2021 (1) TMI 890 - HC - Income Tax

Income tax on the compensation payable to the claimants - As submitted that in spite of deduction of income tax from source as the deceased was salaried person, the law mandates further deduction of income tax on the total amount of compensation also - HELD THAT - It is well established principle of law that while awarding compensation, amount of income tax, if payable, has to be deducted while assessing the loss of dependency. In case the income of the victim is only from salary , the presumption would be that the employer under Section 192(1) has deducted the tax at source from the employee's salary. In case if an objection is raised by any party, the objector is required to prove by producing evidence such as LPC to suggest that the employer failed to deduct the TDS from the salary of the employee. There can be cases where the victim is not a salaried person i.e. his income is from sources other than salary, and the annual income falls within taxable range, in such cases, if any objection as to deduction of tax is made by a party then the claimant is required to prove that the victim has already paid income tax and no further tax has to be deducted from the income. In the present case, the learned counsel for the appellant did not dispute that there was no evidence on record to show that no income tax was deducted at source while paying salary to the deceased; but, her contention was that the amount of income tax was required to be deducted again from the total amount of compensation payable. This is wholly misconceived plea inasmuch as once the income tax is deducted at source while making payment of the salary to the deceased employee, no law requires deduction of the income tax again on the amount of compensation.

Summary

Issues involved:
1. Appeal against judgment awarding compensation for death in a claim petition.
2. Whether income tax should be deducted twice on compensation payable to claimants.

Analysis:

Issue 1: Appeal against judgment awarding compensation for death in a claim petition
The appeal was filed against the judgment passed by the Motor Accident Claims Tribunal (MACT) partly allowing the claim petition and awarding compensation to the claimants for the death of the deceased. The appellant challenged the findings of the Tribunal, arguing that income tax should be deducted from the compensation payable to the claimants. The respondents, on the other hand, supported the Tribunal's decision, stating that the law does not require income tax to be deducted twice. The High Court considered the arguments presented by both parties and examined the relevant legal principles in determining compensation in such cases.

Issue 2: Whether income tax should be deducted twice on compensation payable to claimants
The key legal question in this case was whether income tax should be deducted twice on the compensation payable to the claimants. The appellant relied on judgments of the Hon'ble Apex Court of India to argue that income tax should be deducted both at the source and on the total amount of compensation. However, the respondents contended that the law does not mandate double deduction of income tax, especially when it has already been deducted at the source. The High Court referred to the relevant legal provisions and previous judgments to analyze the requirement of income tax deduction in cases of compensation for death. The Court emphasized the principle that income tax, if payable, should be deducted while assessing the loss of dependency. It further clarified that once income tax has been deducted at the source from the deceased's salary, there is no legal requirement to deduct it again from the compensation amount.

In conclusion, the High Court dismissed the appeal, stating that the appellant's argument for deducting income tax again from the compensation amount was misconceived. The Court held that once income tax is deducted at the source while paying the deceased's salary, there is no legal obligation to deduct it again from the compensation. The judgment reaffirmed the established legal principle that income tax, if payable, should be considered while determining compensation but does not require double deduction.