State Consumer Disputes Redressal Commission
Parag Girishchandra Desai vs Dr.Ashokbhai C.Shah on 10 June, 2022
Details DD MM YY
Date of Judgment 10 06 2022
Date of filing 28 09 2021
Duration 09 04 02
IN THE CONSUMER DISPUTES REDRESSAL COMMISSION
GUJARAT STATE, AHMEDABAD
Execution Application NO. 2020/01 Court No. 1
Parag Girishbhai Desai, E/401, Rajshree Enclave, Shreyas Tekra, Ambawadi,
Ahmedabad-380015.
Vs.
1. Dr. Ashokbhai C. Shah, A9/10, Mangaltirth Complex, Nr. Dharnidhar Society,
Vasna Road, Ahmedabad.
2. The New India Assurance Co. Ltd., DO II, Nanalal Chambers, Ashram Road,
Ahmedabad.
Coram : Hon‟ble Mr. Justice V. P. Patel, President
Ms. A. C. Raval, Member
Order: (By Hon‟ble Mr. Justice V. P. Patel, President) 01.06.2022
1. The applicant has filed the Execution application under section 27 of the Consumer Protection Act, 1986 (herein referred to as „the Act‟), wherein, the main relief is prayed in term of para 7 which reads as under:
"The Hon'ble this commission may be pleased to issue notice under section 27 of the Consumer Protection Act, 1986 and in case default still continues may please pass appropriate orders for sentencing imprisonment and penalty to erring officers of the respondent insurer and Dr. Ashok Shah.
Any other and further order which may be deemed fit in the fact and circumstances of this case please be passed and oblige."
2. Heard Ld. Advocate Mr. S. S. Parekh, for the applicant and Ld. Advocate Mr. Nilay Dave for the opponent no. 1 and Ld. Advocate Mr. Rituraaj Meena for the opponent no. 2. Perused the application and record of case.
2.1 The present applicant is the original complainant and opponent no. 1 is original opponent 1 and opponent no, 2 is original opponent no. 2. Herein after the applicant and opponents will be referred as per their original status.
Facts of the compliant:
3. The present application is the original complainant who has filed the consumer complaint no. 92/2001 before this Commission Richa EA-20-01 Page 1 of 12 against the opponent to pay the compensation on account of negligence in providing medical service. This Commission has partly allow the compliant on 18.4.2012 and opponent were directed to pay the compensation of Rs. 3,00,000/- for 9% interest p.a. and cost of Rs. 5000/-. It is further submitted that in the application that being aggrieved and dissatisfied with the impugned judgment and order passed by this Commission in C.C. no.92/2001 the complianant has preferred an appeal no. 293/2012 for enhancement the awarded amount. Opponent no. 2 has also preferred appeal no. 425/2012 before the National Commission against the order passed by this Commission. That the appeal filed by the opponent no. 2 insurance company was dismissed where as the appeal filed by the present applicant was allow and enhanced the amount of compensation Rs. 3,00,000/- to 8,00,000/- and awarded cost of Rs. 25,000/- vide order dated on 14.5.2019.
3.1 It is further stated that the opponents were liable to pay Rs. 21,37,904/-. During the telephonic discussion it was came to that opponent no. 2 insurance company has deducted TDS wrongly from, the awarded interest applying wrong interpretation of the provision of the income tax Act regarding payment of interest in deposit. That the applicant made clear that the amount awarded by the National Commission cannot be treated as income therefore it is not subject to tax. However the respondent insurance company‟s officers just to harass the applicant deducted TDS wrongly and paid less amount of Rs. 1,30,290/-.
3.2 That the applicant has made representation to the opponent insurer to return the TDS deducted. The applicant has also drawn the attention of judgment of Hon‟ble Supreme Court wherein it is held no TDS amount is required to be deducted from the amount of compensation. That the applicant has consulted Charted Accountant who has advised that he has to suffer loss for getting refund of TDS amount from the Income Tax Authority. Therefore the applicant has filed the present application to punish the officer of insurance company under section 27 of the Consumer Protection Act.
