IMPORTANT POINT
Income tax held deductible on the interest amount which was paid to complainants on the compensation.

ORDER (ORAL)

V.K. Jain, Presiding Member.—A consumer complaint was instituted by respondent Nos.1, 2 & 3 against several entities, including the appellant company. The consumer complaint was allowed by the State Commission by directing payment of compensation quantified at Rs.10 lakhs to the complainants. Cross appeals against the order of the State Commission were preferred before this Commission and were disposed of vide order dated 28.9.2012. This Commission directed payment of compensation amounting to Rs.12,80,000/- to the complainants, out of which Rs.10 lakhs were to be paid by the insurer. In compliance of the order passed by this Commission, the appellant deposited a sum of Rs.7,80,000/- with the State Commission alongwith interest amounting to Rs.722964/- thereby making a total sum of Rs.1502964/-. A sum of Rs.144593/- was deducted by the appellant towards income tax at source on the interest component of Rs.722964/-. The case of the complainant is that no income tax could have been deducted on the interest paid to them whereas the case of the insurer is that income tax was rightly deducted in view of the legal requirement of Section 194A of the Income Tax Act.

2. The State Commission having held in favour of the complainants, the insurer is before this Commission. Thus, the only dispute involved in this appeal is whether the interest could have been deducted on the amount of Rs.722964/- paid by way of interest and if so, what should have been the rate of income tax to be deducted at source.

3. As noted earlier, the amount deposited by the appellant with the State Commission had two components. One component would be the principal amount awarded to the complainants and the other component was the interest on the compensation. Though the income tax may not be deductible at source from the compensation, the compensation not being an income it was, in my opinion, certainly deductible on the interest which was paid to the complainants on the compensation awarded by this Commission. This is not the case where income tax had been deducted on the compensation paid to the complainants. Here, the income tax has been deducted only on the interest which this Commission had awarded on the compensation amount.

4. Coming to the rate at which income tax could be deducted, the relevant provision required deduction of income tax at source @ 20% p.a in case PAN Card was not provided by the payee of the interest. The income tax at source was deductible @ 10% p.a. where PAN Card was provided by the payee to the deductor. There is no evidence of the appellant bank having asked the complainants to submit their PAN Card. Admittedly, the complainants did possess the PAN Card which was filed before the District Forum. Had the appellant company required the complainants to submit a copy of the PAN Card, there is no reason why they would not have provided the same to the appellant company. Therefore, the appellant, in my opinion, was not justified in deducting income tax at source @ 20% p.a. and the same ought to have been deducted only @ 10% p.a.

5. The appellant having deducted excess income tax, it is liable to pay that amount to the complainants though it would be at liberty to claim refund of the amount from Income Tax Department if it is otherwise entitled to such a refund. Therefore, the appeal is disposed of by directing the appellant company to refund amount of Rs.72,296.50/- (50% of Rs.144593/-) to the complainants within eight weeks from today failing which, the said amount shall carry interest @ 9% p.a. from the date of this order. The appeal stands disposed of accordingly.

Appeal disposed of.