TMI Blog2023 (2) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of interest computed from the date of application for claim till deposit of cheques before the learned Motor Accidents Claims Tribunal on account of delay in disbursal of the amount of compensation awarded to the petitioners-claimants? HELD THAT:- MV Act makes detailed provisions for awarding compensation for death or disablement of any person resulting from an accident arising out of the use of a motor vehicle. Essentially, such claim is in the nature of tortious liability. The concept of compulsory third party insurance has been statutorily introduced. The relationship between the insurer and the insured is basically a contractual relationship but interjected by a range of statutory provisions. Under such contract of insurance, the insurer undertakes to indemnify the insured to the extent agreed. The statutory provisions contained in the MV Act make third party insurance compulsory and limit the defences which the insurance company may raise to repudiate its liability. The purpose of granting compensation under the MV Act is to ameliorate the sufferings of the victims so that they may be saved from social evils and starvation, and that the victims get some sort of help ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per financial year. In the present case, after the award being finalised, the opposite party No.4-National Insurance Co. Ltd. has calculated the interest payable on the entire amount of compensation. Had the interest in question been computed by spreading over for six years commencing from 2013-14 till the deposit is made, the interest would be less than Rs.50,000/-. In such eventuality in view of Section 194A(3)(ix) [pre-amendment]/ Section 194A(3)(ixa) [post amendment], TDS was not required to be deducted by the opposite party No.4. In the result, the writ petition is allowed and the TDS amount wrongly deducted will be refunded to the petitioners by the Income-tax Department not later than eight weeks from today, failing which simple interest at the rate of 6% per annum on the said sum will be paid to the petitioners for the period of delay. - DR. S. MURALIDHAR CHIEF JUSTICE AND MURAHARI SRI RAMAN, JUDGE Advocates appeared in the case: For the Petitioners : Mr. Bisikesan Pradhan, Advocate For the Opposite Parties : Mr. Sidhartha Sankar Mohapatra, Senior Standing Counsel (Income-Tax) for the opposite party Nos.2 3 Mr. Bibekananda Udgata, Advocate for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make payment of the modified awarded amount with interest within eight weeks hence before the Tribunal. Learned Tribunal is to disburse the amount proportionately. On production of receipt showing payment of awarded amount, statutory deposit, if any, be returned with accrued interest. The MACA is accordingly disposed of. 2.2. It has been stated by the petitioners that the opposite party No.4 pursuant to aforesaid direction of the National Lok Adalat deposited cheques dated 20.09.2019 and accordingly, order has been passed by the learned MACT on 22.10.2019. 2.3. It is alleged in the writ petition that no disclosure was made with regard to details of interest nor was any intimation given to the petitioners with regard to tax deducted at source (TDS) on interest. However, on being asked, the opposite party No.4 replied that out of the amounts payable on account of interest of Rs.2,15,834/-, Rs.2,15,833/- and Rs.2,15,333/-, deduction of income-tax at source for sum of Rs.43,167/-, Rs.43,167/- and Rs.43,067/- have been made. Contention of the counsel for the petitioners: 3. The quantum awarded vide Judgment and Order dated 17.10.2017 of the MACT being mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he counsel for the National Insurance Co. Ltd.- opposite party No.4: 5. Sri Bibekananda Udgata, learned Advocate for the opposite party No.4 supporting the case of the opposite party Nos.2 and 3, submitted that having deducted the income-tax at source in terms of Section 194A(3) read with Section 56 of the IT Act, National Insurance Co. Ltd. has deposited the amount(s) with the Income-tax Department. Issue involved for adjudication: 6. Whether the opposite party No.4-National Insurance Co. Ltd. is justified in deducting income tax at source in terms of Section 194A(3)(ixa), as amended or Section 194A(3)(ix), as existed prior to amendment read with Section 56(2) of the Income Tax Act, 1961 in respect of interest computed from the date of application for claim till deposit of cheques before the learned Motor Accidents Claims Tribunal on account of delay in disbursal of the amount of compensation awarded to the petitioners-claimants? Analysis of the Court: 7. Provisions of Section 2(28A), Section 56, Section 145B and 194A of the IT Act so far as they are relevant for adjudication of present case are extracted hereunder: 2. Definitions.- (28A) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case may be, the aggregate of the amounts of such income paid during the financial year does not exceed fifty thousand rupees; *** 7.1. It may be stated that prior to substitution for Sections 145A and 145B, with retrospective effect from 01.04.2017 by virtue of the Finance Act, 2018, at the material period Section 145A stood thus: 145A.Method of accounting in certain cases.- Notwithstanding anything to the contrary contained in Section 145,- *** (b) interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received. 