Procedure adopted by this Commission:
4. This Commission is empowered under section 27 (2) of Consumer Protection Act the power of judicial magistrate first class Richa EA-20-01 Page 2 of 12 for the purpose of Criminal Procedure Code to deal this application. As per section 27 of Consumer Protection Act 1986 all the offences in this Act will be tried summarily by the District Commission or the State Commission. Therefore this Commission has adopted the procedure of summary trial as provided under chapter XXI (sec 260-265) of the Criminal Procedure Code 4.1 As per section 262 of Criminal Procedure Code for the summary trial the procedure specified in the code for the trial of summons case shall be followed. Therefore this Commission has adopted the procedure prescribed in chapter XX (sec 251-259) of the Criminal Procedure Code.
4.2 The plea of both the opponent no. 1 Dr. Ashokbhai Shah and the opponent no. 2 senior divisional Manger of New India Insurance Company was recorded under section 251 of the Criminal Procedure Code on 2.2.2021 where in both accused including Jayantilal Pandya has not pleaded a guilty he has claim to be trial.
4.3 The commission has to hear the prosecution and take all evidence as produced in support of his case under sec 254 of Criminal Procedure Code. The complainant/applicant has produced affidavit and documentary evidence in support of his case which is taken on record. The accused no.1 and 2 have filed interrogatory in view of cross examination. The opponent no. 1 has filed interrogatory in view of cross examination on 24.2.21 and accused no. 2 has filed interrogatory in view of cross examination on 4.3.2021. Thereafter the complainant has filed reply to the interrogatory which was taken on record.
5. The applicant has filed pursis declaring that the applicant do not want to proceed this Execution Application against Dr. Ashok shah accused no. 1 and do not press any relief against Dr. Shah. However the present application proceeding shall be continue further against the accused no. 2. Therefore it was ordered not to proceed till further order against opponent/accused no.1. the applicant has filed pursis to close his evidence. The said pursis was recorded.
6. The further statement of accused no. 2 Jayantilal Pandya was recorded under section 313 of Criminal Procedure Code. The Richa EA-20-01 Page 3 of 12 accused no. 2 Jayantilal Pandya he has given answer yes to the further statement question no.1 to 12, 22, 24, 25, 26, 27 and rest of the answer he has said no. Further he has told to as to weather he wants to examine himself on oath and filed an affidavit in his defence ? He has replied that "yes, I am producing affidavit dated 17.8.2021". Further he has produced documentary evidence at annexure R 1. He was further asked to examine any witness in support of his case? He said yes but he has not examine any witness. Further it was asked as to weather he wants to say anything else he said that concern officer at the relevant time has rightly deducted the TDS as per income tax Act and circular of our company. I have only conveyed him to file TDS return as per law. Thereafter arguments of ld. Advocates of both the parties were heard under sec 314 of Criminal Procedure Code.
Argument of the applicant :
7. Ld. Advocate for the applicant had argued that the amount of Rs. 1,30,290/- was wrongly deducted as TDS and not paid the said amount to the applicant. It is further submitted that the said contentions of TDS was admitted by the accused. That the TDS is required to be deducted only what awarded amount has been received as income. The decretal amount is compensation and since the interest is awarded in lieu of compensation, the amount awarded as damages cannot be considered as income therefore not subject to income tax liability. That the provision stated by the The New India Assuarance Company is not applicable to the present application. That the insurance company has totally ignored the request of the complainant and merely because TDS certificate has been issued to the applicant does not mean that order has been complied. That the section 2(28A), 194A, 200 and sec. 194A (3) (ix) of Income Tax Act are not applicable in the present case. That the commission has awarded interest from the date of incident. Value of money decreases due to inflation the interest awarded cannot be treated as income. It is further argued that the offences under section 27 of the Consumer Protection Act is clearly established. He request to punish the accused no. 2. He has relied upon the judgment which will be discuss hereinafter.
