2023 (8) TMI 1197

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....2003, she had filed a petition seeking compensation under the provisions of Motor Vehicles Act, 1988 (for short "MV Act"). The Motor Accident Claims Tribunal, Patiala (for short "MACT") awarded her compensation to the tune of Rs. 7,60,000/-. She approached this Court for enhancement of compensation amount by filing an FAO No. 2013 of 2005. Vide order dated 01.08.2018, the same was allowed and compensation amount was enhanced to the tune of Rs. 14,79,221/- payable with interest @7.5% per annum. In the execution petition filed by her before MACT, the Insurance Company deposited an amount of Rs. 12,39,188/- while deducting TDS at the rate of 10% which came to be Rs. 1,23,919/-. Then at the time of filing her ITR for the assessment year (A.Y.) ....

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....the MACT as interest was awarded under a social welfare legislation which in case of conflict with taxation legislation, was to prevail. He submitted that the interest paid on compensation which was in the nature of capital receipt was to be treated at par with the compensation for the purpose of taxability and could not be regarded as income liable to tax. In support of his contention, learned counsel relied upon authorities cited as The New India Assurance Co. Ltd. v. Savitri Devi and another, CR No.6784 of 2016, decided on 04.04.2018; National Insurance Company Limited v. Janki, CR No. 6320 of 2016, decided on 08.08.2019 and Drawing and Disbursing Officer v. Income Tax Officer, ITA No. 495 of 2009, decided on 30.03.2011 by Co-ordinate Be....

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....uld have been, had the loss of life or injury not been suffered. With regard to the contention that the interest received on compensation or enhanced compensation is deemed to be income of the assessee, it may be mentioned that the term 'income' which is inclusively defined in Section 2 (24) of the Act, 1961 does not include 'interest' as income. Section 2 (28A) of the Act, 1961 defines the term 'interest' as the interest payable in any manner in respect of any money delayed or debt incurred and includes any service fee or other charge in respect of the moneys charged or debt incurred or in respect of any credit facility which has not been utilized. Section 56 (2) (viii) of the Act, 1961 says that income by way of interest received on compe....

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....n under motor accident claims is given to the legal heirs of the deceased for loss of life of their bread earner or to the victim in case of permanent disablement or injuries. The recipients of such award might not even come within the ambit of Act, 1961 and that is why, there have been several pronouncements that award of compensation under motor accident claims cannot be regarded as income of the interest on such awards also cannot be termed as income to legal heirs of the deceased or to the victim himself. In this regard, reference can be made to Gobald Motor Service Limited and another v. R.M.K. Veluswami and others, AIR 1962 SC 1, wherein the Hon'ble Supreme Court had held that the interest on compensation awarded by MACT is by way of ....

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....f receipt of compensation as per award under the MV Act, compensation is in the nature of capital receipt for death or injury and cannot be held to be in the nature of income. Reference can also be made to The Oriental Insurance Company Limited's case (Supra) which is a recent citation of the High Court of Gujarat and wherein similar observations were made after discussing pronouncements of different High Courts. 8. In view of ratio of law as laid down in the above cited authorities, there is no hesitation to hold that the compensation awarded under MV Act by MACT or the interest on the said compensation amount cannot be termed as income. However, at this juncture, the contention as raised by the respondents that the interest received on....

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....Appeal, till the judgment of the High Court in such appeal, was not exigible to tax, not being an income. It was held that this position was not changed on account of Clause (b) of Section 145-A of the Act, 1961 as it stood amended by Finance Act, 2009 or on account of Sub Section (1) of Section 145-B of the present Act. It was held that Section 194-A of the Act, 1961 was only a provision for deduction of tax at source and did not govern the taxability of the receipt and the question of deduction of tax at source would also arise only if the payment was in the nature of income of the payee. It had also been observed that the interest was not made chargeable to tax even by Section 56 (2) (viii) of the Act, 1961 only that part of the interest....