Rajasthan High Court

United India Insurance Co Ltd vs Smt Lalita And Others on 21 January, 2021

Bench: Mahendar Kumar Goyal

      HIGH COURT OF JUDICATURE FOR RAJASTHAN
                  BENCH AT JAIPUR

         S.B. Civil Miscellaneous Appeal No. 2363/2016
United India Insurance Company Limited through Manager,
Sahara Chambers, Tonk Road, Jaipur
                                        ----Appellant/Non-Claimant No.3
                                   Versus
1. Smt Lalita Fothedar Wife of Shri Maharaj Krishna Fothedar,
aged 57 years.
2. Ishan Fothedar Son of Late Shri Maharaj Krishna Fothedar,
aged 28 years.
3. Babby Nisha Fothedar Daughter of Late Shri Maharaj Krishnba
Fothedar, aged 25 years.
(All resident of House No. 128 Lalpath Nagar Kanaar Road
Jammu.
                                                 ----Respondents/Claimants

4. Kismat Singh @ Toni Son of Bhagwan Sigh, age 45 years resident of Mali Mohall Pushkar District Ajmer (Driver Mini Bus No. R.J.01-P-2970)

5. Vasudev Sharma Son of Shri Murlidhar Sharma resident of behind Ragunath Bhawan Agra Gate Ganj Ajmer (Rajasthan) (Owner Mini Bus No. R.J.01-P2970)

6. Arjun Phokraj Son of Shri Tak Singh, Resident of K-5,-95 Green Park Quince Road Jaipur (Driver Ambassador Car No. R.J.14-T1411)

7. Cornel R.Hartiya Son of V.D. Haritya, resident of House No.95 Green Park Khatipura Road Jaipur (Owner Ambassador Car No. R.J.14-T1411)

8. National Insurance Company Ltd. Through Regional Manager Regional office Near Ambedkar Circle LIC Building Jaipur.

Respondents/Non-Claimants

For Appellant(s) : Ms. Archana Mantri For Respondent(s) : Mr. Dinesh Kala, for respondent no.8 Mr. Dharmendra Gurjar, for Mr. Raunak Dixit, for respondents/claimants Mr. Govind Gupta, for respondent no.

HON'BLE MR. JUSTICE MAHENDAR KUMAR GOYAL Order

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21/01/2021

This appeal is preferred against the judgment dated

03.03.2016 passed by learned MACT no.1, Jaipur Metropolitan,

Jaipur in claim petition no. 459/2001 whereby, partly allowing the

claim petition filed by the respondents-claimants, a compensation

of Rs.20,74,680 has been awarded to the claimants on account of

death of Shri Maharaj Krishna Fothedar.

Learned counsel for the appellant, assailing the findings of

the learned Tribunal vide Issue no.4, relying on the judgments of

the Hon'ble Apex Court of India in case of National Insurance

Company Limited vs. Indira Srivastava and Ors.- 2008(1)

T.A.C. 424(S.C.) and Vimal Kanwar & Ors. vs. Kishore Dan

& Ors.- 2013 R.A.R. 118 (SC) contended that the learned

Tribunal has erred in not deducting the income tax on the

compensation payable to the claimants. She submitted that in

spite of deduction of income tax from source as the deceased was

salaried person, the law mandates further deduction of income tax

on the total amount of compensation also.

Learned counsel appearing for the respondents-claimants,

supporting the findings reported by the learned Tribunal,

submitted that law does not stipulate deduction of income tax

twice; once at the stage of payment of salary i.e. deduction at

source in terms of Section 192(1) of the Income Tax Act, 1961

and again on the amount of compensation. He, therefore, prayed

that the appeal be dismissed.

Heard the learned counsels for the parties and perused the

record.

