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TMI Blog2025 (5) TMI 1615X X X X Extracts X X X X X X X X Extracts X X X X ..... 81;य रिट आदेश या निर्देश जारी किया जावे की वह इजरा प्रकरण में प्रत्यर्थी से रूपये 29,896/- वसूल करके याचिकाकार को दिलावें तथा प्रत्यर्थी को भी निर्देशित किया जावे कि वह रूपये 29,896/- न्यायालय एकादशम् मोटर दुर्घटना दावा &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sources and the point of changeability would be the actual receipt and a conjoint reading of clause (viii) of sub-section (2) of section 56, clause (b) of section 145A [145B(1)] and section 194A (3) of the Act would lead to an inescapable conclusion that interest on the compensation or enhanced compensation would be chargeable as income from other sources at the point when the same is actually received by the claimants. 5. It was further submitted that the Finance Act, 2015 has inserted new Section 194A(3) (ix-a) with effect from 1st June 2015 and the effect of the amendment is as under:- "(1) No liability for TDS shall be attracted in respect of any income credited by way of interest on the compensation amount awarded by the MACT. (2) Such liability for deduction of tax in respect of interest on compensation will be attracted, only at the time of actual payment and only if the amount of such payment or aggregate amounts of such payments during a financial year exceeds Rs. 50,000/- ." 6. To bolster his submissions, learned counsel for the petitioner placed reliance in the matters of United India Insurance Co. Ltd. Vs. Janki Devi and others reported in 2009 ACJ 1937; Shatrudha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aikh and others reported in 2017 ACJ 1775; New India Assurance Co. Ltd. Vs. Ravinder Kumar and others reported in 2023 ACJ 757. 9. Heard learned counsel for the parties and perused the record. 10. Before analyzing the rival stands, this Court deems it necessary to briefly refer to the applicable provisions contained in the Income Tax Act. Section 2(24) of the Act defines the income:- (i) profits and gains; (ii) dividend ; (iia) voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes or by an association or institution referred to in clause (21) or clause (23), or by a fund or trust or institution referred to in sub-clause (iv) or sub-clause (v) or by any university or other educational institution referred to in sub-clause (iiiad) or sub-clause (vi) or by any hospital or other institution referred to in sub-clause (iiiae) or subclause (via) of clause (23C) of section 10 or by an electoral trust. Explanation.-For the purposes of this sub-clause, "trust" includes any other legal obligation; (iii) the value of any perquisite or profit in lieu of sala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members; (viii) [Omitted by the Finance Act, 1988, w.e.f. 1-4-1988. Original subclause (viii) was inserted by the Finance Act, 1964, w.e.f. 1-4-1964;] (ix) any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever. Explanation.-For the purposes of this sub-clause,- (i) "lottery" includes winnings from prizes awarded to any person by draw of lots or by chance or in any other manner whatsoever, under any scheme or arrangement by whatever name called; (ii) "card game and other game of any sort" includes any game show, an entertainment programme on television or electronic mode, in which people compete to win prizes or any other similar game ; (x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees ; (xi) any sum received under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) In particular and without prejudice to the generality of the provisions of sub-section (1), the following incomes shall be chargeable to income tax under the head "Income from other sources", namely: - (viii) income by way of interest received on compensation or on enhanced compensation referred to in [sub-section (1) of Section 145-B]" 13. Section 145 B(1) [unamended Section 145A(b)] of the Income Tax Act reads as under:- Section 145A(b) in The Income Tax Act, 1961 (b)"recognized stock exchange" shall have the meaning assigned to it in clause (ii) of Explanation 1 to clause (5) of section 43; 18. Section 194(A)(3) (ix and ix-a) of the Act is with regard to "interest other than interest of securities." The same reads as under:- Section 194A(3) in The Income Tax Act, 1961. (3) The provisions of sub-section (1) shall not apply- (ix) to such income credited by way of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal; (ixa) to such income paid by way of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal where the amount of such income or, as the case may be, the aggregate of the amounts of such income paid during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieved and the statutory provisions contained in the Act of 1988 makes third party insurance compulsory and limit the difference, which the insurance company may raise to its liability. 