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AMIT RAWAL
Ayisha w/o. Late Ahammed – Appellant
Versus
New India Assurance Company Ltd – Respondent
JUDGMENT
[WP(C) Nos.8280/2013, 17283/2021]
This order of mine shall dispose of two writ petitions W.P. (C).No.8280 of 2013 titled as Ayisha v. The New India Assurance Company Limited and Others (first writ petition) and W.P.(C).No.17283 of 2021 titled as Sajitha and Others v. The manager, United India Insurance Co.Ltd. And Others (second writ petition) where the question involved is whether the income tax deducted on the interest received on the award is permissible or not.
2. In the first writ petition, petitioner, the widow of one Ahammed, who unfortunately died in a road accident, preferred O.P.(MV)No.2402/2006 before the Motor Accidents Claims Tribunal, Thrissur along with daughter and son. On the basis of evidence on record, learned MACT vide award dated 10.01.2013 assessed the compensation of Rs.3,01,000/- with interest @ 8% from the date of petition till date of realization. Insurance Company accepted the amount but later on received a letter from the Senior Divisional Manager that the award of the Tribunal carrying interest is more than Rs.50,000/- and until and unless the details of the PAN card are not furnished, the tax will be deducted at source at the rate of 20% instead
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.
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.
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.
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.
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