Himachal Pradesh High Court
New India Assurance Company Limited vs Hari Narayan on 29 August, 2023
Author: Sandeep Sharma
Bench: Sandeep Sharma
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
CMPMO No. 159 of 2021
Date of Decision: August 29, 2023
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New India Assurance Company Limited ......... Petitioner
Versus
Hari Narayan .......Respondent
Coram
Hon'ble Mr. Justice Sandeep Sharma, Judge.
Whether approved for reporting?
of
For the petitioner: Mr. B.M. Chauhan, Senior Advocate with Ms.
Kamakshi Tarkokta and Mr. Amit Himalvi, Advocates.
For the Respondent: Mr. R.L. Chaudhary and Mr. H.R. Sidhu, Advocates.
rt
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Sandeep Sharma, J. (Oral)
Being aggrieved and dissatisfied with order dated 1.3.2021 passed by learned Motor Accident Claims Tribunal-I, Una, District Una, Himachal Pradesh, whereby objections preferred by the petitioner insurance company (hereinafter, 'petitioner') in Execution Petition No. 204 of 2019, titled Hari Narayan v. New India Assurance Company, filed by the respondent/claimant (hereinafter, 'claimant'), came to be dismissed, petitioner has approached this court in the instant proceedings filed under Art. 227 of the Constitution of India, praying therein to set aside the aforesaid order.
2. Precisely, the facts of the case, as emerge from the record, are that the claimants, filed claim petition under S.166 of the Motor Vehicles Act, 1988 (hereinafter, 'Act') seeking compensation on account of injury sustained by him in a motor accident occurred on 31.8.2011 involving Truck bearing registration No. ::: Downloaded on - 31/08/2023 20:33:09 :::CIS 2 HP24C-3565. Learned Motor Accident Claims Tribunal I, Una, Himachal Pradesh vide award dated 29.10.2018 passed in MACP No. 66 of 2014, held the claimant entitled to compensation to the tune of Rs. 20,31,000/- alongwith interest at the .
rate of 9% from the date of filing petition till the deposit of award amount (Annexure P-1).
3. Since, no appeal, whatsoever, ever came to be filed by petitioner against the award, same has attained finality. Thereafter, the claimant filed Execution Petition of under Order XXI, rule 11 CPC, and S.174 of the Act, for execution of award dated 29.10.2018.
4. rt Pursuant to notice issued in the execution petition, petitioner insurance company filed objections (Annexure P-3), wherein petitioner claimed that accrued interest is more than Rs.50,000/- and as such, as per latest amendment to Income-
Tax Act i.e. S.194A9(ix) of the Income-Tax Act, effective from 15.1.2015, Tax Deducted at Source (TDS) will be applicable on accrued interest on the compensation amount. Petitioner further submitted that interest was calculated as Rs.8,62,870/- but as per compliance of aforesaid provision of Income-Tax Act, petitioner has deducted an amount of Rs.1,72,574/- i.e. on account of TDS i.e. 20% of total interest of Rs.8,62,870/- and deposited the same with Income-Tax Department vide Challan No. 2392 on 13.2.2019. To prove factum with regard to deposit of income-tax with Income-Tax Department, petitioner also placed on record Form 16A. Petitioner submitted before learned court below that the provisions of Income-Tax Act are a 'fiscal statute' and provisions thereof are to be ::: Downloaded on - 31/08/2023 20:33:09 :::CIS 3 strictly construed, failing which petitioner shall be liable for penalty contemplated under S. 271 of Income-Tax Act.
5. Aforesaid claim put forth by the petitioner came to be refuted by the claimant, .
who stated that claim petition was filed on 31.5.2014 and petitioner deposited the award amount on 18.2.2019, whereafter, the claimant earned interest amounting to Rs.8,62,870/- from the date of filing petition i.e. 31.5.2014 till deposit of amount on 18.2.2019. Claimant claimed that since interest of Rs.8,62,8370/- was not of earned by him in single financial year and the same has to be spilt over 5 financial years, no tax deduction at source could have been done by petitioner. Apart from rt above, claimant also claimed that the provision, as taken into consideration by the petitioner does not apply to accident claim cases and compensation received under Motor Vehicles Act cannot be said to 'taxable income' as compensation in injury or death of suffered in accident is 'damages' and not an 'income'.
