National Consumer Disputes Redressal
Rita Bakshi vs M3M India Limited & 4 Ors. on 2 March, 2022
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI EXECUTION APPLICATION NO. 122 OF 2019 IN CC/2123/2016 1. RITA BAKSHI ...........Appellants(s) Versus 1. M3M INDIA LIMITED & 4 ORS. ...........Respondent(s)
BEFORE: HON'BLE MR. DINESH SINGH,PRESIDING MEMBER HON'BLE MR. JUSTICE KARUNA NAND BAJPAYEE,MEMBER For the Appellant : Mr. Deepak Narayana, Advocate For the Respondent : Mr. A. K. Takkar, Advocate with Ms. Syashee Pesswani, Advocate Dated : 02 Mar 2022 ORDER E.A. No. 122 of 2019 in C.C. No. 2123 of 2016
1. We have heard the learned counsel for the decree holder and the judgment debtors, and have perused the record.
2. The Award made vide the Order dated 11.06.2018 of this Commission in C.C. No. 2123 of 2016 Rita Bakshi vs.M3M India Limited & ors., which has attained finality within the meaning of Section 24 of the Act 1986, is reproduced as under:
11. For the reasons stated hereinabove, the complaint is disposed of with the following directions:
(i) The OP i.e. M3M India Limited shall refund the entire principal amount of Rs. 2,74,79,831.48p, to the complainant alongwith compensation in the form of simple interest @11% per annum from the date of each payment till the date of refund.
(ii) The OP i.e. M3M India Limited shall pay a sum of Rs. 25,000/- as the cost of litigation to the complainant.
(iii) The payment in terms of this order shall be made within three months from today.
3. It is admitted to by both sides that the entire amount paid by the decree holder to the judgment debtors i.e. the deposited amount of Rs. 2,74,79,831.48p. has been refunded. The "compensation in the form of simple interest" at the rate of 11% per annum from the respective dates of deposit till the date of realisation has also been paid. The cost of litigation of Rs. 25,000/- has been paid as well.
4. The short point outstanding is apropos the tax deducted at source (TDS) by the judgment debtors in respect of the "compensation in the form of simple interest". Accordingly the issue for consideration is whether or not compensation, which in the instant case was computed by way of interest on the deposited amount, attracts TDS.
5. Learned counsel for the decree holder submits that The Income Tax Act, 1961 under which TDS is deducted and The Consumer Protection Act, 1986 under which compensation is awarded have to be read together in conjunction. He places reliance on germane provisions of the Income Tax Act and of the Consumer Protection Act, relevant extracts of which are reproduced below for reference:
Section 56(2)(viii) of The Income Tax Act, 1961:
56(2)(viii): Income from other sources.- - - - - - the following incomes shall be chargeable to income-tax - - - Income by way of interest received on compensation or on enhanced compensation - - -.
Section 194A of The Income Tax Act, 1961:
194A. 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:- - -
Section 14(1)(c) & (d) of The Consumer Protection Act, 1986:
14. Finding of the District Forum.-- (1) If, after the proceeding conducted under section 13, the District Forum is satisfied that the goods complained against suffer from any of the defects specified in the complaint or that any of the allegations contained in the complaint about the services are proved, it shall issue an order to the opposite party directing him to [do] one or more of the following things, namely:-- - - -
(c) to return to the complainant the price, or, as the case may be, the charges paid by the complainant;
(d) to pay such amount as may be awarded by it as compensation to the consumer for any loss or injury suffered by the consumer due to the negligence of the opposite party: - - -
Learned counsel submits that the award made under the Consumer Protection Act contained two parts, one, refund of the deposited amount and, two, payment of compensation on the deposited amount, which was computed "in the form of simple interest" on the deposited amount. Section 14(1)(c) of the Consumer Protection Act of 1986 provides for "return to the complainant" the "price" or "charges" paid by the complainant, which, in the instant case, was refund of the deposited amount. Section 14(1)(c) of the Consumer Protection Act provides for "compensation" to the consumer for "any loss or injury suffered", which, in the instant case, was computed "in the form of simple interest" on the deposited amount.
