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IN THE HIGH COURT OF KARNATAKA
S. ABDUL NAZEER, J.
ORIENTAL INSURANCE CO. LTD. - Appellant
Versus
CHENNABASAVAIAH AND OTHERS - Respondent
Writ Petition No. 49878 of 2012 (GM-AC)
Decided on : 18-02-2015
TDS - Insurance Company - Exemption from Payment of Tax on Interest Component
Fact of the Case:
The Insurance Company deducted TDS on the interest component exceeding Rs. 50,000, leading to a dispute with the claimants seeking exemption from tax payment.
Finding of the Court:
The court found that the Insurance Company was justified in deducting TDS on the entire interest component as per Section 194-A(3)(ix) of the Income Tax Act, 1961. The claimants were directed to claim refund of the deducted amount before the competent authority.
Issues: Dispute over TDS deduction on interest component exceeding Rs. 50,000 and claimants' contention for exemption from tax payment.
Ratio Decidendi: The statutory obligation of the Insurance Company to deduct TDS from the entire interest component and the claimants' responsibility to claim refund before the competent authority.
Final Decision: The court allowed the writ petition and quashed the order directing the Insurance Company to deposit the deducted TDS amount, emphasizing the claimants' obligation to claim refund before the competent authority.
S. ABDUL NAZEER, J.
1. The respondents are the claimants in MVC No. 224/2003 on the file of the Civil Judge (Sr.Dn.) and Addl. MACT, Madikeri. The claim petition was allowed granting compensation of Rs. 4,82,000/-. On an appeal filed by the petitioner-Insurance Company, the compensation amount was reduced to Rs. 3,90,000/-. The petitioner-Insurance Company deposited the aforesaid amount with interest in a sum of Rs. 1,42,802/- after deducting TDS on the interest component in a sum of Rs. 28,560/-. This amount was deposited by the petitioner-Insurance Company with the Income Tax authorities and a certificate has been issued to that effect to the claimants. The respondent/claimants have filed Ex. Case No. 80/2008 against the petitioner/Insurance Company for execution of the judgment and award in MVC No. 224/2003 dated 5.9.2008. The contention of the respondent/claimants is that exemption from payment of tax is available on interest component up-to a sum of Rs. 50,000/-. Therefore, petitioner-Insurance Company should not have deducted TDS on the entire interest amount. Deduction of TDS on tax component of Rs. 50,000/- is unauthorized. Accepting this contention, the court below by order dated 15.9.2012 has directed the petitioner- Insurance Company to deposit an amount of Rs. 10,000/-, which was deducted towards TDS on Rs. 50,000/-.
2. Having heard the learned Counsel for the petitioner- Insurance Company, I am of the view that the court below was not justified in directing the petitioner-Insurance Company to deposit a sum of Rs. 10,000/- deducted by it towards TDS. Section 194-A(3)(ix) of the Income Tax Act, 1961 grants exemption from payment of tax on the interest component up-to a sum of Rs. 50,000/-. This exemption has to be claimed by the respondent/claimants by filing necessary returns before the assessing authority. It is the statutory obligation of the petitioner-Insurance Company to deduct the TDS from the entire interest component and deposit the same before the competent authority, which has been done in this case. A certificate to that effect has been issued to the respondent/claimants. The respondent/claimants have to make a claim for refund of the aforesaid amount before the competent authority. With these observations, writ petition is allowed. The order dated 15.9.2012 in Ex. Case No. 80/2008 passed by the court below is hereby quashed.
No costs.
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