However, In Gouri Deepak Patel & Ors v. Newindia Assurance Co. Ltd., The Division Bench Ofbombay High Court Has Accepted The Interpretation Ofsection 194A Of Income Tax As Made In Smt.hansagauri Prafu

10.03.2022 Ct. 21 D/L 9 C.O. 1724 of 2021 The New India Assurance Co. Ltd.-Vs-Uday Kumar Saha @ Uday Saha & Anr. Mr. Rajdeep Bhattacharya ... for the petitioner Petitioner is represented by its lawyer. None appears on behalf of the opposite parties.The revisional application is taken up for hearing.The present application under Article 227 of theConstitution of India is at the instance of the New IndiaInsurance Company Limited being aggrieved by orderdated 05.07.2021 passed by the Learned AdditionalDistrict Judge & 4[th] Fast Track Court, Motor AccidentClaims Tribunal, Diamond Harbour, South 24Parganas, in MACC No.272/2015, whereby the LearnedCourt below directed the Insurance company to repay asum of Rs.1,90,626./- which it had deducted towardsTDS towards compensation amount paid by it to theclaimant within one month from the date of receipt ofthe order. Only question that requires determination in thepresent case is whether compensation awarded byMotor Accident Claims Tribunal and interest thereon is taxable and can Insurance Company deduct TDS?Learned advocate appearing for the Insurance Companydraws attention of this Court to Section 194 A (ixa) ofIncome Tax Act, which provides Income Tax ischargeable to such income credited by way of intereston the compensation amount awarded by the MotorAccidents Claims Tribunal where the amount of suchincome or, as the case may be, the aggregate of theamounts of such income paid during the financial yeardoes not exceed Rs. 50,000/-. Thereby he submits theopposite parties no.1 & 2 who are entitled to get intereston awarded compensation being beyond ceiling limit ofRs.50,000/- is subject to income tax and as such theInsurance Co. in view of such provision of Income TaxAct, 1961 introduced in the Act by way of amendmentand giving effect from 1st June, 2015 is bound todeduct Income Tax on the accrued interest exceedingRs. 50,000/- and thereafter make payment to theclaimants. The impugned order being in violations ofsuch provisions of law is liable to set aside. Different High Courts appear to have takendivergent views whether interest payable oncompensation is subject to tax or not. Section 194A(ixa) is introduced by way of amendment in Income TaxAct, 1961 with effect from 1st June 2015 bringinginterest payable on compensation exceeding Rs.50,000/- during the financial year taxable. So, this court is of view if such provision is not given effect thenintroduction of such provision in Income Tax Act 1961with effect from 01.06.2015 would be meaningless andnugatory. Some High Courts are of view that Motor VehiclesAct is social welfare legislation and if there is conflictbetween social welfare legislation and tax legislation, inthat case the social legislation will prevail, since it sub-serves larger public interest. A person who suffers alsocannot be asked to part with solatium he receives sinceit is the only remedy he has been provided with by law.The Motor Vehicles Act is one such legislation whichhas been passed with a benevolent intention forcompensating the accidents victims who have sufferedbodily disablement or loss of life and the Income TaxAct which is primarily intended for tax collection by theState cannot put spokes in the effective and efficaciousenforcement of the Motor Vehicles Act. The interestawarded on compensation under Motor Vehicles Actdoes not fall within the definition of Income. TheInsurance Company cannot deduct tax at source oninterest payable on compensation. However, in Gouri Deepak Patel & Ors vs NewIndia Assurance Co. Ltd., the Division Bench OfBombay High Court has accepted the interpretation ofSection 194A of Income Tax as made in Smt.Hansagauri Prafulcandra Ladhani vs. Oriential However, in Gouri Deepak Patel & Ors vs NewIndia Assurance Co. Ltd., the Division Bench OfBombay High Court has accepted the interpretation ofSection 194A of Income Tax as made in Smt.Hansagauri Prafulcandra Ladhani vs. Oriential Insurance Co. Ltd. Reported in 2007 ACJ 1897(Gujarat) and where it was held:-” the interest on thecompensation awarded by the Tribunal or enhancedcompensation awarded by the appellate court cannot betaken to have accrued on the date of award of Tribunalgranting compensation or from the date of the award ofthe appellate court granting enhanced compensation,but has to be taken as having accrued year after yearfrom the date of filing of the claim petition till the dateof deposit by the insurance company.” Therefore, thiscourt is of view that procedure laid down in Hansaguri(supra) and followed in Gouri Deepak Patel (supra) isrequired to follow by the Insurance Company whiledepositing the amount of compensation Awarded by aTribunal and which include interest amount infollowing manner:- (a) First spread the interest amount over to therelevant financial years for the period from the date offiling the claim petition till the date of deposit, (b) Thereafter, if the interest for any particularfinancial year exceeds Rs.50,000/-, separately depositbefore the Tribunal the amount liable to be deducted atsource under the provisions of section 193-A (3) to (ix)of the Income Tax Act,1961. Such amount shall not,however, straightway be paid over to Income TaxDepartment, (c) Produce before the Claims Tribunal astatement of computation of interest by spreading theamount over the relevant years from the date of claimapplication till the date of deposit if the interest for anyparticular financial year exceeds Rs.50,000/- and alsorequest the Tribunal to treat the amount as a separatedeposit. The Tribunal who passed the award is requiredto follow the following Procedure:- (I)The Tribunal shall ensure that the amount ofinterest accrued each year is apportioned amongstclaims on year to year basis. (II) If the interest payable to any claimant during anyparticular financial year exceeds Rs.50,000/-, ClaimsTribunals shall permit the insurancecompanies/owners to pay over the amount liable to bededucted at source u/s 194-A(3) (ix) to the Income TaxDepartment in respect of that particular year, withoutprejudice to the claimant’s case that he is not liable topay any income tax for that year. (III)For the financial year(s) for which the interestpayable to the concerned claimant does not exceedRs.50,000/-, that Tribunal may permit such claimant towithdraw the amount deposited as per direction (i) (b)without producing certificate from the concernedincome tax authority that there is no income tax liability on the interest which has accrued on thecompensation awarded by the Tribunal. (IV) It is clarified that the amount other than theamount liable to be deducted at source u/s 194-A(3)(ix)shall be invested/disbursed by the Tribunal. (V) When the claimants make the application beforethe authority under the Income Tax Act,1961 for therefund of the amount deducted under the provisions ofsection 194-A(3)(ix) of the Act, the concerned authorityshall decide such application with utmost expedition.In view of the above findings, the order impugned is setaside with a direction to the Learned Tribunal to see theInsurance Company make deposit of the awardedcompensation along with interest thereon by followingthe above mentioned procedure and thereafter complythe procedure it need to follow. Accordingly, C.O 1724 of 2021 is allowed. Interim order, if any, stands discharged. There will be no order as to cost. All parties are directed to act on a server copy ofthis order duly downloaded from the official website ofthis Court. Urgent Photostat certified copies of this order, ifapplied for, be given to the parties upon compliance ofall requisite formalities. ( Kesang Doma Bhutia, J.)