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TMI Blog2019 (8) TMI 1833X X X X Extracts X X X X X X X X Extracts X X X X ..... t all, even if such interest is beyond Rs.50,000/- in a particular year. Hence, honouring the ratio of the said judgment of the Division Bench, no tax would be deductible at source uptil 01.06.2015, even if such interest exceeds Rs.50,000/- in the financial year 2014-15, and upto 01.06.2015 in the financial year 2015-16. Therefore, if the petitioner company has paid the interest on compensation to the claimants prior to 01.06.2015, and deposited TDS with the income tax authorities at that time, even where such interest did not exceed Rs.50,000/- in any particular financial year, then such deposit has been made by the company wholly contrary to what has been held by the Division Bench of this court in Drawing Disbursing Officers' case (supra), (though in my opinion, strictly even in terms unamended clause (ix) of sub-clause (3) of Section 194-A of the Act of 1961, the tax was deductible at source, whether credited or actually paid). As per applicability of the ratio of that judgment, the claimants cannot be burdened with filing returns seeking a refund, if the fault is that of the company itself (by making an erroneous deduction). In view of the aforesaid discussion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt, in Drawing and Disbursing Officer v. Income Tax Officer (ITA no.495 of 2009), decided on 30.03.2011, with the Tribunal observing in its order that in the said judgment, this court had framed specific issues after referring to various authorities of the Supreme Court, and had thereafter held that the interest component in the compensation awarded by a Motor Accident Claims Tribunal, being a part of compensation so awarded, is to be treated as a capital receipt and not income, till the claimant has actually received the amount. 2. Notice of motion having been issued in both these petitions, as per the report of the Registry, the respondents in CR no.6419 of 2016, i.e. the claimants before the learned Motor Accident Claims Tribunal, stand duly served. However, despite that, they have chosen not to appear and contest the petition. In CR no.6320 of 2016, the report is to the effect that the claimant has expired. However, her son, Suraj Kumar, is the one who actually submitted her death certificate to the learned District Judge, Moga, (upon a direction from this court, there being some confusion on whether she had died or not). Obviously therefore, with her son fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in Gauri Deepak Patel v. New India Assurance Co. Ltd. 2009 (20) RCR (Civil) 515 , wherein it was held that the Tribunal while dealing with cases before it, would spread the interest accruing on the compensation amount, over to the relevant financial years and thereafter, if the interest in a particular financial year exceeds Rs.50,000/-, in terms of clause ix (a) of sub-section 3 of Section 194-A, the Tribunal would permit the insurance companies to deduct the tax at source for that particular financial year and pay it to the income tax department. Learned counsel also relied upon a judgment of a Division Bench of this court in Gurdev Singh and others v. State of Haryana and another 2014 (46) RCR (Civil) 453, wherein it was held (in the context of compensation paid for land acquired under the Land Acquisition Act, 1894), that on the interest component, income tax was payable under Section 56 of the Income Tax Act, as income from other sources. 5. On the other hand, of course, is the judgment of another Division Bench of this court (as has been relied upon by the Tribunal), in Drawing and Disbursing Officers' case (supra). In that case, the following sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... component being a part of the compensation awarded, does not attract tax deduction at source, it not being income till the claimant has actually received it (with it to be treated as a capital receipt till that time). 8. In this context, it must be said that, undoubtedly, Section 194-A of the Income Tax Act does stipulate that any person other than an individual or Hindu Undivided Family, who is responsible for paying any income to a resident Indian by way of interest (other than income by way of interest on securities), is liable to deduct tax at source, at the applicable rate. However, the Division Bench of this court in the aforesaid case, observed that the essential question for consideration before it, was whether the interest component has to be treated as taxable income or as a part of the compensation which, being in the nature of a capital receipt, is not taxable. (Before considering the matter in detail, at the outset itself their Lordships expressed their opinion to the effect that the interest component was a part of the compensation that is not taxable. - Reference paragraph 8 of the judgment downloaded from the website of this court). This was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he claim as it may specify in this behalf. Thereafter, a judgment of the Supreme Court in Commissioner of Income-tax, Faridabad v. Ghanshyam (HUF) (2009) 315 ITR 1 was also referred to, wherein it was found to have been held that interest paid by the Collector under Section 34 of the Land Acquisition Act, 1894, was part of compensation (for acquisition of land) and was treated to be at par with compensation for purposes of taxability. Another judgment of the Supreme Court, in Central Bank of India v. Ravindra and others AIR 2001 (SC) 3095 , was also referred to and quoted from. Lastly, a judgment of the Apex Court, in Tuticorin Atkali Chemicals and Fertilizers Limited v. Commissioner of Income Tax, (1997) 227 ITR 172, was also cited by the Division Bench of this court, wherein it was found to have been held that though, ordinarily, interest received is income, however it would not be of 'revenue nature' where it was received by way of damages or compensation. 11. Thus, having referred to the entire case law on the subject, it was held that even in the context of Section 194-A (3) (ix), the tax deductible at source would only be in the context of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome and what does not). It needs to be also specifically noticed that at the time when that judgment was rendered by this court (on March 30, 2011), clause (ix) of subsection (3) of Section 194A of the Income Tax Act read as follows (with there being no clause (ixa) at that stage):- The provision of sub-section (1) shall not apply xxxxx xxxxx xxxxx (ix) to such income credited or paid by way of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid during the financial year does not exceed fifty thousand rupees. Thus, clause (ix) at that stage also stipulated that tax must be deducted at source even on income by way of interest, at the time of credit or payment thereof, if the amount of such income by way of interest exceeded Rs.50,000/- in a single financial year; (with the said provision obviously being specific to interest accruing on compensation awarded by a Motor Accident Claims Tribunal). 14. Yet, it has been held by a Division Bench of this court, after going into det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st would be deductible at source at all, even if such interest is beyond Rs.50,000/- in a particular year. Hence, honouring the ratio of the said judgment of the Division Bench, no tax would be deductible at source uptil 01.06.2015, even if such interest exceeds Rs.50,000/- in the financial year 2014-15, and upto 01.06.2015 in the financial year 2015-16. 17. Therefore, if the petitioner company has paid the interest on compensation to the claimants prior to 01.06.2015, and deposited TDS with the income tax authorities at that time, even where such interest did not exceed Rs.50,000/- in any particular financial year, then such deposit has been made by the company wholly contrary to what has been held by the Division Bench of this court in Drawing Disbursing Officers' case (supra), (though in my opinion, strictly even in terms unamended clause (ix) of sub-clause (3) of Section 194-A of the Act of 1961, the tax was deductible at source, whether credited or actually paid). As per applicability of the ratio of that judgment, the claimants cannot be burdened with filing returns seeking a refund, if the fault is that of the company itself (by making an erroneous deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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