2013 (7) TMI 1062 - HC - Income Tax

Summary

Issues involved: Interpretation of Section 194A(3)(ix) of the Income Tax Act, 1961 regarding deduction of income tax on interest from compensation awarded by Motor Accidents Claims Tribunal.

Summary:
The respondents filed an Execution Petition (E.P.) in the lower Court to recover a balance amount from an insurance company, which had been remitted to the Income Tax Department as per Section 194A(3)(ix) of the Income Tax Act, 1961. The respondents argued that income tax should not be deducted as the interest accrued did not exceed Rs. 50,000 per claimant per financial year. The revision petitioner, however, contended that the interest paid should be spread over the period for which it was accrued. The Court referred to decisions from other High Courts and held that income tax should only be payable on interest accrued year after year. The insurance company had already deducted and remitted the TDS amount to the Income Tax Department, and the claimants could approach the Income Tax Assessing Authority for refund if needed. The Court found that the lower Court erred in directing the insurance company to remit the TDS amount again and set aside the order.

In conclusion, the civil revision petition was allowed, and the lower Court's order, along with the warrant for execution, was set aside.