8. The MV Act makes detailed provisions for awarding compensation for death or disablement of any person resulting from an accident arising out of the use of a motor vehicle. Essentially, such claim is in the nature of tortious liability. The concept of compulsory third party insurance has been statutorily introduced. The relationship between the insurer and the insured is basically a contractual relationship but interjected by a range of statutory provisions. Under such contract of insurance, the insurer undertakes to inde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to file the income tax return and claim the refund. As a result of the foregoing discussion, it is held that the interest paid along with the compensation as a result of the order of the Tribunal or of the superior Court is not liable for TDS. 8.4. Section 171 of the MV Act provides that where a Tribunal allows the claim for compensation, such Tribunal may direct that in addition to the amount of compensation, simple interest shall also be paid at such rate and from such date, not earlier than the date of making the claim as it may specify in this behalf. 8.5. The Courts award compensation for loss of dependency benefit, loss of estate, loss of consortium in case of a spouse, loss of love and affection for the family members and funeral charges in the circumstances where the death is caused due to road accident. In case of injury, the compensation is computed under the heads of actual loss of income, future loss of income, pain, shock and suffering, loss of enjoyment of amenities of life, medical treatment, past and future, miscellaneous heads such as attendant charges, special diet, transportation, etc. 8.6. The multiplier method has been accepted to be sound and legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f payment of interest is discretionary and is not and cannot be bound by rules. 10. Interest is compensation for forbearance or detention of money, which ought to have been paid to the claimant. No rate of interest is fixed under Section 171 of the Act and the duty has been bestowed upon the court to determine such rate of interest. In order to determine such rate we may refer to the observations made by this Court over the years. In the year 2001 in Kaushnuma Begum Vrs. New India Assurance Co. Ltd., (2001) 2 SCC 9, on the question of the rate of interest to be awarded it was held that earlier, 12% was found to be the reasonable rate of simple interest but with a change in economy and the policy of Reserve Bank of India the interest rate has been lowered and the nationalised banks are now granting interest @ 9% on fixed deposits for one year. Accordingly, interest @ 9% was awarded in the said case. *** 9. The Hon ble Bombay High Court in the case of Shri Rupesh Rashmikant Shah Vrs. Union of India, (2019) 417 ITR 169 (Bom) after taking into consideration the decisions of other High Courts taken in the context, which are cited before this Court during the course of he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure since the amount is being paid to the claimant for an expenditure which may be incurred at a later point of time. This dichotomy, thus, between awarding interest on future income while not awarding interest for future expenditure brings out the true character of the interest being awarded. 10. Turning to IT Act, Section 194A, being not a charging provision, deals with deduction of tax at source in respect of interest other than interest on securities . Said provision is attracted only when the payment of interest is in the nature of income in the hands of the recipient. Clause (ix) of subsection (3) of Section 194A prior to amendment pertains to income credited or paid by way of interest on the compensation amount awarded by the Motor Accident Claims Tribunal where such amount did not exceed Rs.50,000/-. On substitution of this provision by virtue of the Finance Act, 2015, while clause (ix) provides that the provision of sub-section (1) does not apply to such income credited by way of interest on the compensation awarded by the Motor Accident Claims Tribunal, clause (ixa) virtually retains the original provision of unamended clause (ix). 10.1. Section 145A(b) as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. Sri Bisikesan Pradhan, counsel for the petitioners has vehemently emphasized that since the interest component is relatable to period from 2013-14 to 2019-20, i.e., for six years, by method of spreading over, the quantum of interest would be less than Rs.50,000/-. In such view of the matter, tax could not have been deducted at source in terms of Section 194A(3)(ixa), as amended or Section 194A(3)(ix), as it stood prior to amendment. 11.1. In United India Insurance Co. Ltd. Vrs. Ramlal, 2010 SCC OnLine MP 567 it has been discussed as follows: 14. Keeping in view the principles laid down 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 q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd.-opposite party No.4 to deduct TDS. 11.5. In Oriental Insurance Co. Ltd. Vrs. Smt. Kala Bai, M.P. No.6637 of 2019, vide Order dated 20th March, 2020 , the Hon ble Madhya Pradesh High Court laid down that: This Court in the case of The Oriental Insurance Co. Ltd. Vrs. Smt. Swaroopibai (M.P. No.5090/2018) has also held that the Insurance Co. is liable to deduct the TDS on the interest paid by it as per provisions of Section 194A(3)(ix)/(ix-a) of the Income Tax Act and if the assessee is of the view that the tax has been deducted in excess, then he can always claim a refund of the same from the Income Tax Department. 11.6. This Court is, therefore, of the considered opinion that the amount so deducted towards tax at source, being on erroneous understanding of the opposite party No.4, said amount is liable to be refunded to the petitioners. Conclusion and directions: 12. When this Court is faced with the above proposition of law laid down in various Judgments of different Courts, it is not considered proper to accept the contention of the opposite parties, nonetheless, it is reasonable to follow the view expressed in favour of the claimants who are suffer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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