2019 (4) TMI 2063 - HC - Income Tax

TDS on the compensation payable to the petitioner - deposit the entire amount as originally ordered by the authority under the Workmens Compensation Act - First respondent would submit that in view of the requirement under the provisions of Income tax, deduction has been made towards TDS and it is not for the second respondent to deduct or insist the TDS on the compensation payable to the petitioner - HELD THAT - If there is a conflict between a Social Welfare Legislation and a Taxation Legislation, Social Welfare Legislation should prevail since it subserves larger public interest and the compensation like the present one which is being paid to the petitioner, there should not be any income tax deduction thereon at all. This Court is in complete agreement with the ratio laid down by the learned Single Judge of this Court in the above referred decision, and this Court is of the view that in the matters of compensation of this nature, the provisions of income tax cannot be invoked for the purpose of deducting tax at source. Therefore, the deduction by the second respondent appears to be unjust, arbitrary and irrational and also contrary to the beneficial provisions of the Workmen Compensation Act. This Court is of the view that the first respondent is directed to recover a sum of Rs.97,580/- and deposit the same within a period of two weeks from the date of receipt of a copy of this order. It is once again made clear that the second respondent is not entitled to deduct any amount towards TDS on the amount that is payable to the petitioner under the provisions of the Workmen Compensation Act. On recovery of the TDS amount, which is deducted, the entire amount is liable to be paid to the petitioner.

Summary

Issues:
1. Compliance with the order of the Deputy Commissioner, Workmen Compensation, Coonoor.
2. Deduction of TDS at 20% on the compensation amount.
3. Conflict between Social Welfare Legislation and Taxation Legislation regarding TDS deduction on compensation.

Compliance with Deputy Commissioner's Order:
The Writ Petition sought a Writ of Mandamus to direct the first respondent to take action against the second respondent based on the proceedings of the Deputy Commissioner, Workmen Compensation, Coonoor. A deposit of Rs.3,90,322/- was made in favor of the Deputy Commissioner of Labour, Coonoor, in compliance with the earlier order. The petitioner requested the full amount of Rs.4,87,902/- to be deposited without TDS deduction.

Deduction of TDS on Compensation:
The petitioner argued against the deduction of Rs.97,580/- towards TDS by the second respondent, emphasizing that the entire amount should be deposited as originally ordered under the Workmen Compensation Act. The first respondent justified the TDS deduction citing Income Tax provisions, stating it was not within the second respondent's discretion.

Conflict between Social Welfare and Taxation Legislation:
The petitioner relied on a judgment emphasizing that Social Welfare Legislation should prevail over Taxation Legislation in cases of compensation, contending that TDS should not be deducted on compensation amounts. The Court agreed, stating that TDS deduction on compensation under the Workmen Compensation Act was unjust, arbitrary, and contrary to the law. The first respondent was directed to recover the TDS amount and deposit it within two weeks, clarifying that no TDS should be deducted on the compensation payable to the petitioner.

Conclusion:
The Court held that TDS deduction on compensation under the Workmen Compensation Act was not justified. The judgment emphasized the precedence of Social Welfare Legislation over Taxation Legislation in such cases. The first respondent was directed to recover and deposit the TDS amount, ensuring the full compensation was paid to the petitioner. The writ petition was disposed of with no costs incurred.

This comprehensive analysis of the judgment highlights the issues involved, the arguments presented by the parties, the legal principles applied by the Court, and the final decision rendered in the case.