Argument of the accused/opponent:
8. Ld. Advocate for the accused/opponent has agued that the respondent complying with the judgment and order of NC and paid Richa EA-20-01 Page 4 of 12 amount of compensation. That the complying the order of ld.
commission TDS amount has been deducted and certificate has been issued to the complainant. That the amount of Rs. 1,30,290/- is deducted has TDS and the form no. 16 certificate has been given to the complainant. He has relied upon the provision of Income tax Act under section 2(28A), 194 A and 200 of Income Tax Act-1961. It is further argued that there is no willful negligence and disobedience of order or non-compliance of order. He requested to dismiss the Execution Application.
Merits of the case:
9. It will be beneficial to refer the provision of section 27 (1) which provides penalty in the offences which reads as under:
"Where a trader or a person against whom a complaint is made [or the complainant] fails or omits to comply with any order made by the District Forum, the State Commission or the National Commission, as the case may be, such trader or person [or complainant] shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to three years, or with fine which shall not be less than two thousand rupees but which may extend to ten thousand rupees, or with both."
10. The main contentions of the applicant is that the amount of Rs. 21,37,904/- is required to be paid by the opponent no. 2 insurance company to the applicant/original claimant. The amount of Rs. 1,30,290/- was deducted by the insurance company opponent no.2 and not credited said amount to the complainant.
11. It is admitted in the para 7 of the affidavit filed by the opponent no. 2 accused Jayantilal Pandya is as under:
"It is submitted that the respondent no. 2 have deducted Rs. 1,30,290/- towards TDS and the Form 16 TDS certificate was given to the complainant."
As there is an admission on the part accused insurance company, as above there is no need to discuss further evidences lead by the complainant. Inspite of that the complainant has filed an affidavit and considering reply when for the question of interrogatory submitted by the accused which support the case of the prosecution. Complainant has produced documentary evidence as regards to the TDS is concern which support the case of prosecution.
Richa EA-20-01 Page 5 of 1212. Thus it an is admitted fact that the amount of Rs. 1,30,290/- was deducted and no TDS amount paid to the complainant. Now, question is raised that weather the amount of TDS is required to be deducted as per the Income Tax Act or weather deduction of amount of Rs. 1,30,290/- was rightly deducted or not. For this purpose we will refer judgment cited by the ld. Advocate for the complainant.
13. Ld. advocate for the accused has relied upon the judgment of National Commission 2019 CPR (NC) 347 in case of Janko Devi and Ors. v/s National Insurance Company Ltd. and Anr.
This judgment is not applicable in the present case in view of the judgment cited by the Learned Advocate for the applicant. Which is discussed hereinafter.
14. Ld. advocate for the applicant has relied upon the judgment of Supreme Court reported in 1 (2005) CPJ 18 (SC) in case of Haryana Urban Development Authority v/s Munshi Ram which reads as under:
"6. In this case possession has been given. Appellants have also paid a sum of Rs.23,140/-on 23rd July, 2004. However, whilst paying this amount they have deducted TDS. As these are payments towards compensation/ damages for mental agony and harassment TDS could not have been deducted. The appellants shall pay to the respondent within one month from date of this order the amount deducted as TDS with interest thereon at 12% from date of deduction till payment. In our view the payment already made and the refund of TDS amount will be sufficient recompense."
15. Ld. advocate for the applicant has relied upon the judgment of NCDRC Revision Petition no. 2244 of 1999 in case of Ghaziabad Development Authority v/s Dr. N.K. Gupta, which reads as under:
"13. A similar question arose before the Income-lax Appellate Tribunal in the case of Delhi Development Authority v. Income Tax Officer (1995) 53 ITD 19 (Delhi), and the Appellate Tribunal held that the amounts credited in the accounts of the allottees were not in the nature of interest within the meaning of section 2(28A) of the Income-tax Act and the Appellate Tribunal quashed the orders of those authorities and directed that what is recovered by the DA be refunded. The Appellate (O Tribunal also hoped that the DA will be equally quick in paying back the amounts it recovered from the Richa EA-20-01 Page 6 of 12 allottees. It appears to us that the Revenue authorities did not challenge this order of the Appellate Tribunal by making reference to the High Court under section 256 of the Income-tax Act. The Appellate Tribunal held that the amounts paid/credited to the allottees by the DDA under SFS (Self-Finance Scheme) did not fall under any category in section 2(28A) of the Income-tax Act, but represented measure for quantifying compensation for delay in construction and handing over possession of dwelling unit which was in the nature of non-taxable capital income. In coming to this conclusion the Appellate Tribunal relied on various judgments including that of the Supreme Court in the case of Dr. Shamal Narula v. Commissioner of Income Tax (1964) 53 ITR 151.
