Jammu & Kashmir High Court - Srinagar Bench
National Insurance Company vs Mst. Khatiji Wd/O Gh. Nabi Sofi on 15 May, 2015
IN THE HIGH COURT OF JAMMU AND KASHMIR AT SRINAGAR C. Rev. no. 63 of 2010 C. M. P. NO. 252 of 2010 National Insurance Company Divisional Office Srinagar through Its Divisional Manager. Petitioners Mst. Khatiji Wd/o Gh. Nabi Sofi Kounsar Jabeen D/O Ghulam Nabi Sofi Mehraj-ud-Din (Minor) Nusrat (Minor) Rehana (Minor) Sons/Daughters of Gh. Nabi Sofi, All residents of Vicharnag, Srinagar. Respondents !Mr. J. A. Kawoosa, Advocate ^Mr. M. A. Tibetbaqal, Advocate Honble Mr. Justice N. Paul Vasanthakumar, Chief Justice Date: 15/05/2015 : J U D G M E N T :
1. This Civil Revision Petition is filed against the order passed by the Motor Accidents Claims Tribunal, Srinagar dated 17.03.2010 as well as the order dated 31.03.2010 in Execution Petition No. Misc. 41, praying for directions to the petitioner to deposit the award amount in terms of the award passed on 26.09.1995 which was affirmed by the learned Single Judge on 23.11.2004 and by the Division Bench of this Court in LP Appeal No. 185/2004 dated 08.0.5.2009. The Executing Court, noticing the fact of deposit of Rs. 3,71,724/- on 14.11.2005, of which intimation was not given to the respondents-claimants, ordered payment of interest by the Insurance Company even after deposit. The Executing Court also found fault with deduction of TDS amount to the tune of Rs. 29,505/- . Both the said orders are challenged in this Revision Petition.
2. It is the primary contention of the petitioner that the deposit was directed by the Division Bench of this Court while entertaining L.P. Appeal on 29.10.2005, in presence of the counsel for the respondents- claimants, therefore, separate intimation should have been given to the respondents-claimants with regard to deposit of the amount, does not arise. The learned counsel further submitted that whole amount having been deposited pursuant to the directions issued by the Division Bench of this Court, the claimants cannot claim interest for further period after the deposit of award amount by the Insurance Company and whatever interest has accrued with regard to the deposited amount, the claimants can receive the same. The learned counsel further submitted that the TDS amount was deducted and remitted to the Income Tax Department as the interest amount was received in lump sum by the claimants.
3. The learned counsel appearing for the respondents-claimants, on the other hand, submitted that even though order was passed in presence of the counsel of the respondents for depositing the amount, after the deposit was made no further intimation was given to the respondents-claimants or their counsel and, therefore, the future interest as awarded by the Executing Court is proper. Learned counsel further submitted that insofar as the interest component is concerned, the interest was to be spread over the years for which the interest was calculated and if for any year the payment of interest exceeds Rs. 50,000/-, TDS can be deducted and, therefore, the Executing Court was justified in ordering payment of the deducted interest amount to the respondents-claimants which was erroneously paid to the Income Tax Department by the Insurance Company.
4. I have considered the rival submissions of the learned counsel for the parties.
5. It is not in dispute that while admitting the L.P. Appeal, the Insurance Company was directed to deposit the entire award amount, less by the amount already paid and deposited within two weeks. The said order was passed on 29.10.2005 in presence of the learned counsel for the claimants-respondents, namely Mr. M. A. Tibatbaqal. Within the time permitted the Insurance Company also deposited the amount. Thus the liability fastened by the Executing Court to pay interest for future period cannot be sustained. It is not the case of the respondents- claimants that only a part of the awarded amount was deposited and balance amount was not deposited, in such circumstances, one can understand that the whole amount having not been deposited, interest is bound to be paid by the Insurance Company till the amount was paid. In such view of the mater the order of the Executing Court to pay future interest, after deposit of the amount by the Insurance Company, cannot be sustained.
6. Insofar as the deduction of the amount by the Insurance Company from the interest component towards Income Tax is concerned, Section 194 A of the Income Tax Act, 1961 is relevant which reads as follows:-
194-A: Interest other than interest on securities:- (1) Any person not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash, or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income tax thereon at the rates in force:
Provided that ...
(3) The provisions of sub-section (1) shall not apply:-
(i) to (viii) .
(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.
7. The interpretation of the deduction of Tax at Source came up for consideration before Honble the Supreme Court in the decision reported in (1990) 181 ITR 400 ( Rama Bai v. Commissioner o Income Tax, AP) wherein the issue was calculation of income tax towards interest for the enhanced compensation which was granted the Land Acquisition Act, 1894. Honble the Supreme Court held that interest on the enhanced compensation having accrued year after year from the date of delivery of possession of the land till the date of such order, such interest cannot be assessed to income tax in only lump sum in the year in which the order is made and it should spread over all the years of delivery of possession.
The Division Bench of the Gujarat High Court in the decision reported in 2007 ACJ 1897 ( Hansaguri Prafulchandra Ladhani and ors v. Oriental Insurance Co. Ltd. and ors) considered the tax deducted at source insofar as the Motor Accidents Claims are concerned. After going through the Income Tax Act 1961 and its provisions it was held that the interest component should be spread over to all the years and if for any financial year the interest payable exceeds Rs. 50,000/-, then only the tax can be deducted. The concluding portion of the judgment reads as follows:-
14. ..
We, therefore, direct that -
I. The Insurance Companies or the owners of the motor vehicles depositing the amounts in compliance with the awards of the Motor Accident Claim Tribunals shall -
(a) first spread the interest amount over to the relevant financial years for the period from the date of filing the claim petition till the date of deposit.
