TMI Blog2010 (11) TMI 1118X X X X Extracts X X X X X X X X Extracts X X X X ..... he interest has to be spread over on annual basis right from the date of delivery of possession till the date of order on a time basis. This Court is of the view that the interest awarded has to be spread over in number of years from the date of filing of claim petition till the date of payment because the right to receive compensation arises immediately on occurrence of accident and the interest is awarded by the Tribunal or the Courts for the delay that occurs due to the delay in determination of the compensation and if the interest for the financial year payable to each of individual claimant exceeds Rs. 50000/- then only question of TDS will arise. So far as obligation of Petitioner/Insurance Company responsible for the payment is concerned, it is made clear that before releasing the amount of interest claimant shall be required to submit an affidavit to the effect that claimant has furnished a declaration on form No. 15-G of Rule 29-C of the Income Tax Rules in terms of Section 197-9(1-A) of the Income Tax Act for each financial year in the office of Insurance Company so that concerned Insurance Company is relieved of its obligation of payment of TDS. Hence, appeal st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliance is placed on a decision in the matter of Union of India Insurance Company Ltd. v. Mitahen Dharmeshbhai Shah and Ors. reported in 2004 ACJ 1996 Gujarat High Court had an occasion to take into consideration Section 194A(3)(ix) of the Income Tax Act wherein Insurance Company deducted income tax at source on amount payable as interest on the awarded amount. The tribunal found that amount of interest awarded to claimants has become judgment debt and lost character as interest and Insurance Company was duty bound to deposit the entire amount of judgment debt. It was further held that Clause (ix) of Sub-section (3) has been inserted with effect from 1.06.2003 by the Finance Act, 2003. The amount of interest has been deposited by the Insurance Company on 2.7.2003. It was held that in view of specific provisions contained in Income Tax Act, 1961, the Insurance Company was duty bound to deduct the amount of Income Tax from the amount of interest paid by it. It is submitted that in view of the aforesaid provisions of law, learned tribunal committed error in passing the impugned order. It is submitted that the petition be allowed and the impugned order be set aside. 4. Since the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Insurance Company, during financial year, they are bound to deduct the Income Tax at source under Section 194A of the Income Tax Act, 1961. It is submitted that in the facts and circumstances of the case, impugned order passed by the tribunal cannot be allowed to sustain. Thus the Learned Counsel supported the contention of Petitioner Insurance Company. 7. Shri P.M. Choudhari, advocate for the Assessee appeared as amicus curie submits that the amount payable towards interest is to be spread over in number of years for which such, interest has been awarded. For his contention Learned Counsel placed reliance on a decision of the Supreme Court in the matter of Rama Bai v. CIT reported in 1919 181 ITR 400 and Reliance is also placed on a Full Bench decision of Kerala High Court in the matter of Peter John v. CIT Reported in (1986) 157 ITR 711 wherein Full Bench of Kerala High Court determined and decided the question regarding accrual of interest with reference to the right to receive compensation and have linked the right to receive interest with the right of compensation and have finally held that the interest on compensation awarded with respect to land acquired under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each financial year together with his/her other income in that year exceeds the taxable limit for that year; claimants may seek necessary refund from the Income Tax Department. 11. Thus the question for consideration in the present case before this Court is regarding the position of law in regard to the deduction of tax at source Under Section 194A from the amount of interest awarded on the amount of compensation under the provisions of Motor Vehicles Act by the Motor Accident Claims Tribunal and particularly whether such interest awarded by the Tribunal is to be spread over from the date from which it is payable to the date of actual payment. 12. Section 194A obliges a person responsible for paying 'to a resident' any income by way of interest to deduct Income Tax from such payment of interest at the time of credit of such amount to the account of the payee or at the time of payment thereof in cash or by cheque or draft or by any other mode which ever is earlier. Sub-section (3) of said section is in the nature of an exemption provision and it provides that the provisions of Sub-section (1) regarding the deduction of tax at source will not apply in the cases falling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in various cases mentioned hereinabove which would apply with equal force to the claim cases this Court is of the view that the interest awarded has to be spread over in number of years from the date of filing of claim petition till the date of payment because the right to receive compensation arises immediately on occurrence of accident and the interest is awarded by the Tribunal or the Courts for the delay that occurs due to the delay in determination of the compensation and if the interest for the financial year payable to each of individual claimant exceeds Rs. 50000/- then only question of TDS will arise. So far as obligation of Petitioner/Insurance Company responsible for the payment is concerned, it is made clear that before releasing the amount of interest claimant shall be required to submit an affidavit to the effect that claimant has furnished a declaration on form No. 15-G of Rule 29-C of the Income Tax Rules in terms of Section 197-9(1-A) of the Income Tax Act for each financial year in the office of Insurance Company so that concerned Insurance Company is relieved of its obligation of payment of TDS. 15. With the aforesaid, appeal stands disposed of. - - TaxTM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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