2010 (2) TMI 1203 - HC - Income Tax

Payment of interest under the decree - Computation of the Interest amounts due - attached monies are not sufficient - liability of judgment debtor / DDA till which date the decree holder is entitled to interest? - till the date of attachment or till the date of release of the attached monies - HELD THAT - Recently in N.K. Garg Company Vs. Union of India 2009 (3) TMI 1101 - DELHI HIGH COURT held that where the decree directs the payment of interest till the date of payment of the decretal amount interest is payable till the date of payment and not till the date of attachment. In the present case also no neglect can be attributed to the decree holder in release of the attached monies. The judgment debtor inspite of notice of the execution kept on seeking adjournments and ultimately on 31st March 2006 the court issued warrants of attachment of the monies lying in the bank account of the judgment debtor. Even thereafter opportunities were sought for making the payment directly. Ultimately on 2nd August 2006 on the failure of the judgment debtor to make payment inspite of assurances this court directed the attached monies to be forwarded by the bank in the name of the Registrar General of this Court. Thereafter on 18th December 2006 the counsel for the judgment debtor for the first time contended that the amount payable under the decree was less than the amount attached and received in the Court. Accordingly order for release of the amount admitted by the judgment debtor was made on 18th December 2006 and pursuant thereto the monies released on 10th January 2007. It is thus held that the decree holder would be entitled to interest under the decree till 10th January 2007. TDS on the element of interest - 194C OR 194A - HELD THAT - Recently in Indian Hume Pipe Co. Ltd. v. State of Rajasthan 2009 (10) TMI 530 - SUPREME COURT it has been held that a person deprived of monies is entitled to be compensated by whatsoever name called be it interest compensation or damages. Thus it cannot be said that payment of interest under the decree is akin to payment of interest to which Section 194 A applies. The reasoning given in Unique Enterprises 2006 (1) TMI 624 - DELHI HIGH COURT that such payment is as part of a decree and the payment merges in the decree holds good qua Section 194 A also. No merit in either of the objections raised by the judgment debtor. The parties to appear before the Registrar General of this Court for computation of the amounts due in terms of the aforesaid and the additional amounts found due to the decree holder be released from the attached monies and if the attached monies are not sufficient the judgment debtor / DDA to pay the said amount to the decree holder immediately on computation.

Summary

Issues:
1. Entitlement to interest by the decree holder till a specific date.
2. Claim for deduction of tax at source on the element of interest.

Analysis:
1. The primary controversy in this execution revolves around the entitlement of the decree holder to interest until a specific date. The court, in a previous case, established that interest is payable until the date of payment and not until the date of attachment. In this instance, the decree holder diligently pursued the release of attached monies, while the judgment debtor delayed payment despite multiple opportunities. Ultimately, the court directed the attached monies to be forwarded to the Registrar General. The decree holder was deemed entitled to interest until the date of release of the attached monies, which occurred on 10th January, 2007.

2. Regarding the deduction of tax at source on the interest element, the decree holder cited a previous judgment where it was held that no deduction could be claimed as the payment had merged in the decree. This decision was supported by other Single Judges in subsequent cases. The judgment debtor attempted to distinguish these cases by arguing that they pertained to a different section of the Income Tax Act. However, the court rejected this argument, emphasizing that the reasoning applied to Section 194 A as well. Citing a recent case, the court reiterated that interest under a decree is not akin to interest subject to Section 194 A. Consequently, the court dismissed the objections raised by the judgment debtor and instructed the parties to appear for computation of amounts due, with the judgment debtor to pay any shortfall immediately if attached monies were insufficient.

In conclusion, the judgment clarified the entitlement of the decree holder to interest until the release of attached monies and upheld the position that no deduction of tax at source could be made on the interest element as it merged in the decree. The parties were directed to appear for further proceedings as per the court's instructions.