It is well established principle of law that while awarding

compensation, amount of income tax, if payable, has to be

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deducted while assessing the loss of dependency. The Hon'ble

Apex Court of India in case of Vimal Kanwar & Ors. (Supra) has

held as under:-

"21. The third issue is "whether the income tax is liable to be deducted for determination of compensation under the Motor Vehicles Act".

In the case of Sarla Verma & Anr.

(Supra), this Court held "generally the actual income of the deceased less income tax should be the starting point for calculating the compensation."

This Court further observed that "where the annual income is in taxable range, the word "actual salary" should be read as "actual salary less tax". Therefore, it is clear that if the annual income comes within the taxable range income tax is required to be deducted for determination of the actual salary. But while deducting income-tax from salary, it is necessary to notice the nature of the income of the victim. If the victim is receiving income chargeable under the head "salaries" one should keep in mind that under Section 192(1) of the Income-tax Act, 1961 any person responsible for paying any income chargeable under the head "salaries" shall at the time of payment, deduct income-tax on estimated income of the employee from "salaries" for that financial year. Such deduction is commonly known as tax deducted at source ("TDS" for short). When the employer fails in default to deduct the TDS from employee salary, as it is his duty to deduct the TDS, then the penalty for non-deduction of TDS is

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prescribed under Section 201(1A) of the Income-tax Act, 1961.

Therefore, in case the income of the victim is only from "salary", the presumption would be that the employer under Section 192(1) of the Income-tax Act, 1961 has deducted the tax at source from the employee's salary. In case if an objection is raised by any party, the objector is required to prove by producing evidence such as LPC to suggest that the employer failed to deduct the TDS from the salary of the employee.

However, there can be cases where the victim is not a salaried person i.e. his income is from sources other than salary, and the annual income falls within taxable range, in such cases, if any objection as to deduction of tax is made by a party then the claimant is required to prove that the victim has already paid income tax and no further tax has to be deducted from the income.

22. In the present case, none of the respondents brought to the notice of the Court that the income-tax payable by the deceased Sajjan Singh was not deducted at source by the employer- State Government. No such statement was made by Ram Avtar Parikh, PW-2 an employee of Public Works Department of the State Government who placed on record the Last Pay Certificate and the Service Book of the deceased. The Tribunal or the High Court on perusal of the Last Pay Certificate, have not noticed that the income- tax on the estimated income of the employees was not deducted from the salary of the employee during the said month or Financial Year. In absence of such evidence, it is

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presumed that the salary paid to the deceased Sajjan Singh as per Last Pay Certificate was paid in accordance with law i.e. by deducting the income-tax on the estimated income of the deceased Sajjan Singh for that month or the Financial Year. The appellants have specifically stated that Assessment Year applicable in the instant case is 1997-98 and not 1996-97 as held by the High Court. They have also taken specific plea that for the Assessment Year 1997-98 the rate of tax on income more than 40,000/- and upto Rs.60,000/- was 15% and not 20% as held by the High Court. The aforesaid fact has not been disputed by the respondents.

23. In view of the finding as recorded above and the provisions of the Income-tax Act, 1961, as discussed, we hold that the High Court was wrong in deducting 20% from the salary of the deceased towards income-tax, for calculating the compensation. As per law, the presumption will be that employer-State Government at the time of payment of salary deducted income-tax on the estimated income of the deceased employee from the salary and in absence of any evidence, we hold that the salary as shown in the Last Pay Certificate at Rs.8,920/- should be accepted which if rounded off comes to Rs.9,000/- for calculating the compensation payable to the dependent(s)."

In the present case, the learned counsel for the appellant did

not dispute that there was no evidence on record to show that no

income tax was deducted at source while paying salary to the

deceased; but, her contention was that the amount of income tax

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was required to be deducted again from the total amount of

compensation payable. This is wholly misconceived plea inasmuch

as once the income tax is deducted at source while making

payment of the salary to the deceased employee, no law requires

deduction of the income tax again on the amount of

compensation.

In these circumstances the appeal is devoid of merit and is