New India Assurance Company Ltd v. The Commissioner Of Income Tax Ayakar Bhawan Central Revenuebuilding, Birchand Patel Marg, Patna.building, Birchand Patel Marg, Patna

IN THE HIGH COURT OF JUDICATURE AT PATNACivil Writ Jurisdiction Case No.12429 of 2019 ====================================================== New India Assurance Company Ltd. through its Deputy Manager RegionalOffice 6th Floor B.S.F.C. Building Fraser Road Patna. ... ... Petitioner/s Versus 1.The Commissioner of Income Tax Ayakar Bhawan Central RevenueBuilding, Birchand Patel Marg, Patna.Building, Birchand Patel Marg, Patna. 2.Babulal Sah S/o Late Chulhai Sah R/o Village Rampur Mahinath, P.S. Piar,District Muzaffarpur.District Muzaffarpur. CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE PARTHA SARTHYORAL JUDGMENT(Per: HONOURABLE THE CHIEF JUSTICE) Date : 14-07-2023 The Insurance Company in the above writ petitionchallenged the order of the Motor Accidents Claims Tribunal,Muzaffarpur (hereinafter referred to as the ‘Tribunal’) whichdirected the Insurance Company to pay an amount of Rs.17,126/- being the TDS deducted with interest at the rate of 9%per annum from 29.01.2008 till payment. The InsuranceCompany, before the Tribunal and before this Court, asserts thatthere can be no liability cast on the Insurance Company of a likenature.When the amounts are deducted as TDS, from the interestamounts granted in accordance with an award of the MACT, theclaimant has to approach the Income Tax Department for arefund. 2. In the present case, we find an infirmity insofar as the Tribunal having passed the order in an application in whichthe applicant expired when the order was passed. In the presentcase, a substitution petition has been filed by one Bhola Shah,aged about 41 years, son of Late Babulal Sah, the applicantbefore the Tribunal. The applicant is said to have died on02.04.2015 and the order was passed on 09.02.2018, after thedeath. Substitution application has been filed by the InsuranceCompany also seeking to bring the above applicant in I.A. No. 1of 2020 on record by I.A. No. 2 of 2023. I.A. No. 1 of 2020 isallowed and the applicant is brought on record as the legalrepresentative of the deceased, the 2[nd] respondent herein. I.A.No. 2 of 2023 is closed as unnecessary. We proceed to hear theissue as agitated since the learned Standing Counsel for theInsurance Company impressed upon us the need to caution theTribunals in such matters. 3. Both the parties are present here and even if themater is remanded, the substituted additional second respondentwill have to be heard before the Tribunal. 4. The Tribunal seems to have followed thedecisions of the High Court of Bombay and Gujarat, which reliedon a Division Bench judgment of the Bombay High Court inGauri Deepak Patel & Ors. V. New India Assurance Co. Ltd. 3. Both the parties are present here and even if themater is remanded, the substituted additional second respondentwill have to be heard before the Tribunal. 4. The Tribunal seems to have followed thedecisions of the High Court of Bombay and Gujarat, which reliedon a Division Bench judgment of the Bombay High Court inGauri Deepak Patel & Ors. V. New India Assurance Co. Ltd. & Anr.; 2011 ACJ 1782. Therein the widow, two minor childrenand mother of the deceased approached the Motor VehicleAccident Tribunal for compensation. In the proceedings beforethe High Court, it was directed that the money awarded to theclaimants be deposited and the claimants allowed to withdraw acertain portion of the amount. The respondent-InsuranceCompany then directed the applicant to furnish the Pan Card andphoto copy for the purpose of deducting income tax at source,which was the liability of the Insurance Company, as per Section194A(3)(ix) of the Income Tax Act 1961 (hereinafter referred toas the ‘Act’). The Division Bench followed a judgment of theHon’ble Supreme Court in Rama Bai v. Commissioner ofIncome Tax; [1990] 181 ITR 400, wherein it was held that theinterest on enhanced compensation of land compulsorily acquiredunder the Land Acquisition Act, 1984, on a reference underSection 18 of the Act is deemed to have accrued year after yearfrom the date of delivery of possession of the land and not on thedate of the order of the Court. On the same principle, the HighCourt of Bombay directed the Insurance Companies to spreadover the interest amount over the relevant financial year anddeduct T.D.S. only if the interest for any particular financial yearexceeds Rs. 50,000/-. However, the statutory provision insofar as the liability to tax on interest income from an award of the MotorAccidents Claim Tribunal is explicit as to the year in which taxationoccurs. 5. We are told by the learned Standing Counselappearing for the Insurance Company that the Motor AccidentClaims Tribunals, across the State, have been directing suchrefund by the Insurance Company, of amounts deducted as TDSand already credited to the Income Tax Department. It is alsopointed out that the said directions are issued in total disregard ofthe binding precedents of two Division Bench judgments of thisCourt, produced as Annexure-2 series i.e. the decisions dated20.09.2013 in CWJC No. 5352 of 2013, titled as NationalInsurance Co. Ltd. vs. Commissioner of Income Tax anddated 05.02.2015 in CWJC No. 18558 of 2012, titled as NationalInsurance Co. Ltd. Vs. Union of India and connected cases. Inthe order dated 20.09.2013 on similar directions issued by theTribunal, it was found that the Tribunal had ignored the statutoryduty conferred upon the Insurer under Section 194(1)[sic-194A(1)]. Following the said judgment, by order dated05.02.2015, another Division Bench elaborately considered thematter, especially relying on decisions of the Madras High Courtin New India Assurance Co. Ltd. vs. Mani & Ors. [2004] 270ITR 394, the Gujarat High Court in United India Insurance Co. Ltd. Vs. Mitaben Dharmeshbhai Shah & Ors.; [2004] 269 ITR 63 and Section 194A(1) and (3)(ix), to hold that theInsurance Company has a duty to deduct tax when the amount ofinterest credited or paid during the financial year exceeds Rs.50,000/-. The order of the District Judge directing refund by theInsurance Company in derogation of the statutory provision wasdeprecated. 