14. It will be interesting to note that the DA filed a writ petition in the Delhi High Court arising out of the aforesaid judgment of the Appellate Tribunal wherein it demanded interest with reference to sections 244(1A) and 244A of the Income-tax Act. This was on account of the Revenue authorities not refunding the amounts in terms of the order of the Appellate Tribunal. The Division Bench of the Delhi High Court in (Delhi Development Authority v. Income Tax Officer (1998) 230 IT 9) consisting of Mr. Justice R. C. Lahoti (as his Lordship then was) and the Mr. Justice J. K. Mehra, held in favour of the DDA that sections 244 and 244A are applicable and directed refund of the amount with interest in view of the order of the Appellate Tribunal."
16. This Commission has come across the judgment of Gujarat High Court reported in Special Civil Application no. 4800 of 2021 in case of The Oriental Insurance Co. Ltd. v/s Chief Commissioner of Income Tax (TDS) which reads as under:
"49. It is crucial to note that in Rama Bai (supra), the Supreme Court drew no distinction between the interest under Section 28 and interest under Section 34 of the Land Acquisition Act, 1894. Later in Ghanshyam (2009) 315 ITR 1 (SC), the Supreme Court drew this distinction and held that the interest under Section 28 of the Land Acquisition Act, 1894 would form part of the compensation itself and is taxable under the capital gain only. The amendment of Section 145A(b), Sections 56(2) (viii) and 194A reply would therefore not apply to the interest under Section 28 of the Land Acquisition Act, 1894, but would apply only to Section 34 interest as is held in the case of [2016] 388 ITR 343 (Gujarat) Movaliya Bhikhubhai Balabhai. Therefore, the implication of Sections 145A(b) is not absolute even with respect to the interest awarded under Section 28 of the Land Acquisition Act and cannot apply to the interest awarded by the MACT as well.Richa EA-20-01 Page 7 of 12
50. The term "income" is inclusively defined in Section 2(24). Such definition does not include the "interest" referred to in the Section 56(2) (viii) or interest received in the MACT award.
51. The words of Section 194A(3) are crucial i.e "income by way of interest" and not simply "interest". Therefore, even when interest is paid, if the same is received not in the name of "income", then Section 194A(3) would not operate.
52. Therefore, the interest on compensation not being taxable at all there is no question of deducting tax on the same under Section 194(A).
RATIONALIZATION OF PROVISIONS FOR TAXATION OF INTEREST RECEIVED ON ENHANCED COMPENSATION OR DELAYED COMPENSATION:
54. The existing provisions of the Income Tax Act provide that the income chargeable under the head "Profits and gains of business or profession" or "Income from other sources", shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Further, the Supreme Court, in the case of Rama Bai (supra) has held that arrears of interest computed on delayed or enhanced compensation shall be taxable on accrual basis. This has caused undue hardship to the taxpayers. With a view to mitigating the hardships, it is proposed to amend Section 145A to provide that the interest received by an assessee on compensation or enhanced compensation shall be deemed to be his income for the year in which it is received, irrespective of the method of accounting followed by the assessee.
Further, it is proposed to insert clause (viii) in subsection (2) of Section 56 to provide that income by way of interest received on compensation or on enhanced compensation referred to in sub- section (2) of Section 145A shall be assessed as "income from other sources" in the year in which it is received. This amendment will take effect from 1 st April 2010 and shall accordingly apply in relation to the assessment year 1998-99 and subsequent assessment years. [Clauses 26, 27, 56] RATIONALISATION OF PROVISIONS RELATING TO DEDUCTION OF TAX ON INTEREST (OTHER THAN INTEREST ON SECURITIES):
55. Under Section 194(3)(ix) of the Act, tax is not required to be deducted from the interest or paid on the compensation amount awarded by the Motor Accident Claim Tribunal if the amount of such interest credited or paid during a financial year does not exceed Rs.50,000/-. Finance (No.2) Act, 2009 amended the Richa EA-20-01 Page 8 of 12 provisions of Section 56 of the Act as well as substituted Section 145A of the Act to, inter alia, provide that interest income received on compensation or enhanced compensation shall be deemed to be the income of the year in which the same has been received.
