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2017 (4) TMI 183 - HC - Income TaxTDS u/s 194A - interest payment made under the award of the Tribunal in motor vehicle accident case - Held that - The action of the Petitioner deducting tax at source on the interest awarded by the Tribunal, without following the mandate of the Division Bench of this Court in Gauri Deepak Patel & Ors. Vs. New India Assurance Co.Ltd. & Anr. (2009 (12) TMI 964 - BOMBAY HIGH COURT ) was wholly unjustified and illegal Petitioner wherein held Petitioner as having knowledge of the provisions of the Income Tax Act and the law laid down by the Division Bench ought not to have deducted a lumpsum TDS and deposited the same with the Income Tax department. It was observed that the Petitioner by deducting the TDS amount has actually deprived Respondent No.1 from receiving the award amount, and as the Petitioner was not ready to deposit the amount, warrant of attachment was directed The submissions on behalf of the Petitioner relying on a cumulative reading of Sections 56, 145A and 194A(3)(ix) of the Act cannot be accepted for two reasons, firstly there cannot be any dispute in the context what Section 56 and 145A would provide in respect of tax to be paid on interest directed to be paid on the compensation awarded by the Tribunal, as these provisions would stipulate and secondly, in view of the above clear position in law as laid down by the Division Bench of this Court in Gauri Deepak Patel & Ors. (supra) interpreting Section 194(3)(ix) of the Act, relevant in the present context. Resultantly the action of the Petitioner deducting tax at source on the interest awarded by the Tribunal, without following the mandate of the Division Bench of this Court in Gauri Deepak Patel & Ors. Vs. New India Assurance Co.Ltd. & Anr. (supra) was wholly unjustified and illegal.
Issues Involved:
1. Legality of TDS deduction on interest awarded by the Motor Accident Claims Tribunal (MACT). 2. Compliance with the Division Bench's guidelines in the case of Gauri Deepak Patel & Ors. Vs. New India Assurance Co. Ltd. & Anr. Issue-wise Detailed Analysis: 1. Legality of TDS Deduction on Interest Awarded by MACT: The Petitioner, New India Assurance Company Limited, contested an order by the Maharashtra Accident Claims Tribunal (the Tribunal) which allowed the issuance of a warrant of attachment against the Petitioner for not depositing the full award amount, citing that part of the amount was deducted as tax deducted at source (TDS) under Section 194A(3)(ix) of the Income Tax Act, 1961. The Petitioner argued that it was legally obligated to deduct TDS on the interest component of the award and had deposited the TDS amount with the Income Tax Authorities, providing a TDS certificate (Form 16A) to the Tribunal. The Petitioner contended that the Respondent No.1 could claim a refund from the Income Tax Authorities if eligible. The Tribunal, however, relied on the Division Bench's decision in Gauri Deepak Patel & Ors. Vs. New India Assurance Co. Ltd. & Anr. (2011 ACJ 1782), which laid down specific guidelines for the deduction of TDS on interest awarded by MACT. The Tribunal observed that the Petitioner had not complied with these guidelines, which resulted in the deprivation of the Respondent No.1 from receiving the full award amount. 2. Compliance with the Division Bench's Guidelines: The Division Bench in Gauri Deepak Patel & Ors. Vs. New India Assurance Co. Ltd. & Anr. provided detailed guidelines for the deduction of TDS on interest awarded by MACT. These guidelines required the insurance companies to: - Spread the interest amount over the relevant financial years from the date of filing the claim petition till the date of deposit. - Deposit the TDS amount separately before the Tribunal if the interest for any particular financial year exceeds ?50,000, without directly paying it to the Income Tax Department. - Produce a statement of computation of interest and request the Tribunal to treat the TDS amount as a separate deposit. - Ensure that the interest accrued each year is apportioned amongst claims on a year-to-year basis. - Allow the claimants to withdraw the interest amount not exceeding ?50,000 per financial year without requiring a certificate from the Income Tax Authority. - Permit the claimants to apply for a refund of the TDS amount from the Income Tax Authorities. The Tribunal found that the Petitioner had not followed these guidelines, leading to the issuance of a warrant of attachment. The Tribunal's decision was supported by the Division Bench's interpretation of Section 194A(3)(ix) and the Gujarat High Court's decision in New India Assurance Co. Ltd. Vs. Bhoyabhai Haribhai Bharvad (2016)72 Taxmann.com 335 (Gujarat), which emphasized the proper procedure for TDS deduction on interest awarded by MACT. The Petitioner’s reliance on other judicial decisions, including The New India Assurance Co. Ltd. Vs. Mani S. Nachimuthu, N. (270 ITR 394 Mad.) and Bikram Singh & Ors. Vs. Land Acquisition Collector (1997)10 SCC 243, was not found persuasive in light of the binding guidelines established by the Division Bench in Gauri Deepak Patel & Ors. Vs. New India Assurance Co. Ltd. & Anr. Conclusion: The High Court concluded that the Petitioner’s action of deducting TDS on the interest awarded by the Tribunal without following the Division Bench's guidelines was unjustified and illegal. The Writ Petition was rejected, reaffirming the necessity for insurance companies to adhere to the specific procedural requirements for TDS deduction on interest awarded by MACT as laid down in Gauri Deepak Patel & Ors. Vs. New India Assurance Co. Ltd. & Anr.
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