New India Assurance Company Ltd vs The Commissioner Of Income Tax
2023 Latest Caselaw 3026 Patna

         IN THE HIGH COURT OF JUDICATURE AT PATNA
                    Civil Writ Jurisdiction Case No.12429 of 2019
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New India Assurance Company Ltd. through its Deputy Manager Regional Office 6th Floor B.S.F.C. Building Fraser Road Patna.

... ... Petitioner/s Versus

1. The Commissioner of Income Tax Ayakar Bhawan Central Revenue Building, Birchand Patel Marg, Patna.

2. Babulal Sah S/o Late Chulhai Sah R/o Village Rampur Mahinath, P.S. Piar, District Muzaffarpur.

... ... Respondent/s ====================================================== Appearance :

For the Petitioner/s : Mr.Ashok Priyadarshi, Advocate For the Respondent/s : Mrs.Archana Sinha @ Archana Shahi, Advocate ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE PARTHA SARTHY ORAL JUDGMENT (Per: HONOURABLE THE CHIEF JUSTICE)

Date : 14-07-2023

The Insurance Company in the above writ petition

challenged the order of the Motor Accidents Claims Tribunal,

Muzaffarpur (hereinafter referred to as the 'Tribunal') which

directed the Insurance Company to pay an amount of Rs.

17,126/- being the TDS deducted with interest at the rate of 9%

per annum from 29.01.2008 till payment. The Insurance

Company, before the Tribunal and before this Court, asserts that

there can be no liability cast on the Insurance Company of a like

nature. When the amounts are deducted as TDS, from the interest

amounts granted in accordance with an award of the MACT, the

claimant has to approach the Income Tax Department for a

refund.

2. In the present case, we find an infirmity insofar Patna High Court CWJC No.12429 of 2019 dt.14-07-2023

as the Tribunal having passed the order in an application in which

the applicant expired when the order was passed. In the present

case, a substitution petition has been filed by one Bhola Shah,

aged about 41 years, son of Late Babulal Sah, the applicant

before the Tribunal. The applicant is said to have died on

02.04.2015 and the order was passed on 09.02.2018, after the

death. Substitution application has been filed by the Insurance

Company also seeking to bring the above applicant in I.A. No. 1

of 2020 on record by I.A. No. 2 of 2023. I.A. No. 1 of 2020 is

allowed and the applicant is brought on record as the legal

representative of the deceased, the 2nd respondent herein. I.A.

No. 2 of 2023 is closed as unnecessary. We proceed to hear the

issue as agitated since the learned Standing Counsel for the

Insurance Company impressed upon us the need to caution the

Tribunals in such matters.

3. Both the parties are present here and even if the

mater is remanded, the substituted additional second respondent

will have to be heard before the Tribunal.

4. The Tribunal seems to have followed the

decisions of the High Court of Bombay and Gujarat, which relied

on a Division Bench judgment of the Bombay High Court in

Gauri Deepak Patel & Ors. V. New India Assurance Co. Ltd. Patna High Court CWJC No.12429 of 2019 dt.14-07-2023

& Anr.; 2011 ACJ 1782. Therein the widow, two minor children

and mother of the deceased approached the Motor Vehicle

Accident Tribunal for compensation. In the proceedings before

the High Court, it was directed that the money awarded to the

claimants be deposited and the claimants allowed to withdraw a

certain portion of the amount. The respondent-Insurance

Company then directed the applicant to furnish the Pan Card and

photo copy for the purpose of deducting income tax at source,

which was the liability of the Insurance Company, as per Section

194A(3)(ix) of the Income Tax Act 1961 (hereinafter referred to

as the 'Act'). The Division Bench followed a judgment of the

Hon'ble Supreme Court in Rama Bai v. Commissioner of

Income Tax; [1990] 181 ITR 400, wherein it was held that the

interest on enhanced compensation of land compulsorily acquired

under the Land Acquisition Act, 1984, on a reference under

Section 18 of the Act is deemed to have accrued year after year

from the date of delivery of possession of the land and not on the

date of the order of the Court. On the same principle, the High

Court of Bombay directed the Insurance Companies to spread

over the interest amount over the relevant financial year and

deduct T.D.S. only if the interest for any particular financial year

exceeds Rs. 50,000/-. However, the statutory provision insofar as Patna High Court CWJC No.12429 of 2019 dt.14-07-2023

the liability to tax on interest income from an award of the Motor

Accidents Claim Tribunal is explicit as to the year in which taxation

occurs.