6. On the basis of aforesaid pleadings adduced on record by respective parties, learned executing Court vide order dated 1.3.2021, rejected the objections filed by the petitioner and directed it to pay /deposit amount deducted by it with interest at the rate of 9% from the date of deposit with Income-Tax Department till actual payment to the claimant, within 45 days.
7. In the aforesaid background petitioner has approached this court in the present proceedings, praying therein to set aside the order passed by learned court below, thereby dismissing the objections filed by the petitioner.
8. Having heard learned counsel for the parties and perused material available on record vis-à-vis reasoning assigned in the order impugned in the instant ::: Downloaded on - 31/08/2023 20:33:09 :::CIS 4 proceedings, this court finds no illegality in the same and as such, no interference is called for.
9. Precisely, the question, which has fallen for determination in the case at .
hand is, "whether TDS can be deducted from the amount awarded as compensation as well as interest accrued thereupon in motor accident cases or not?"
10. In the case at hand, dispute is with regard to tax deducted from interest of earned by the claimant on the amount of compensation awarded by Motor Accident Claims Tribunal on account of his having suffered injury in the accident. It is not in rt dispute that no tax has been deducted from the amount of compensation awarded by Motor Accident Claims Tribunal rather, petitioner has deducted Rs.1,72,574/-
i.e. 20% of total interest of Rs.8,62,870/- earned as interest by the claimant on the total amount of compensation of Rs.20,31,000/-, for the period with effect from 31.5.2014 to 29.10.2018.
11. This court finds that the aforesaid issue stands already adjudicated by Division Bench of this court in CWPIL No. 9 of 2014, titled Court On Its Own Motion v. the H.P. State Cooperative Bank Limited decided on 15.10.2014 and thereafter, Co-ordinate Bench of this court, while placing reliance upon said judgment in National Insurance Company Limited v. Dil Kumari and others, CMPMO No. 166 of 2018, decided on 1.6.2018, has held that no TDS can be deducted on the amount of interest accrued on compensation amount deposited by insurance company on account of injury or death in accident cases. It would be apt to take note of following paragraphs of order dated 1.6.2018:
::: Downloaded on - 31/08/2023 20:33:09 :::CIS 5"4. In execution petition preferred by the claimants/respondents for payment of balance amount of compensation, the Commissioner, vide impugned order, has directed to attach .
movable property of respondent-petitioner herein for realization of 75,017/¬ ( 47,248/¬ + interest). ₹ ₹
5. Section 194¬A of Income Tax Act, 1961, clearly provides that any person, not being an individual or a Hindu undivided family, responsible for paying to a 'resident' any income by way of interest, other than income by way of interest on securities, shall of deduct income tax on such income at the time of payment thereof in cash or by issue of cheque or by any other mode. Compensation awarded under Motor Vehicles Act or Employees' rt Compensation Act in lieu of death of a person or bodily injury suffered in a vehicular accident, is a damage and not an income and cannot be treated as taxable income.
6. It is well settled that interest awarded by the Motor Accident Claims Tribunal on a compensation is also a part of compensation upon which income tax is not chargeable as also held by the Division Bench of this Court in Court on its own motion vs. The H.P. State Cooperative Bank Ltd. and others, reported in 2014 (Suppl.) Him.L.R. (DB) 2575 and reiterated in CWP No. 460 of 2014, titled Shiv Ram Sharma vs. Union of India and others, and other connected matters vide decision dated 3rd June, 2015. The same principle will be applicable in the present case also.
7. Therefore, in view of abovesaid decision, deduction of income tax by petitioner/Insurance Company on the interest accrued/awarded on the compensation deposited by the petitioner/Insurance Company is illegal and is contrary to the law of land.
8. In view of above discussion, this petition is disposed of directing respondent No. 6-Income Tax Officer, Nahan to refund the ::: Downloaded on - 31/08/2023 20:33:09 :::CIS 6 TDS to the petitioner/Insurance Company within ten weeks from date of receiving information thereof, which shall be supplied by petitioner/Insurance Company within two weeks from today, as .
per Rules applicable and petitioner company is also directed to make payment of balance amount of compensation, i.e. 75,017/-, within four weeks from the date of ₹ receipt of refund from Income Tax Officer, failing which petitioner company shall also be liable to pay interest @ 9% per annum on the said amount with effect from 1st February, 2018, till payment/deposit.