However, the existing provisions of Section 194A of the Act provide for deduction of tax from the interest paid or credited on compensation, whichever is earlier. Section 145A(b) of the Act provides an exception to the method of accounting contained in Section 145 of the Act and mandates for taxation of interest on compensation on receipt basis only. Therefore, deduction of tax on such interest on mercantile / accrual basis results into undue hardship and mismatch. It is, therefore, proposed to amend the provisions of Section 194A of the Income Tax Act, 1961 to provide that deduction of tax under Section 194A of the Act from the interest payment on the compensation amount awarded by the Motor Accident Claim Tribunal compensation shall be made only at the time of payment, if the amount of such payment or aggregate amount of such payments during a financial year exceeds Rs.50,000/-. These amendments will take effect from 1 st June, 2015. [Clause 42].
56. We are of the view that compensation under the award of the MACT is not income. The expression "income" used in the Entry 82 of List I of Seventh Schedule to the Constitution can be given widest meaning. Under Section 2(24), the definition is inclusive and not exhaustive. In the absence of any express provision to the contrary, income can be held to refer to something earned. What is received as compensation for loss in one or the other form may not be income.
73. The upshot of the aforesaid discussion is that the compensation received under the Motor Vehicles Act is either on account of loss of earning capacity on account of death or injury or on account of pain and suffering and such receipt is not by way of earning or profit. The award of compensation is on the principle of restitution to place the claimant in the same position in which he would have been as the loss of life or injury would not have been suffered.
74. Our final conclusion may be summarized as under:
[a] The interest awarded by the Motor Accident Claim Tribunal u/s 171 of the Motor Vehicles Act 1988 is not taxable under the Income Tax Act, 1961.
[b] The interest awarded in the motor accident claim cases from the date of the Claim Petition till the passing of the award, or in the case of Appeal, till the judgment of the High Court in such appeal, would not be exigible to tax, not being an income. This position Richa EA-20-01 Page 9 of 12 would not change on account of clause (b) of Section 145A of the Act as it stood at the relevant time amended by Finance Act, 2009, which provision now finds place in sub-section (1) of Section 145B of the Act. Neither clause (b) of Section 145A, as it stood at the relevant time, nor clause (viii) of sub-section (2) of Section 56 of the Act make the interest chargeable to tax, whether such interest is income of the recipient or not. Section 194A of the Act is only a provision for deduction of tax at source. Any provision for deduction of tax at source in the said section would not govern the taxability of the receipt. The question of deduction of tax at source would arise only if the payment is in the nature of income of the payee. [c] The Insurance Companies or the owners of the motor vehicles depositing the requisite amount in due compliance with the awards of the Motor Accident Claims Tribunals shall deposit the full amount with the Tribunal and shall not deduct tax u/s 194A of the Income Tax Act on the interest awarded by the Motor Accident Claims Tribunal."
16.1 Facts stated in case of The Oriental Insurance Co. Ltd. v/s Chief Commissioner of Income Tax (TDS) are regarding the compensation of Motor Vehicle Accident. In this case the compensation awarded under the Consumer Protection Act. Both the Acts Motor Vehicle Act and Consumer Protection Act are benevolent provision for the litigants. The compensation awarded under the both the Acts are similarly situated. Therefore we are of the opinion that the interest generated for the compensation to be paid under the Consumer Protection Act is also cannot be considered as income under the Income Tax Act. Therefore, TDS cannot be deducted from the interest occurred on awarded compensation under the Consumer Protection Act.