(b) thereafter, if the interest for any particular financial year exceeds Rs. 50,000/-, separately deposit before the Tribunal the amount liable to be deducted at source under the provisions of Section 194A(3)(ix) of the Income-tax Act, 1961. Such amount Page 2108 shall not, however, straightaway, be paid over to the Income-tax department.
(c) produce before the Tribunal a statement of computation of interest by spreading the amount over the relevant years from the date of claim petition till the date of deposit if the interest for any particular financial year exceeds Rs. 50,000/- and also request the Tribunal to treat the amount as a separate deposit.
II. (i) The Tribunal shall take into account the principles laid down in this judgment and ensure that the amount of interest accrued each year is apportioned amongst the claimants on year to year basis.
(ii) If the interest payable to any claimant for any particular financial year exceeds Rs. 50,000/-, the Tribunal shall permit the Insurance Companies/owners to pay over the amount liable to be deducted at source under Section 193(3)(ix) of the Income-tax Department in respect of that particular claimant for that particular year, without prejudice to the claimant's case that he is not liable to pay any income-tax for that year.
(iii) for the financial year/s for which the interest payable to the concerned claimant does not exceed Rs. 50,000/-, the Tribunal may permit such claimant to withdraw the amount deposited as per direction I(b) without producing the certificate from the concerned income-tax authority that there is no income-tax liability on the interest which has accrued on the compensation awarded by the Tribunal.
(iv) It is clarified that the amount other than the amount liable to be deducted at source under Section 194A(3)(ix) shall be invested/disbursed by the Tribunal.
III. When the claimants make applications/representations before the authority under the Income-tax Act, 1961 for refund of the amount deducted under the provisions of Section 194A(3)(ix) of the Act, the concerned authority shall decide such applications/representations within six months from the date of receipt of the applications/representations.
(Emphasis supplied)
8. It is also relevant to note that a Division bench of Bombay High Court in the decision reported in 2011 ACJ 1782 ( Gauri Deepak Patel and ors v. New India Assurance Co. Ltd and anr), considered the very issue and held that if the interest component to the claimant for a financial year does not exceed Rs. 50,000/-, the Tax at source need not be deducted and even if any deduction is made, the claimant can submit an application before the authority under the Income Tax Act and demand for refund of the amount deducted under the provisions of Section 194-A (3) (ix) of the Income Tax Act, 1961 and the concerned authority shall decide such application with utmost expedition.
9. The Punjab-Haryana High Court in the decision reported in 1993- 199-ITR, 628 ( Baldeep Singh v. Union of India and anr) also considered the scope of sub-section (3) of Section 194A of the Income Tax Act, 1961 and held that the interest has to be spread over on annual basis and if the total income assessable for the assessment year is less than the minimum prescribed income, the tax need not to be deducted. Insofar as the award of back wages, if the order of termination is found illegal, and on reinstatement, Honble the Supreme Court considered how the back wages to be treated as income of a particular year or the income should be spread over to the period to which the person was out of employment. In the decisions reported in (1985) 2 SCC 349 ( Sant Raj and anr v. O.P.Singla and anr) and (1985) 3 SCC 153 ( K. C. Joshi v. Union of India and ors) Honble the Supreme Court held that income derived towards the back wages have to be spread over to all the years of non- employment period and same cannot be treated as the income of the year in which it was paid.
10. It is also to be noted at this juncture that the Motor Vehicles Act, 1988 and the Income Tax Act, 1961 is common to all the States and the decision rendered by the High Courts, based on the interpretation given to Central legislation, the said judgments will have operation throughout the territory of India by virtue of Article 226(2) of the Constitution of India. The said position is made clear in the judgment of Honble the Supreme Court reported in (2004) 6 SCC 254 ( Kusum Ingots & Alloys Ltd. v. Union of India). In para 21 and 22 it is held thus:-
21. A parliamentary legislation when receives the assent of the President of India and published in an Official Gazette, unless specifically excluded, will apply to the entire territory of India. If passing of a legislation gives rise to a cause of action, a writ petition questioning the constitutionality thereof can be filed in any High Court of the country. It is not so done because a cause of action will arise only when the provisions of the Act or some of them which were implemented shall give rise to civil or evil consequences to the petitioner. A writ court, it is well settled would not determine a constitutional question in vacuum.
22. The court must have the requisite territorial jurisdiction. An order passed on writ petition questioning the constitutionality of a Parliamentary Act whether interim or final keeping in view the provisions contained in Clause (2) of Article 226 of the Constitution of India, will have effect throughout the territory of India subject of course to the applicability of the Act. (Emphasis supplied)
11. A Division Bench of Karnataka High Court in the decision reported in AIR 2014 Karnataka 73 ( Shiv Kumar v. Union of India) considered similar issue and following the above cited Supreme Court decision held that pronouncement on the constitutionality of a provision of a Central Act by a High Court would be applicable throughout India. The Division Bench of Madras High Court also in the decision reported in 2014 (4) LLJ 683 (Union of India v. Textile Technical Tradesmen Association and ors) held that once the Central legislation is held invalid by one High Court the said finding is applicable throughout the country.
12. In the light of the above findings, the Civil Revision is partly allowed by setting aside the order granting interest to the claimants after the deposit was made by the Insurance Company before this Court pursuant to the directions issued in presence of the learned counsel for the claimants, and, insofar as the deduction of income tax made by the Insurance Company towards the interest paid, the same is found erroneous and the order of the Executing Court is modified by giving liberty to the claimants to submit a representation before the authority under the Income Tax Act, 1961 within a period of four weeks and the concerned authority shall refund the amount received, if the interest component was less than Rs. 50,000 per year in the spread over period, within a period of six weeks from the date of receipt of such representation in this behalf.
(N. Paul Vasanthakumar) Chief Justice SRINAGAR 15.05.2015 Anil Raina, Secy