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NEW INDIA ASSURANCE CO. LIMITED Versus BHOYABHAI HARIBHAI BHARVAD AND 3

2016 (9) TMI 451 - GUJARAT HIGH COURT

TDS u/s 194A - whether the insurance company was justified in deducting tax at source while depositing the compensation in favour of the claimants? - Held that:- The case of credit of interest on compensation awarded by the Claims Tribunal continues to find place in the exclusion clause contained in sub section (3) of Section 194A. In fact, it would prima facie appear that the ceiling of ₹ 50,000/- per annum for such exclusion is now done away with in case of crediting of interest on compe .....

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of this ceiling of ₹ 50,000/- per claimant basis. Looked from any angle, the insurance company was not justified in deducting tax at source while depositing the compensation in favour of the claimants. It therefore, cannot avoid liability of depositing such amount with the Claims Tribunal. The Claims Tribunal had committed no error in insisting on the insurance company in making good the shortfall. - SPECIAL CIVIL APPLICATION NO. 13031 of 2016 - Dated:- 8-8-2016 - MR. AKIL KURESHI AND MR. .....

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bus, which was insured by the petitioner-insurance company, dashed against it from behind resulting into fatal injuries to passenger Hakuben. Her legal heirs i.e. her husband and children, therefore, filed Motor Accident Claim Petition No. 818 of 2008 claiming compensation of ₹ 9 lacs from the drivers, owners and insurers of the vehicles involved in the accident. The Claims Tribunal, Vadodara by a judgement and award dated 28.08.2015, awarded compensation of ₹ 4,01,000/- to the claim .....

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Balance ₹ 3,51,000/- Interest @9% from 17.6.2008 to 23.09.2015 (87.20 months) i.e. 2,29,554/- ₹ 2,29,554/- Share of 1st claimant 50% ₹ 1,14,777/- Share of 2nd claimant 50% ₹ 0,57,389/- Share of 3rd claimant 50% ₹ 0,57,389/- Cost ₹ 10,383/- Total Payable ₹ 5,90,937/- (-) TDS ₹ 45,910/- @ 20% (1st claimant) ₹ 22,955/- @ 20% (2nd & 3rd claimants) ₹ 22,955/- Net Payable ₹ 5,45,027/- 4. From such calculations, it can be seen that .....

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order dated 18.06.2016 and has issued distress attachment warrant against the petitioner- insurance company, upon which, such insurance company has filed this petition and challenged the said order of Claims Tribunal. 6. It is undisputed that the decision of Division Bench of this Court in case of Smt. Hansagauri Prafulchandra Ladhani and ors vs. The Oriental Insurance Company Ltd. reported in 2007 (2) GLR 291 governed the situation of requirement of deducting tax at source in connection with p .....

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at source to the Income Tax Department in respect of that particular claimant for that year. 7. The sole ground raised by the petitioner-insurance company in this petition for deducting tax at source despite the judgement of this Court in case of Smt. Hansagauri Prafulchandra Ladhani and ors vs. The Oriental Insurance Company Ltd is that by virtue of amendment in Section 194A of the Income Tax Act ['the Act' for short] by Finance Act 2015 w.e.f. 1.6.2015 there had arisen a requirement o .....

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exceeds ₹ 50,000/-, but who may not be liable to have any tax deducted at source as per the interpretation placed by us on the provisions of Section 194A of the Act. 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 .....

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etition till the date of deposit if the interest for any particular financial year exceeds ₹ 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 ₹ 50,000/-, the Tribun .....

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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, 19 .....

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u 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. Thus, the requirement of deducting tax at source was attached at the stage of credit of such income to the account .....

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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; 10. The Gujarat High Court in case of Smt. Hansagauri Prafulchandra Ladhani and ors vs. The Oriental Insurance Company Ltd (supra) had occasion to interpret this provision. W.e.f. 01.06.2015, however, this Clause (ix) of sub section (3) of Section 194A has been omitted and is replaced by Clauses (ix) and (ix .....

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ct, as it originally stood, requirement of deducting tax at source under sub section (1) would not apply in a case where any income is credited or paid by way of interest on compensation amount awarded by Motor Accident Claims Tribunal where the amount of such income or, the aggregate amounts of such income credited or paid during the financial year does not exceed fifty thousand rupees. This provision of Clause (ix) is now divide into two parts and is replaced by Clauses (ix) and (ixa). Clause .....

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ly incorrect to read the current provision of sub section (3) of Section 194A to argue that the cases of income credited by way of interest on compensation awarded by the Claims Tribunal is no longer part of sub section (3) for exclusion from purview of sub section (1) of Section 194A. In other words, worded slightly differently. The case of credit of interest on compensation awarded by the Claims Tribunal continues to find place in the exclusion clause contained in sub section (3) of Section 19 .....

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