upon any such returns being filed, either by the insurance company or by the claimants before the income tax authorities, delay in filing such returns/revised returns, shall be condoned by the appropriate authority, the matter having been settled upto this court only today." After hearing learned counsel for the parties and going through the judgments of the different High Courts as above, it is apparent that the views taken by the 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 ....