Learned counsel further submits that section 194A of the Income Tax Act provides that income-tax on "income by way of interest" shall be deducted at the time of credit of such income. But "compensation" "for loss or injury suffered" if computed "in the form of simple interest" on the deposited amount is not "income by way of interest" under section 194A. The submission is that "compensation" awarded under section 14(1)(d) of the Consumer Protection Act cannot be treated as "income by way of interest" just because in a particular case the same has been computed by adopting "interest" at a particular rate as a mode of reckoning or as a yardstick for the purposes of its computation. Section 56(2)(viii) of the Income Tax Act provides that "income by way of interest received on compensation or enhanced compensation" shall be chargeable to income-tax. This however is not applicable here. The submission is that undoubtedly "income by way of interest on the compensation" received will be taxable, but this is applicable to "interest on the compensation" and not on the "compensation" per se. Learned counsel concludes his arguments emphasizing that just because the "compensation" for the "loss and injury suffered" was computed by using "interest" at a specific rate as the yardstick does not mean that it will attract tax deduction at source under section 194A of the Income Tax Act, and such the deduction made by the judgment debtors builder is erroneous and legally untenable.
6. Learned counsel for the judgment debtors fairly agrees that the Consumer Protection Act provides for "return" of the "price" paid, which, in the instant case, was refund of the deposited amount and that it also provides for "compensation" for the "loss or injury suffered", which, in the instant case, was computed by using "interest" as a formula or a mechanism or method for computation of the compensation. Without disputing that the compensation awarded under the Consumer Protection Act is not "income by way of interest" or "income by way of interest received on compensation" under the Income Tax Act, learned counsel however submits that tax deduction at source on "compensation in the form of simple interest" on the amount deposited with builders is a normal practice prevalent in the 'service' of 'housing construction'. Moreover, in the instant case it was deducted on the basis of advice given by the judgment debtors' chartered accountant. He emphasizes that in any case the tax deducted at source has been credited to the income tax account of the decree holder and as such if the decree holder wishes for refund / adjustment she is free to do so as per the rules and procedures of the Income Tax Department, and the judgement debtors will provide relevant information as may be necessary from their end in this regard. The submission is that no harm has been caused to the decree holder, the judgment debtors have not retained the deducted amount with them, the decree has been satisfied in its entirety by refunding / payment to the decree holder and by making deposit in the decree holder's account with the Income Tax Department.
7. We have given our thoughtful consideration to the submissions made at the bar and considered the record in the light of the same.
There is no dispute in respect of the refund in toto of the deposited amount i.e. "return" of the "price" paid or on the payment of the cost of litigation.
The only issue is in respect of deduction of tax at source on the "compensation" awarded, which, in the instant case, was computed "in the form of simple interest" on the deposited amount.
8. Section 14 of the Consumer Protection Act (corresponding Section 39 of the Consumer Protection Act of 2019) is in relation to both 'goods' as well as 'services'. Its sub-section (1)(d) provides for "compensation" for the "loss or injury suffered", which is universally applicable to 'goods' as well as to all 'services' including the 'service' of 'housing construction'. The "compensation" is to remedy the loss and injury, the trouble and prejudice, the mental agony and physical discomfort, the hardship and difficulty, as well as to equalize the depreciation in the monetary value of the "price" paid due to the efflux of time. The way and manner of computing "compensation" may differ with case to case. It may be in the form of a lumpsum amount, as may be deemed just and equitable in a particular case, without even making any reference to the term "interest". Or it may be based on some other formula or yardstick, as may be deemed apt and suitable in a particular case. And the formula or yardstick may also, in some cases, have a reference to the term "interest". Certainly tax is not deducted at source if the compensation is awarded in the form of a lumpsum amount, or when the formula or yardstick, if and as any adopted for the purposes of computation, does not involve or refer to the term "interest". It will therefore be erroneous to deduct tax at source just because in a particular case the formula or yardstick adopted for computation alludes to the term "interest".
