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ARUN R. PEDNEKER
Balkrishna – Appellant
Versus
State of Maharashtra – Respondent
JUDGMENT/ORDER
1. The Petitioner is challenging deduction of the TDS on interest component of compensation awarded under the Motor Vehicles Act.
2. Heard Mrs. M. A. Kulkarni, learned counsel for the Petitioner and Mr. P. G. Godhamgaonkar holding for Mr. S. V. Kulkarni, learned counsel for Respondent No.4 / Insurance Company.
3. Rule. Rule made returnable forthwith. With consent of parties heard finally.
4. The brief facts can be summarized as under:-
<WXY>The Petitioner was serving in the Police Station as a Police Constable. He met with an accident at the age of 35 and sustained 100% disability. His claim before the Motor Accident Claims Tribunal, Ahmednagar was allowed and on an Appeal filed by the Petitioner, the same was enhanced. The High Court has enhanced compensation to Rs.22,51,375.00 from 6,31,500/- hence total enhanced payable amount is Rs.16,19,875.00 with interest @9% from 01/08/2000 to 18/07/2018. Following chart produced by the Insurance Company indicated the payment made to the Petitioner:-</WXY>
5. Mrs. M. A. Kulkarni, learned counsel for the Petitioner submits that the TDS deducted on the interest component of the claim amount is unlawful.
6. Mr. P. G. Godhamgaonkar hol
TDS cannot be deducted on interest awarded in motor accident claims prior to the High Court's judgment, as such interest is not classified as income under the Income Tax Act.
Compensation and interest awarded by MACT do not constitute 'income' as defined in the Income Tax Act, hence are not liable for TDS.
Interest on compensation awarded by the Motor Accidents Claims Tribunal is taxable under the Income Tax Act, and TDS applies when interest exceeds Rs.50,000.
The judgment clarified the calculation of compensation under the Motor Vehicles Act, emphasizing the inclusion of future prospects and the correct application of TDS provisions.
Interest awarded as compensation under MV Act is deemed a capital receipt, not taxable under the Income Tax Act, thus refund of incorrectly deducted tax is warranted.
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