IMPORTANT POINT
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.

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 holding for Mr. S. V. Kulkarni, learned counsel for Respondent No.4 / Insurance Company, submits that it is permissible to deduct TDS on the interest component, as the same is permitted under Sec. 194A of the Income Tax Act, 1961 and since no exemption is permitted from TDS, it is to be deducted.

7. This issue has been considered by the Division Bench of this Court in the case of Rupesh Rashmikant Shah Vs. Union of India and others, Writ Petition No.2902 of 2016, dtd. 8/8/2019, the Division Bench has held at Paragraph Nos.56 and 57 as under:-

<WXY>"56. The issue can be looked from a slightly different angle. In the context of interest, there are three crucial dates. The date of the accident is a date in reference to which the entire compensation is calculated. The date of filing of the claim petition is the date from which the claimant can seek interest on the compensation awarded by the Claims Tribunal. Under Sec. 170 of the Motor Vehicles Act, the interest cannot be awarded for a period prior to filing of the Claim Petition. The date of passing of the award by Claims Tribunal is the date on which the compensation is determined and the right to receive interest pendente lite ceases. The interest for the period between the filing of the claim petition and passing of the award thus, is for the period when the claimant for the first time approached the Claims Tribunal asking the Tribunal to assess and award compensation and the time consumed in disposing of the Claim Petition. We may also recall, the interest can be awarded even though part of the compensation would comprise of future loss of income. This is so because, the multiplier method factors this aspect also. At the same time, as noted, the Courts do not award interest on future expenditure since the amount is being paid to the claimant for an expenditure which may be incurred at a later point of time. This dichotomy, thus, between awarding interest on future income while not awarding interest for future expenditure brings out the true character of the interest being awarded.

57. We, therefore, hold that the interest awarded in the motor accident claim cases from the date of the Claim Petition till the passing of the award or in case of Appeal, till the judgment of the High Court in such Appeal, would not be exigible to tax, not being an income. This position would not change on account of clause(b) of Sec. 145A of the Act as it stood at the relevant time amended by Finance Act, 2009 which provision now finds place in sub-sec. (1) of Sec. 145B of the Act. Neither clause (b) of Sec. 145A, as it stood at the relevant time, nor clause (viii) of sub-sec. (2) of Sec. 56 of the Act make the interest chargeable to tax whether such interest is income of the recipient or not. Sec. 194A of the Act is only a