9. As has already been said, in cases pertaining to the 'service' of 'housing construction' also, it has to be seen that if, in similar facts, in one case an order is passed by a consumer protection forum for refund of the deposited amount along with compensation in lumpsum without involving the term "interest" in computing the compensation, and, in another case, an order is passed (by the same or different forum) for refund of the deposited amount along with compensation in which the term "interest" has been alluded to, it does not imply that in the one case where the term "interest" has not been used tax will not be deducted at source and in the other case where the term "interest" has been used or referred to tax will be deducted at source.
10. Where compensation is quantified or computed "by way of interest" on the deposited amount, i.e. when the term "interest" is involved in the formula or yardstick for arriving at a (just and equitable) compensation under section 14(1)(d) of the Consumer Protection Act, the context and meaning of the term "interest" is distinctly different from the context and meaning of the said term as used in section 194A of the Income Tax Act. And it can in no way be treated as "interest on compensation or on enhanced compensation" as contained in section 56(2)(viii) of the Income Tax Act.
11. The award of compensation under section 14(1)(d) of the Consumer Protection Act is in relation to both 'goods' and 'services' as well as in relation to all the different types of 'services' under the purview of the Act including the 'service' of 'housing construction'. It may or may not be computed by using "interest" as the formula or yardstick for computation. Just because in a particular case or in relation to a particular 'service' "interest" is used in a formula or yardstick to compute the compensation it does not imply that the very use of allusion to the term "interest" will cause the provisions of section 194A of the Income Tax Act to be attracted. Also, in so far as the provisions of section 56(2)(viii) of the Income Tax Act are concerned, this is not at all a case of "income by way of interest received on compensation or on enhance compensation" but is too obviously a case of "compensation" per se.
12. We may clarify that we are neither adding to or subtracting from the Income Tax Act. If a person is responsible to pay income-tax on any revenue or capital receipt under the said Act, he will be so liable.
13. We have amply clarified already hereinabove that the "compensation" awarded under the Consumer Protection Act is for the "loss or injury suffered" and is universally applicable to both 'goods' and 'services' inclusive of the 'service' relating to 'housing construction'. Thus in the 'service' of 'housing construction', if, in a particular case, "compensation" is computed "by way of interest" on the deposited amount it shall not be differently treated than the other cases in which the term "interest" may not at all be used in computing the compensation. The context and meaning of the term "interest" if used in the mode of calculation or a formula or yardstick adopted for computing compensation under section 2(1)(d) of the Consumer Protection Act is identifiably different from the context and meaning as used in section 194A of the Income Tax Act.
14. As such there was no justification for deducting tax at source in the instant case.
15. We also observe that the tax deducted at source on the compensation appears to be is a mistake with no malafide and even though the tax ought not to have been deducted it is also seen that the same has not been retained by the judgment debtors and has been deposited in the account of the decree holder in the Income Tax Department.
16. In the present facts and circumstances, though we explicitly and unambiguously make it clear that tax ought not to have been deducted at source on compensation awarded under the Consumer Protection Act even if it was computed "by way of interest" on the deposited amount, but in the instant case, noting the submissions of the learned counsel for the judgment debtors, the ends of justice will be met with if the decree holder takes the necessary steps to get the tax deducted at source duly adjusted / refunded from the Income Tax Department as per its rules and procedures, and information as required from the end of the judgment debtors is provided by them. The learned counsel for the decree holder agrees.
17. With observations as above, the matter is closed. The execution application no. 122 of 2019 stands disposed accordingly.
18. The Registry is requested to send a copy each of this Order to all parties and to their learned counsel immediately. The stenographer is also requested to upload this Order on the website of this Commission immediately.
...................... DINESH SINGH PRESIDING MEMBER ......................J KARUNA NAND BAJPAYEE MEMBER