2009 (12) TMI 964 - HC - Income Tax

TDS u/s 194A - Motor Accidents Claims - deduction at source of income tax payable on the interest received by the claimant on the compensation - HELD THAT - The present claim petition was filed some time in the year 2001 and we see no reason why the amount that is sought to be withdrawn today, should be taken to have accrued all at once on the passing of the award and not year to year. Accordingly, we direct that the following procedure as laid down in the case of Hansaguri 2006 (10) TMI 383 - GUJARAT HIGH COURT shall be followed in the present case and in all the similar cases arising in future before the Motor Accidents Claims Tribunal. Order Accordingly. The Civil application stands disposed of.

Summary

Issues:
1. Deduction of income tax at source before depositing the decretal amount.
2. Interpretation of provisions of section 194A(3)(ix) of the Income Tax Act, 1961 regarding deduction at source of income tax on interest received by claimants.
3. Applicability of judgments in similar cases before the Motor Accidents Claims Tribunal.

Analysis:
1. The Court directed the respondents to deposit the awarded amount and allowed the applicants to withdraw a specific sum. The respondents requested PAN card and photo copy for TDS deduction, but the applicants argued they were not liable for income tax. The Court referred to a judgment stating that interest merged into the award is not subject to TDS deduction, unlike the present case under section 194A(3)(ix) of the Income Tax Act, 1961.

2. The Court cited a Gujarat High Court judgment regarding the interpretation of section 194A(iii)(ix) of the Income Tax Act, 1961 on interest received by claimants. The Gujarat High Court applied principles from a Supreme Court decision related to land acquisition compensation. The Court ruled that interest on compensation should be considered to have accrued year after year, not in a lump sum, from the date of the claim petition till the deposit date.

3. The Court directed a specific procedure for future cases before the Motor Accidents Claims Tribunal based on the Gujarat High Court judgment. This procedure includes spreading interest over relevant financial years, depositing excess interest liable for TDS deduction, apportioning interest among claimants yearly, and permitting withdrawal of certain amounts without income tax liability proof. The Tribunal was instructed to invest/disburse non-TDS deductible amounts and expedite refund applications under the Income Tax Act, 1961.

This judgment clarifies the application of income tax deduction at source on interest received by claimants in motor accident cases, providing a structured procedure for compliance and future cases before the Motor Accidents Claims Tribunal.