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Managing Director, Tamil Nadu State Transport Corpn. (Salem) Ltd. Versus Chinnadurai

2016 (6) TMI 240 - MADRAS HIGH COURT

TDS on compensation and interest awarded by the Motor Accident Claims - whether the deduction of TDS on interest accrued on deposits in terms of Orders passed by the Courts in Motor Accident cases is legally sustainable or not? - Held that:- Compensation cannot be categorized or even described as income as the intention of the legislature in awarding compensation to the victims of Motor Accident cases is to restitute them and rehabilitate them. - If there is a conflict between a social welfa .....

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of the Motor Vehicles Act. In fact, if one might deeply analyse, it could be seen that there is no direct conflict between any provisions of the Income Tax Act and the Motor Vehicles Act and it is only by the interpretation of the provisions the concept of compulsory payment of TDS has crept into the realm of compensation payment in Motor Vehicle Accident cases. - This Court arrives at the conclusion that the compensation awarded or the interest accruing therein from the compensation that h .....

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> M.V. MURALIDARAN, J. Ms. D. Venkatachalam and V. Raghavachari for the Petitioner. T. Pappaiah Dharmarajan for the Respondent. ORDER 'Life' does not mean a mere animal existence and this term occurring in Article 21 of the Constitution of India has been expounded and expanded by the Hon'ble Supreme Court of India and this Court in a long line of decisions and we have travelled a long way from Gopalan to Gandhi (A.K.Gopalan's case AIR 1950 SC 27) to (Menaka Gandhi's case AIR .....

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a narrow, pedentic or hyper-technical approach. It is an unwritten norm that in cases of grant of compensation, the Courts have to be liberal and understand the difficulties of the vicim and compensate him appropriately so that he or his family could limp their way back to a normal life, though not entirely possible. 4. The term 'Compensation' has been explained in R.Ramanatha Aiyar law dictionary refering to Blacks Law dictionary as: "An act which a Court orders to be done, or mone .....

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ty; remuneration or wages given to an employee or officer." 5. The scope of this term has been construed differently in various enactments to convey the meaning that compensation is offered as a solace for a loss suffered by the individual. The purpose of granting compensation in Motor Accident cases as it is already been stated previously is to ensure that the victim or his family is restituted for the great suffering on account of the accident. 6. Whether it would be appropriate to insist .....

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ution Petition R.E.P.No.146 of 2010 before the Motor Accident Claims Tribunal, Dharmapuri in M.CO.P.No.879 of 2006 wherein the amount that they are entitled to ₹ 4,23,271/- and in the memo filed before the Motor Accident Claims Tribunal, ₹ 24,017/- has been deducted for TDS. R.E.P.No.146 of 2010 that has been filed was allowed by the Court below and accordingly, the bus belonging to the Revision Petitioner Corporation was attached and the Corporation was directed to deposit the balan .....

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ithout prejudice to their contention and the Tribunal is directed not to release that much portion of the disputed amount, pending C.R.P. The remaining amount can be released in favour of the judgment holder, as per law. However, on such deposit, the vehicle, namely the bus, shall be released". 8. Mr.Venkatachalam, learned counsel for the Petitioner would submit that as per Sections 194-A and 156 of the Income Tax Act, 1961, the interest portion awarded by the Motor Accident Claims Tribunal .....

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. In all of the above three judgments, it has been held by the Courts that whenever the compensation amount earns interest by reason of delayed payment or otherwise, it is liable to TDS and the exemption could be claimedonly by way of filing the necessary returns before the assessing authority. Hence, on the basis of the above said judgments, the Counsel for the Petitioner prayed that the Revision be allowed. 10. On the contrary, learned counsel for the respondent, Mr.Pappaiah Dharmarajan would .....

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on Petitioner and conclude the matter. 12. But, this Court does not choose to do the same, since the issue at hand is of larger public interest and have far reaching implications. As stated earlier, if the law has to be interpreted so technically and rigidly whereby which a family of an individual who could have possibly lost his life or limbs in an accident has to pay TDS on the interest that has accrued on the compensation amount, will the law be doing a service or disservice to the victims?. .....

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as it has already been stated that the intention of the legislature in awarding compensation to the victims of Motor Accident cases is to restitute them and rehabilitate them. 14. The Income Tax Department appears to have issued a circular dated 14.10.2011 whereby deduction of Income Tax has been ordered on the award amount and the interest accrued on the deposits made under the order of the Court in Motor Accident Cases. Taking serious view of this circular, the Division Bench of the Himachal P .....

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f the said provisions does not apply to the accident claim cases and the compensation awarded under the Motor Vehicles Act cannot be said to be taxable income. The compensation is awarded in lieu of death of a person or bodily injury suffered in a vehicular accident, which is damage and not income. 14. Chapters X and XI of the Motor Vehicles Act, 1988 provides for grant of compensation to the victims of a vehicular accident. The Motor Vehicles Act has undergone a sea change and the purpose of gr .....

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aid Circular is against the concept and provisions referred to hereinabove and runs contrary to the mandate of granting compensation. ...23. Having said so, the Circular, dated 14.10.2011, issued by the Income Tax Authorities, whereby deduction of income Tax has been ordered on the award amount and interest accred on the deposits made under the orders of the Court in Motor Accident Claims Cases, is quashed and in case any such deduction has been made by respondents, they are directed to refund t .....

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place the claimant in the same position in which he would have been loss of life or injury has not been suffered and accordinly held that the orders calling upon the Insurance Company to pay TDS/deduct Tds on the interest part are not sustainable. 16. If we look at other jurisdictions like Australia, Unites States and United Kingdom, even there, the matters where a person has suffered an injury or there has been a loss of life and a compensation has been paid in lieu of that, then it has been he .....

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Act is one such legislation which has been passed with a benevolent intention for compensating the accidient victims who have suffered bodily disablement or loss of life and the Income Tax Act which is primarily intended for Tax collection by the State cannot put spokes in the effective and efficacious enforcement of the Motor Vehicles Act. In fact, if one might deeply analyse, it could be seen that there is no direct conflict between any provisions of the Income Tax Act and the Motor Vehicles .....

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