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TMI Blog2024 (8) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... n of India to the effect that TDS is deductible on the compensation payable to the builder. Besides, Decree Holders submits that the order passed by the NCDRC cannot be treated as a decree, so that the compensation granted by the said order does not partake of the character of a decretal debt. Given the view adopted by the Supreme Court in All India Reporter [ 1960 (11) TMI 21 - SUPREME COURT] as followed by this Court in Voith Hydro Ltd [ 2021 (3) TMI 1424 - DELHI HIGH COURT] and Glencore International [ 2019 (8) TMI 1206 - DELHI HIGH COURT] , the nature of the amount payable to the petitioner, once it stands awarded in an arbitral award, acquires the character of a judgment debt and, therefore, cannot be subjected to deduction of TDS. As the judgments of this Court in Voith Hydro Ltd [ 2021 (3) TMI 1424 - DELHI HIGH COURT] and Glencore International [ 2019 (8) TMI 1206 - DELHI HIGH COURT] , are directly on the point and followed the decision of the Supreme Court in All India Reporter, we are constrained to hold that the respondent cannot be permitted to deduct TDS from the amount awarded to the petitioner by the arbitral award under execution and directed to be paid by this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s passed by this Court. 6. The dispute has percolated down to the issue of whether TDS can be deducted by the respondent on the amounts awarded in favour of the petitioner by the arbitral award under execution. Rival Stands 7. Ms. Sobhana Takiar, learned Counsel for the petitioner, places reliance on the judgment of S.A. Bobde J, (as he then was), sitting singly in the High Court of Bombay in Islamic Investment Company v. U.O.I. (2002) 4 Bom CR 685, which, following an earlier decision of the Supreme Court in All India Reporter Ltd v. Ramchandra D. Datar (1961) 2 SCR 773, holds that, once an amount becomes payable to a decree holder under a decree, it losses its original character and assumes the character of a judgment debt. In the absence of any provision of the Income Tax Act, 1961, which envisages deduction of TDS while paying a judgment debt, the Bombay High Court, following the Supreme Court, held that no TDS could be deducted from the said amount. 8. Mr. Ramesh Singh, learned Senior Counsel for the respondent submitted, yesterday, that if such a view were to be accepted, it would provide fodder for income tax evaders, who may file collusive suits and obtain decrees for payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decree must be executed according to its tenor may be modified by a statutory provision. But there is nothing in the Income Tax Act which supports the plea that in respect of the amount payable under a judgment-debt of the nature sought to be enforced, the debtor is entitled to deduct income tax which may become due and payable by the judgment-creditor on the plea that the cause of action on which the decree was passed was the contract of employment and a part of the claim decreed represented amount due to the employee as salary or damages in lieu of salary . 33. In Islamic Investment Company v. Union of India and Anr.: (supra), the Bombay High Court following the decision in All India Reporter Ltd. v. Ramchandra D. Datar (supra) rejected the contention that the Judgment Debtor (in that case, the Food Corporation of India) must be allowed to deduct TDS on the interest payable to a non-resident. The Court observed that: when such amounts becomes part of a judgment debt, they lose their original character and assume the character of a judgment debt. Once such an amount assumes the character of judgment debt, the decree passed by the civil court must be executed subject only to the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd CC No. 1508/2018, restraining the builder in that case from deducting in tax at source on the compensation held by the NCDRC to be payable to the consumer before it. Para 32 of the judgment of the NCDRC reads thus: 32. Before parting, I may make it clear that the interest @12% p.a. on the refund of the amount which has been awarded as compensation is not factually interest on refund and, therefore, there is no question of deducting any tax on source. 14. The Supreme Court, in the Special Leave Petition preferred against the aforesaid decision, in the penultimate paragraph, (vacated) the direction of the NCDRC restraining the builder from deducting tax at source, which shall be in accordance with law . 15. The Supreme Court has not, therefore, pronounced on deductibility or otherwise, of TDS on the amount payable to the builder but has vacated the omnibus restraint on the builder from deducting TDS, stating that the deduction would be in accordance with law. 16. This solitary sentence towards the closure of the judgment cannot be regarded as a declaration of the law within the meaning of Article 141 of the Constitution of India to the effect that TDS is deductible on the compens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Government or a public sector bank within the meaning of clause (23-D) of Section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode: Explanation-1 For the purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called Interest payable account or Suspense account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. Explanation 2. For the removal of doubts, it is hereby clarified that the obligation to comply with sub-section (1) and to make deduction thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has (i) a residence or place of business or business connection in India; or (ii) any other presence in any manner whatsoever in India. - - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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