TaxTMI 
TaxTMI 
2023 (2) TMI 273
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....Tribunal, Jagatsinghpur in MAC No.149 of 2013, the petitioners have prayed for the following reliefs by way of writ petition under Articles 226 and 227 of the Constitution of India: "*** issue Rule NISI calling upon the opposite parties to show cause as to why the TDS deducted from the interest awarded on compensation to the petitioners vide Annexure-5 shall be held as illegal and as to why opposite party No.4 shall not be directed to pay interest of Rs.9,250/- for one month to the petitioners and if the opposite parties failed to show cause or show insufficient cause make the Rule NISI absolute and allow the writ petition with cost." Facts of the case: 2. The petitioners, the wife and the children of the deceased, filed Motor Accident Claims Case being No.149 of 2013 under Section 166 of the Motor Vehicles Act, 1988 (for brevity be referred to as "MV Act") before the 3rd Motor Accidents Claims Tribunal, Jagatsinghpur (MACT) consequent upon death of Sri Mahendra Kumar Sahoo in road accident on 07.01.2013. 2.1. The MACT vide Judgment and Order dated 17.10.2017 awarded compensation to the tune of Rs.17,90,760/- in favour of the petitioners along with interest @ 7% per annum wi....
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....nd Rs.35,944/-. This amount being less than Rs.50,000/-, in view of Section 194A(3)(ixa) of the Income Tax Act, 1961 ("IT Act" for short) as amended or Section 194A(3)(ix) as existed prior to amendment ibid. 3.2. It is further contended that the award of interest being made in terms of Section 171 of the MV Act, deduction of tax at source ought not to have been made as such an interest is awarded for delay in deposit of compensation as modified by the higher forum/Court. 3.3. To fortify aforesaid contentions, the learned counsel has cited Rupesh Rashmikant Vrs. Union of India, (2019) 417 ITR 169 (Bom); Court on its own Motion Vrs. The Himachal Pradesh State Cooperative Bank Ltd., (2015) 228 TAXMAN 151 (HP); The Managing Director, Tamil Nadu State Transport Corporation (Salem) Ltd. Vrs. Chinnadurai, AIR 2016 Mad 146; Oriental Insurance Co. Ltd. Vrs. Kala Bai, MANU/MP/0755/2020. Arguments advanced by Senior Standing Counsel for the Income-Tax Department: 4. Referring to the counter-affidavit Sri Sidhartha Sankar Mohapatra, Senior Standing Counsel submitted that income by way of interest received on compensation or on enhanced compensation referred to in Section 145B(1) being de....
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....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 on enhanced compensation referred to in sub-section (1) of Section 145B;" 145B. Taxability of certain income.- (1) Notwithstanding anything to the contrary contained in Section 145, the interest received 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) *** 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....
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....come Tax Authorities have treated the amount awarded or interest accrued on term deposits made in Motor Accident Claims cases as income. Therefore, the said Circular is against the concept and provisions referred to hereinabove and runs contrary to the mandate of granting compensation." 8.2. In The Managing Director, Tamil Nadu State Transport Corporation (Salem) Ltd. Vrs. Chinnadurai (supra) it has been held as follows: "Following the Division Bench Judgment, a learned Single Judge of the Punjab and Haryana High Court, in a recent decision, in New India Assurance Company Ltd. Vrs. Sudesh Chawla and Others, C.R. 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." 8.3. In New India Assurance Co. Ltd. Vrs. Savitri Devi and Another, C.R. No. 6784 of 2016, the Hon'ble Punjab and Haryana High Court vide J....
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.... the expected life of the deceased. The multiplier theory proceeds on the basis that with interest that may be earned on the compensation and a portion drawn from the capital should be equivalent to what the deceased would have contributed to his family. At the end of the period, the capital should be completely utilised. While awarding compensation, though the Claims Tribunal awards future loss in praesenti, interest is awarded for the period between filing of the application for claim till passing of the award for compensation. 8.8. Taking note of Abati Bezbaruah Vrs. Geological Survey of India, (2003) 3 SCC 148 in Dharampal Vrs. U.P. State Road Transport Corporation, (2008) 12 SCC 208 it has been held as follows: "8. As per Section 171 of the Motor Vehicles Act, 1988 (hereinafter referred as "the Act") where the claim for compensation made under the Act is allowed by the Claims Tribunal, the Tribunal may direct that in addition to the amount of compensation simple interest shall also be paid at such rate from such date not earlier than the date of making the claim. 9. In National Insurance Co. Ltd. Vrs. Keshav Bahadur, (2004) 2 SCC 370 this Court has held that the provisio....
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....ection 145A by virtue of Finance Act, 2009 also." 9.1. In Rupesh (supra), the Bombay High Court went on further to say that: "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 awarded keeping in mind the rate of inflation. Effort thus is to award just compensation. Awarding interest for delayed computation of compensation is therefore integral part of this exercise. *** The date of passing of the award by Claims Tribunal is the date on which the compensation is determined and the right to receive interest pendente lite ceases. The interest for the period between the filing of the claim petition and passing of the award thus, is for the period when the claimant for the first time approached the Claims Tribunal asking the Tribunal to assess and award compensation and the time consumed in disposing of the Cl....
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....efinition of "interest" contained in Section 2(28A). 10.3. In the instant case, it is not denied that interest was paid for delay in depositing the awarded amount. Reading of clause (28A) of Section 2 of the IT Act would show that in order to fall within the connotation of the term "interest", the money must be: i. Borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes ii. Any service fee or other charge in respect of money borrowed or debt incurred or in respect of any credit facility which has not been utilized. 10.4. The marginal heading of Section 194A suggests that said provision deals with TDS in respect of "interest" definition of which term is given in Section 2(28A), but not "interest on securities" which expression is defined in Section 2(28B). The amount of "interest" deposited by the opposite party No.4 with the MACT is on account of delay in deposit of compensation, which can neither be understood as borrowed or debt incurred nor does it fall within meaning of the term "service fee" or the expression "other charge in respect of money borrowed or debt incurred or in respect of any credit facility which has not be....
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....T Act. 11.3. It is the argument of Sri Bisikesan Pradhan, Advocate for the petitioners that before deducting TDS the opposite party No.4 should have ensured Permanent Account Number (PAN) details from the petitioners. In this regard the following observation of the Hon'ble High Court of Andhra Pradesh in the case of National Insurance Company Limited Vrs. Yeliminti Appanna and Another, 2014 SCC OnLine AP 1175, is worthy of notice: "Be it noted that in case a claimant furnishes a declaration, on Form No. 15G of Rule 29C of the IT Rules in terms of Section 197(1A) of the IT Act or such other declaration on such Form as may be applicable, for each financial year, either to the person concerned or in the office of insurance company, in such a case the person/the insurance company is relieved of his/its obligation of payment of TDS." 11.4. The petitioners having enclosed copies of PAN card to the writ petition urged by demonstrating that had the opposite party No.4 sought for particulars, the petitioners would have furnished such details so that occasion for deduction of tax at source would not have been arisen. Relying on Section 206AA of the IT Act, the learned counsel for the pe....