5. We are told by the learned Standing Counsel

appearing for the Insurance Company that the Motor Accident

Claims Tribunals, across the State, have been directing such

refund by the Insurance Company, of amounts deducted as TDS

and already credited to the Income Tax Department. It is also

pointed out that the said directions are issued in total disregard of

the binding precedents of two Division Bench judgments of this

Court, produced as Annexure-2 series i.e. the decisions dated

20.09.2013 in CWJC No. 5352 of 2013, titled as National

Insurance Co. Ltd. vs. Commissioner of Income Tax and

dated 05.02.2015 in CWJC No. 18558 of 2012, titled as National

Insurance Co. Ltd. Vs. Union of India and connected cases. In

the order dated 20.09.2013 on similar directions issued by the

Tribunal, it was found that the Tribunal had ignored the statutory

duty conferred upon the Insurer under Section 194(1)[sic-

194A(1)]. Following the said judgment, by order dated

05.02.2015, another Division Bench elaborately considered the

matter, especially relying on decisions of the Madras High Court

in New India Assurance Co. Ltd. vs. Mani & Ors. [2004] 270

ITR 394, the Gujarat High Court in United India Insurance Co. Patna High Court CWJC No.12429 of 2019 dt.14-07-2023

Ltd. Vs. Mitaben Dharmeshbhai Shah & Ors.; [2004] 269

ITR 63 and Section 194A(1) and (3)(ix), to hold that the

Insurance Company has a duty to deduct tax when the amount of

interest credited or paid during the financial year exceeds Rs.

50,000/-. The order of the District Judge directing refund by the

Insurance Company in derogation of the statutory provision was

deprecated.

6. We cannot but observe that the Tribunal grossly

erred in relying on a decision of the High Court of Bombay while

the jurisdictional High Court held otherwise. In any event, with

all the respect at our command, we cannot agree with the

decision of the Bombay High Court on a plain reading of the

provisions i.e. Section 194A(1) and 3(ix), which are extracted

hereunder:-

"194A. (1) Any person, not being an individual or a Hindu 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:

Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of Section 44AB during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this Section.

(3) The provisions of sub-section (1) shall not apply-

(ix) to such income credited or paid by way of interest on the compensation amount awarded by the Motor Accidents Patna High Court CWJC No.12429 of 2019 dt.14-07-2023

Claims 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.

7. As per Section 194A(1), 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, be liable for tax deduction at source.

Hence, there can be no spread over of the interest income in the

years in which it accrued after death of the person, which resulted

in the compensation being awarded. We also have to notice sub-

clause (ix) of sub-section(3) of Section 194A, which speaks of

such exemption from deduction of tax, from the interest income,

when the aggregate amount of such income credited or paid

during the financial year exceeds Rs. 50,000/-. Hence, the

income has to be found to have accrued only on the date of

payment or credit.

8. We have to caution the Tribunals, insofar as the

proper procedure being the resort to refund, if at all the claimant

does not have income in excess of the taxable limit under the

Income Tax Act.

9. On the above reasoning, we find that the

application filed before the Tribunal was unsustainable. We, Patna High Court CWJC No.12429 of 2019 dt.14-07-2023

hence, set aside the order of the Tribunal dated 09.02.2018 and

caution the Tribunals from issuing such orders directing refund

for the periods prior to 01.06.2015. We specifically notice that

Section 194A(3)(ix) has been substituted by the Act 20 of 2015

with effect from 01.06.2015, which reads as under:-

"(3)(ix)-To such income credited by way of interest on the compensation amount awarded by the MACT."

On the above provision coming into force from 01.06.2015, no

TDS can be deducted even on the interest component. The writ

petition is allowed, leaving the parties to suffer their respective

costs.

10. Since, we have answered the question against

the refund directed by the Tribunal, we are of the opinion that the

application before the Tribunal need not be restored and the same

shall stand closed as not maintainable.

(K. Vinod Chandran, CJ)

( Partha Sarthy, J)

Sujit/-

AFR/NAFR                AFR
CAV DATE
Uploading Date          21.07.2023
Transmission Date