6. We cannot but observe that the Tribunal grossly erred in relying on a decision of the High Court of Bombay whilethe jurisdictional High Court held otherwise. In any event, withall the respect at our command, we cannot agree with thedecision of the Bombay High Court on a plain reading of theprovisions i.e. Section 194A(1) and 3(ix), which are extractedhereunder:- Ltd. Vs. Mitaben Dharmeshbhai Shah & Ors.; [2004] 269 ITR 63 and Section 194A(1) and (3)(ix), to hold that theInsurance Company has a duty to deduct tax when the amount ofinterest credited or paid during the financial year exceeds Rs.50,000/-. The order of the District Judge directing refund by theInsurance Company in derogation of the statutory provision wasdeprecated. 6. We cannot but observe that the Tribunal grossly erred in relying on a decision of the High Court of Bombay whilethe jurisdictional High Court held otherwise. In any event, withall the respect at our command, we cannot agree with thedecision of the Bombay High Court on a plain reading of theprovisions i.e. Section 194A(1) and 3(ix), which are extractedhereunder:- “194A. (1) Any person, not being an individual or a Hinduundivided family, who is responsible for paying to aresident any income by way of interest other than incomeby way of interest on securities, shall, at the time of creditof such income to the account of the payee or at the time ofpayment thereof in cash or by issue of a cheque or draft orby any other mode, whichever is earlier, deduct income-taxthereon at the rates in force: Provided that an individual or a Hindu undivided family,whose total sales, gross receipts or turnover from thebusiness or profession carried on by him exceed themonetary limits specified under clause (a) or clause (b) ofSection 44AB during the financial year immediatelypreceding the financial year in which such interest iscredited or paid, shall be liable to deduct income-tax underthis Section. (3) The provisions of sub-section (1) shall not apply- (ix) to such income credited or paid by way of interest onthe compensation amount awarded by the Motor Accidents Claims Tribunal where the amount of such income or, asthe case may be, the aggregate of the amounts of suchincome credited or paid during the financial year does notexceed fifty thousand rupees. 7. As per Section 194A(1), any income by way of interest other than income by way of interest on securities shall atthe time of credit of such incometo the account of the payee or atthe time of payment thereof in cash or by issue of a cheque ordraft or by any other mode, be liable for tax deduction at source.Hence, there can be no spread over of the interest income in theyears in which it accrued after death of the person, which resultedin the compensation being awarded. We also have to notice sub-clause (ix) of sub-section(3) of Section 194A, which speaks ofsuch exemption from deduction of tax, from the interest income,when the aggregate amount of such income credited or paidduring the financial year exceeds Rs. 50,000/-. Hence, theincome has to be found to have accrued only on the date ofpayment or credit. 8. We have to caution the Tribunals, insofar as theproper procedure being the resort to refund, if at all the claimantdoes not have income in excess of the taxable limit under theIncome Tax Act. 9. On the above reasoning, we find that theapplication filed before the Tribunal was unsustainable. We, hence, set aside the order of the Tribunal dated 09.02.2018 andcaution the Tribunals from issuing such orders directing refundfor the periods prior to 01.06.2015. We specifically notice thatSection 194A(3)(ix) has been substituted by the Act 20 of 2015with effect from 01.06.2015, which reads as under:- “(3)(ix)-To such income credited by way ofinterest on the compensation amount awarded bythe MACT.” On the above provision coming into force from 01.06.2015, noTDS can be deducted even on the interest component. The writpetition is allowed, leaving the parties to suffer their respectivecosts. 10. Since, we have answered the question against the refund directed by the Tribunal, we are of the opinion that theapplication before the Tribunal need not be restored and the sameshall stand closed as not maintainable. (K. Vinod Chandran, CJ) ( Partha Sarthy, J) Sujit/- “(3)(ix)-To such income credited by way ofinterest on the compensation amount awarded bythe MACT.” On the above provision coming into force from 01.06.2015, noTDS can be deducted even on the interest component. The writpetition is allowed, leaving the parties to suffer their respectivecosts. 10. Since, we have answered the question against the refund directed by the Tribunal, we are of the opinion that theapplication before the Tribunal need not be restored and the sameshall stand closed as not maintainable. (K. Vinod Chandran, CJ) ( Partha Sarthy, J) Sujit/- AFR/NAFRAFRCAV DATEUploading Date21.07.2023Transmission Date