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2021 (9) TMI 1510 - HC - Income TaxTDS u/s 194C - income tax on interest payable to the claimants/respondents on compensation awarded a/u Motor Accident Claim - HELD THAT:- 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 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 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. 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 as titled Court On Its Own Motion v. the H.P. State Cooperative Bank Limited [2014 (10) TMI 972 - HIMACHAL PRADESH HIGH COURT]. 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. This petition is disposed of directing respondent No. 7 Income Tax Officer, (TDS), Sector 2, Panchkula, Haryana to refund the TDS to the petitioner/Insurance Company within eight weeks from date of receiving information thereof, failing which petitioner company shall also be liable to pay interest @ 9% per annum on the said amount with effect from 20.6.2018 till payment/deposit.
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