TMI Blog2002 (3) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the court and a decree was passed in terms thereof on March 8, 2000. Under the decree the total amount payable towards the principal was Rs. 7,99,067.16. The total decretal amount along with interest on principal at the rate of 10 per cent. per annum from February 7, 1989, to March 8, 2000, including cost of Rs. 4,165.50 was in the sum of Rs. 16,89,430.66. The interest on the above principal sum of Rs. 7,99,067.16 for the period from February 7, 1989, to March 8, 2000, at the rate of 10 per cent. per annum was Rs. 8,86,198. Further interest on the above principal from March 9, 2000, to December 31, 2001, at the rate of 10 per cent. per annum was in the sum of Rs. 1,45,145.62. Thus, the total interest at the rate of 10 per cent. per annum on the above principal from February 7, 1989, to December 31, 2001, came to Rs. 10,31,344. The Food Corporation of India has an account with the State Bank of India. The decree-holder, M/s. Islamic Investment Company, sought a garnishee order against the State Bank of India which was granted on September 12, 2001. On the garnishee order being served on the State Bank of India, that bank informed the Food Corporation of India which, according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable. (3) Subject to rules made under sub-section (5), any person entitled to receive any interest or other sum on which income-tax has to be deducted under sub-section (1) may make an application in the prescribed form to the Assessing Officer for the grant of a certificate authorising him to receive such interest or other sum without deduction of tax under that sub-section, and where any such certificate is granted, every person responsible for paying such interest or other sum to the person to whom such certificate is granted shall, so long as the certificate is in force, make payment of such interest or other sum without deducting tax thereon under sub-section (1). (4) A certificate granted under sub-section (3) shall remain in force till the expiry of the period specified therein or, if it is cancelled by the Assessing Officer before the expiry of such period, till such cancellation. (5) The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim, it became a judgment debt. It is clear from the report of the case that the All India Reporter had not applied in the suit to the court for making a provision in the decree for payment of income-tax due by Datar. It is important to note in the present case, also that when the award was made rule of the court and a decree was passed on March 8, 2000, the judgment-debtor, i.e., the Food Corporation of India, did not apply to the court for making a provision in the decree for payment of income-tax due on the interest payable to the petitioner/decree-holder under the decree. Before the Supreme Court, the issue was that if the amount payable to Datar was treated as salary, it would have attracted deduction of tax at source under section 18 of the Income-tax Act. While considering this issue, the Supreme Court observed that a substantial part of the claim decreed represented compensation for wrongful termination of employment and it would be difficult to predicate of the claim sought to be enforced what part thereof if any represented salary due. However, the Supreme Court observed as follows: "Granting that compensation payable to an employee by an employer for wrongful termina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he character of a judgment debt. Once such an amount assumes the character of a judgment-debt, the decree passed by the civil court must be executed subject only to the deductions and adjustments permissible under the Code of Civil Procedure. Learned counsel for the Food Corporation of India has not been in a position to point out any provision under the Income-tax Act or under section 195 in particular or under the Code of Civil Procedure where the amount of the interest payable under a decree is deductible from the decretal amount on the ground that it is an interest component on which tax is liable to be deducted at source. Learned counsel for the Food Corporation of India relies on two judgments of the Supreme Court in [1966] 62 ITR 458 (sic) and T.N.K. Govindaraju Chetty v. CIT [1967] 66 ITR 465, which take the view that interest retain its character and is liable to be treated as income under the Act. This decision has no direct application to the facts of the present case. Learned counsel for the Food Corporation of India further cited a recent decision of the Supreme Court in Transmission Corporation of A.P. Ltd. v. CIT [1999] 239 ITR 587 and relied on the observation of ..... 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