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Issues involved: Interpretation of statutory duty u/s 194(1) of the Income Tax Act regarding deduction of tax at source by an Insurer from interest paid to claimant in a compensation award.
Summary: The High Court of Patna heard a Petition filed by the National Insurance Company Ltd. challenging an order of the Additional District and Sessions Judge-cum Motor Accident Claim Tribunal directing the Insurer to pay a sum to the claimant. The Tribunal had directed the Insurer to pay the claimant an amount after deducting the income tax from the interest paid in accordance with the compensation award. The Insurer had deducted 20% towards income tax from the interest amount of Rs. 3,50,708, which was the cause of complaint by the claimant. The Tribunal's order was based on this deduction. The Court noted that the Insurer had a statutory duty u/s 194(1) of the Income Tax Act to deduct tax at source from the interest paid to the claimant and deposit it with the Government of India. The Tribunal had erred in directing the Insurer to pay the deducted sum to the claimant. The respondent-claimant's advocate admitted the Insurer's statutory liability to deduct tax at source and mentioned that the claimant had filed an income tax return claiming a refund of the deducted amount. Therefore, the Court allowed the Petition, quashed, and set aside the impugned order of the Tribunal dated 5th December 2012 in Claim Case No. 111 of 1998.
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