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Issues involved: Challenge to the legality and validity of order directing Insurance Company to deduct T.D.S. from award amount u/s 194-A(3)(ix) of Income Tax Act, 1961.
Summary: Issue 1: Legality of T.D.S. deduction by Insurance Company The petitioner challenged the order directing the Insurance Company to deduct T.D.S. from the award amount, arguing compliance with Section 194-A(3)(ix) of the Income Tax Act, 1961. The Tribunal directed the Insurance Company to deposit the T.D.S. amount, leading to the present dispute. Issue 2: Interpretation of Income Tax Act provisions The petitioner contended that T.D.S. deduction was mandatory u/s 194-A(3)(ix) of the Income Tax Act, 1961, citing judgments of Gujarat and M.P. High Courts. In contrast, the respondent argued against T.D.S. deduction from the interest component of the award amount. Issue 3: Applicability of Section 194-A of Income Tax Act Section 194-A mandates T.D.S. deduction on interest income, including compensation awarded by Motor Accident Claims Tribunal. The clause (ix) specifying the threshold for T.D.S. deduction was inserted in 2003, post the award date in this case. Judgment: The High Court agreed with the petitioner's stance, supported by precedents from Gujarat and M.P. High Courts. It held that the Insurance Company was justified in deducting T.D.S. from the interest component of the award amount. Consequently, the impugned order directing T.D.S. deposit was quashed, and each party was directed to bear their own costs.
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