19. The statement of objects and reasons for enactment of this Motor Vehicle Act records that the need was filled for consolidation by an amendment of law relating to motor vehicle and such law should take into account also changes in the road transport technology, pattern of passenger and freight movements, developments, of the road network in the country and particularly the improved techniques in the motor vehicles management. Chapter-X of the Act of 1988 pertains to liability without fault in certain cases and chapter XI of the Act of 1988 pertains to Insurance of Motor Vehicles against third party risks. Chapter XII of the Act pertains to Claims Tribunal and Section 166 of the Act of 1988 pertains to application for compensation under which a person who has sustained injury or the owner of the property or where death has resulted into the accident, the legal representative of the deceased could make an application for compensation to the Motor Accident Tribunal. On such an application Claims Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss 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. 22. It is, therefore, that while awarding compensation, though the Claims Tribunal awards future loss in praesenti, interest is awarded for the period between filing of the Claim Petition till passing of the award and, therefore, as held by the Hon'ble Apex Court in the case of Abati Bezbaruah (supra) and Dharampal (supra), such interest is considered to be part of compensation, and accretion to the compensation since the same is awarded for the compensation which is ascertained with reference to an earlier date i.e., the date of accident. At the same time, courts have not approved granting interest on future expenditure. 23. Now, coming to the provisions of the Income Tax Act and applying these conclusions to the relevant provisions contained therein, it could be seen that Section 56 of the Income Tax Act pertains to income from other sources. Sub-section (1) of section 56 provides that income of every kind which is not to be excluded from the total income u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim compensation or enhanced compensation, decisions of the Supreme Court including in cases of Abati Bezbaruah (supra), Kaushnuma Begum (supra), Patricia G. Mahajan (supra) a n d Dharampal (supra) have been referred. These decisions suggest that the interest is awarded for delayed computation of compensation and right to award interest flows from section 170 of the Motor Vehicles Act, 1988. As it is well settled that the authority of the Court to award interest must be traced to a statutory provision or should be in agreement between the parties and in absence of section 170 of the Motor Vehicles Act, perhaps it would not be lawful for the Tribunal or this Court to award interest on compensation. Thus, from the discussion in the judgments cited above it could be very well said that the interest is compensatory in nature and thus, forms part of the compensation itself. Compensation is computed with reference to the date of accident and all calculations are based on such reference point and such interest is awarded keeping in mind the rate of inflation, effort thus is to award just compensation and, therefore, awarding interest for delayed computation of compensation is an integra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest is income of the recipient or not. Section 194-A of the Act is only a provision for deduction of tax at source. Any provision for deduction of tax at source in the said section would not govern the taxability of the receipt. The question of deduction of tax at source would arise only if the payment is in the nature of income of the payee. 30. The Division Bench of the Bombay High Court in the matter of Rupesh Rashmikant Shah vs Union of India (Supra) in paragraph 58 and 59 has discussed the provisions of Section 194-A, clauses (ix) and (ixa) of subsection (3) of section 194. The relevant extract is reproduced herein below:- 58. We are not oblivion to erstwhile clause (ix) of sub-section (3) of section 194A or the newly amended clauses (ix) and (ixa) thereof substituting original clause (ix) w.e.f. 1.6.2015 by Finance Act, 2015. Subsection (1) of section 194A provides for deduction of tax at source upon payment of any income by way of interest. Subsection (3) of section 194A contains exclusion clauses from the purview of subsection (1). Clause (ix) contained in sub- section (3) prior to amendment pertained to income credited or paid by way of interest on the compensation amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of assessment. He has made a bonafide assessment. With his approach, there can be no criticism. But when it comes to issuing notice for penalty, it defies logic. The petitioner despite his stand that the interest is not taxable, filed the return, offered the interest to tax and also deposited such tax under protest. What was the purpose of issuing notice for penalty is difficult to understand 63. In the result, we find that the Assessing Officer had committed an error in levying tax on the interest component of the compensation awarded to the petitioner till the date of the judgment of the High Court. On any interest paid to him post the judgment, tax had to be collected as income from other sources. This Court, therefore, set aside the impugned order of assessment and place the assessment of the petitioner back to the Assessing Officer for passing fresh order in line with this judgment. Before closing, we record our appreciation for the industry and punctuality with which the learned Senior Counsel Mr.Jamshed Mistri, the Amicus Curiae, had assisted the Court in the present petition. 32. A similar view has been taken by Division Bench of Gujarat High Court in the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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