17. We have considered the facts of the Execution Application, evidence produced by the prosecution/ complainant, affidavit filed by the opponent insurance company accused, reply given by the opponent accused in the further statement, ratio laid down in the aforesaid referred judgment, facts and circumstances of the case. We are of the view that the complainant has established the ingredients of the offence under section 27 of the Consumer Protection Act that the accused opponent no. 2 has not complied or fails to omit the order passed by the State Commission as well as National Commission in letter and spirit and deducted amount of TDS Rs.1,30,290/-. Therefore, we found the offences is made out Richa EA-20-01 Page 10 of 12 and opponent accused no. 2 is required to be punished under section 27 of the CP Act and hence following order is passed.
ORDER
1. The accused no. 1 Dr. Ashokbhai Shah is discharged from this proceeding.
2. The accused no. 2 the officer of The New India Assurance Co. Ltd. is held guilty for the offence under section 27 of the Consumer Protection Act.
3. The matter is kept for hearing of sentence under section 255(2) of the Criminal Procedure Code.
[Ms. A. C. Raval] [Justice V. P. Patel]
Member President
4. Heard opponent no. 2/ accused Mr. Jayantibhai H. Pandey in person. Ld. advocate Mr. Rituraj Meena for the appellant and ld. advocate Mr. S. S. Parekh, for the original complainant. The accused submitted that this is first offence and at the relevant point of time he was not in charge but he is looking into this case being an officer of the insurance company and the concerned person is already retired. It is submitted that he is ready to pay the amount of TDS deducted Rs. 1,30,290/- with appropriate interest within 10 days from today subject to the outcome of the appeal, if file. The time is granted.
5. Ld. advocate for the appellant has further submitted that the observation as regards to the non deduction of TDS is required to be stayed for 15 days from today. There is no provision in C.P. Act 2019 or in Cr.Pc. to stay the observation made in of conviction order. Hence submission is rejected. There is one provision Cr.Pc. 389 (C) to grant bail and suspension of sentence. But such power is required to be exercised after final order of conviction. The matter is kept for final order on 10.6.2022.
[Ms. A. C. Raval] [Justice V. P. Patel]
Member President
Richa EA-20-01 Page 11 of 12
Oral Order: (By Mr. Justice V. P. Patel, President) 10.06.2022
1 The applicant and ld. advocate for the applicant Mr. S. S. Parekh are present. Ld. advocate Mr. N. S. Dave, for the opponent No. 1 and opponent no. 2 Jayantibhai Pandey/accused and his ld. advocate Mr. Rituraj Meena are present. Opponent no. 2 has produced pursis wherein, it is stated as under:
"With reference to the award of EA 01/2020 dated 1/6/2022 by the Hon'ble Gujarat State Commission, Ahmedabad, we have prepared DD no. 083525 of Rs. 165147/- dated 9/6/2022.
Please note that we are making payment of this award "under protest" and with an endorsement that the same will be subject to outcome of the appeal that may be filed by the insurance company."
2 Ld. advocate for the applicant has filed pursis wherein, it is stated as under:
"I say and undertake that I have not claimed amount of TDS deposited by the respondent insurance company and ready to co-operate the respondent insurance company for refusing the said amount. I further say that if at any point of time its found that the amount of TDS is claimed by me and ready to refund the same to the respondent insurance company."
3 This Commission has considered the provision of Section 27 of the Consumer Protection Act, 1986 wherein, it is provided that if the person who fails or omits to comply with any order made by the Commission the person shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to three years, or with fine which shall not be less than two thousand rupees but which may extend to ten thousand rupees or with both.
4 We have considered that the demand draft of Rs. 1,65,147/- is handed over to the complainant under protest. We have considered the facts and circumstances of the case and in the interest of justice following order is passed.
ORDER
1) The opponent no. 2/accused the officer of the insurance company is already convicted for the offence punishable under Section 27 of the C. P. Act, 1986. He is directed to pay the fine of Rs. 10,000/- (Rupees Ten Thousand Only) and in default of payment of fine the officer of the insurance company will be liable for simple imprisonment of one month, if amount of fine is not paid within 30 days from today.
Pronounced in the open Court today on 10th June, 2022.
[Ms. A. C. Raval] [Mr. Justice V. P. Patel}
Member President
Richa EA-20-01 Page 12 of 12