2006 (1) TMI 624 - HC - Income Tax

Summary

Issues:
1. Application under Section 151 of CPC for withdrawal of deposited amount pursuant to an award.
2. Whether tax deduction at source under Section 194C of the Income Tax Act, 1961 is applicable to the decretal amount.
3. Release of balance amount to the judgment debtor after payment to the decree holder.

Analysis:
1. The application was filed under Section 151 of the CPC seeking withdrawal of the amount deposited in the Court following an award made a rule of the Court. The total amount due as of a certain date was specified, and it was acknowledged that an amount exceeding this sum had been deposited by the judgment debtor. The counsel for the judgment debtor requested the release of the excess amount after payment to the decree holder, mentioning that interest had accrued on the deposited amount.

2. The first issue raised by the judgment debtor's counsel related to the applicability of tax deduction at source under Section 194C of the Income Tax Act, 1961 to the decretal amount. The argument presented was that since the payment was for work done by a contractor, it should be subject to tax deduction. However, the decree holder's counsel contended that the payment was pursuant to a decree, not a contract, and provided a circular supporting this position. The judgment cited the CPWD Manual, emphasizing that no deduction should be made for payments under an award/decree under Section 194C.

3. The second point raised was regarding the release of the balance amount to the judgment debtor after paying the decretal amount and costs to the decree holder. The judgment clarified that only the amount decreed should be given to the decree holder, and any excess, including accrued interest, should be returned to the judgment debtor. The order directed the release of the specified amounts to the respective parties within a week, absolving the judgment debtor of any liability for tax deduction at source under Section 194C in relation to the decretal amount.

In conclusion, the application was disposed of with directions for the release of specific amounts to the decree holder and judgment debtor, addressing the issues of tax deduction under Section 194C and the distribution of the deposited funds in accordance with the decree.