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12. Recently, High Court of Gujarat at Ahmedabad, in Oriental Insurance Co.
Ltd. v. Chief Commissioner of Income Tax (TDS), R/Special Civil Application rt No. 4800 of 2021, decided on 5.4.2022, has also held that compensation as well as interest thereupon is not 'income' but 'damages' as such, same cannot be subjected to TDS as per 194(a)(3)(ix) of the Income Tax Act. It is would be relevant to take note of aforesaid judgment passed by High Court of Gujarat at Ahmedabad:
"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."
13. Having perused aforesaid judgments passed by this court as well as High court of Gujarat, it can be safely concluded that compensation and interest thereupon awarded by Motor Accident Claims Tribunal, by no stretch of imagination, can be said to be 'income' rather same being 'damages' granted by ::: Downloaded on - 31/08/2023 20:33:09 :::CIS 7 court on account of injury or death in accidental cases, cannot be subjected to S.194 of Income Tax Act, which otherwise mandates for Tax Deduction at Source for the interest amount beyond Rs.50,000/-.
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14. Similarly, this Court in National Insurance Company Ltd. v. Prabha Vati & Ors, Latest HLJ 2021 (HP)(2)1338, has held as under:
"3. Section 194-A of Income Tax Act, 1961, clearly provides that any person, not being an individual or a Hindu undivided family, of responsible for paying to a 'resident' any income by way of interest, other than income by way of interest on securities, shall deduct income tax on such income at the time of payment thereof in cash or rt by issue of cheque or by any other mode. Compensation awarded under Motor Vehicle Act cannot be said to be taxable income.
Compensation is awarded in lieu of death of a person or bodily injury suffered in a vehicular accident, which is damage and not income.
4. It is well settled that interest awarded by the Motor Accident Claims Tribunal on a compensation is also a part of compensation upon which income tax is not chargeable as also held by the Division Bench of this Court in Court on its own motion vs. The H.P. State Cooperative Bank Ltd. and others reported in 2014 (Suppl.) Him.L.R. (DB) 2575 and reiterated in CWP No. 460 of 2014 titled Shiv Ram Sharma vs. Union of India and others and other connected matters vide decision dated 3.6.2015.
5. Therefore, in view of above said decision, deduction of income tax by petitioner/Insurance Company on the interest accrued/awarded on the compensation deposited by the petitioner/Insurance Company is illegal and is contrary to the law of land.
6. In view of above discussion, this petition is disposed of directing respondent No. 7 Income Tax Officer, (TDS), Sector 2, Panchkula, ::: Downloaded on - 31/08/2023 20:33:09 :::CIS 8 Haryana to refund the TDS to the petitioner/Insurance Company within eight weeks from date of receiving information thereof, which shall be supplied by petitioner/Insurance Company within two weeks from .
today, as per Rules applicable and petitioner company is also directed to make payment of balance amount of compensation along with interest, if any received by it from the Income Tax Department to the claimants/respondents, within two weeks from the date of receipt of refund, failing which petitioner company shall also be liable to pay interest @ 9% per annum on the said amount with effect from of 20.6.2018 till payment/deposit. Interim order dated 25.09.2018 passed in CMP No. 9331 of 2018 also stands vacated in above terms. The Motor Accident Claims Tribunal-IV, Shimla H.P. is directed to proceed rt further accordingly."
15. In view of above, this court finds no merit in the petition and same is dismissed. Order dated 1.3.2021 passed by learned Motor Accident Claims Tribunal-I, Una, District Una, Himachal Pradesh in Execution Petition No. 204 of 2019, titled Hari Narayan v. New India Assurance Company is upheld.
16. Needless to say, petitioner can always apply to the Income Tax Department for refund of amount deposited on account of TDS deducted from interest accrued upon compensation amount awarded in favour of the claimants..
17. The petition stands disposed of in the afore terms, alongwith all pending applications.
(Sandeep Sharma) Judge August 29, 2023 (Vikrant) ::: Downloaded on - 31/08/2023 20:33:09 :::CIS