2005 (5) TMI 263

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..... ade out that assessee-company paid compensation to different persons as per direction of MACT. According to the AO, compensation paid by the assessee included interest on which tax was liable to be deducted at source. The AO accordingly issued notice to the assessee to furnish details of interest paid exceeding Rs. 2,500 in motor accident claims (awards) in the financial years 1995-96 to 1999-2000. 3. The assessee in its reply dt.10th Aug., 1999claimed that assessee did not pay any interest to which provisions of s. 194A were applicable. It was claimed that disbursement of claim is made by the Court and not by the assessee. In support of its claim, the assessee placed reliance on the following three decisions: (i) Bikram Singh Ors. vs .....

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..... e us, claimed that compensation amount is deposited by assessee with MACT as per directions of Court and it had no option but to comply with orders of the Court. The amount paid by the assessee will not fall within the definition of 'interest' as per s. 2(28A) of IT Act. The provisions of s. 194A were not applicable to the case of assessee. The Bench observed as under: "As per insurance policies, the assessee shall have to indemnify the third party for losses suffered by them on account of death, bodily injury or damages to the property provided that the conditions of the policies are not violated. The interest on the compensation would be granted in the discretion of the Court. The assessee-company is made one of the necessary party to t .....

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..... finition of 'interest' as is provided under s. 2(28A), the specific words used in the aforesaid section are interest payable on moneys borrowed or debt incurred. These are specific words which are followed by the inclusive general words like 'deposit', 'claim' or other similar right or obligation. Therefore, the general words like deposit, claim, etc. have to be used in the sense as they are used specifically in respect of moneys borrowed or debt incurred. The inclusive definition has, therefore, to be read along with specific words of money borrowed or debt incurred. In the instant case, the claimants had received the decretal amount from the assessee-company through the Court of law (MACT). The claimants and the assessee-company as such h .....

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