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2021 Supreme(Raj) 275
IN THE HIGH COURT OF RAJASTHAN AT JAIPUR BENCH
Mahendar Kumar Goyal, J.
United India Insurance Company Limited & Ors. - Appellants
Versus
Smt Lalita Fothedar & Ors. - Respondents
S.B. Civil Miscellaneous Appeal No. 2363/2016
Decided on : 21-01-2021
Ms. Archana Mantri, for the Appellant; Mr. Dinesh Kala, Mr. Dharmendra Gurjar, Mr. Raunak Dixit, Mr. Govind Gupta, for the Respondent.
Income tax is not required to be deducted twice, once at the stage of payment of salary and again on the amount of compensation.
Headnote:
INCOME TAX - DEDUCTION - MOTOR VEHICLES ACT - Section 192(1) - Income tax is not required to be deducted twice, once at the stage of payment of salary and again on the amount of compensation.
Fact of the Case:
The appellant challenged the decision of the MACT in awarding compensation to the claimants without deducting income tax on the compensation amount. The appellant argued that income tax should be deducted twice, once at the source and again on the total compensation amount.
Finding of the Court:
The court held that income tax is not required to be deducted twice. Once income tax is deducted at source while paying salary to the deceased employee, no law requires deduction of income tax again on the amount of compensation.
Issues: Whether income tax should be deducted twice, once at the stage of payment of salary and again on the amount of compensation.
Ratio Decidendi: The court relied on the judgment of the Supreme Court in Vimal Kanwar & Ors. vs. Kishore Dan & Ors. (2013 R.A.R. 118 (SC)), which held that if the annual income of the deceased comes within the taxable range, income tax is required to be deducted for determination of the actual salary. However, if the income tax is already deducted at source while paying salary, no further deduction is required from the compensation amount.
Final Decision: The court dismissed the appeal, holding that the MACT was correct in not deducting income tax on the compensation amount.
JUDGMENT
1. This appeal is preferred against the judgment dated 03.03.2016 passed by learned MACT no.1, Jaipur Metropolitan, Jaipur in claim petition no. 459/2001 whereby, partly allowing the claim petition filed by the respondents-claimants, a compensation of Rs.20,74,680 has been awarded to the claimants on account of death of Shri Maharaj Krishna Fothedar.
2. Learned counsel for the appellant, assailing the findings of the learned Tribunal vide Issue no.4, relying on the judgments of the Hon'ble Apex Court of India in case of National Insurance Company Limited vs. Indira Srivastava and Ors.- 2008(1) T.A.C. 424(S.C.) and Vimal Kanwar & Ors. vs. Kishore Dan & Ors.- 2013 R.A.R. 118 (SC) contended that the learned Tribunal has erred in not deducting the income tax on the compensation payable to the claimants. She submitted that in spite of deduction of income tax from source as the deceased was salaried person, the law mandates further deduction of income tax on the total amount of compensation also.
3. Learned counsel appearing for the respondents-claimants, supporting the findings reported by the learned Tribunal, submitted that law does not stipulate deduction of income tax twice; once at the stage of payment of salary i.e. deduction at source in terms of Section 192(1) of the Income Tax Act, 1961 and again on the amount of compensation. He, therefore, prayed that the appeal be dismissed.
4. Heard the learned counsels for the parties and perused the record.
5. It is well established principle of law that while awarding compensation, amount of income tax, if payable, has to be deducted while assessing the loss of dependency. The Hon'ble Apex Court of India in case of Vimal Kanwar & Ors. (Supra) has held as under:-
"21. The third issue is "whether the income tax is liable to be deducted for determination of compensation under the Motor Vehicles Act".
In the case of Sarla Verma & Anr. (Supra), this Court held "generally the actual income of the deceased less income tax should be the starting point for calculating the compensation."
This Court further observed that "where the annual income is in taxable range, the word "actual salary" should be read as "actual salary less tax". Therefore, it is clear that if the annual income comes within the taxable range income tax is required to be deducted for determination of the actual salary. But while deducting income-tax from salary, it is necessary to notice the nature of the income of the victim. If the victim is receiving income chargeable under the head "salaries" one should keep in mind that under Section 192(1) of the Income-tax Act, 1961 any person responsible for paying any income chargeable under the head "salaries" shall at the time of payment, deduct income-tax on estimated income of the employee from "salaries" for that financial year. Such deduction is commonly known as tax deducted at source ("TDS" for short). When the employer fails in default to deduct the TDS from employee salary, as it is his duty to deduct the TDS, then the penalty for non-deduction of TDS is prescribed under Section 201(1 A) of the Income-tax Act, 1961.
Therefore, in case the income of the victim is only from "salary" the presumption would be that the employer under Section 192(1) of the Income-tax Act, 1961 has deducted the tax at source from the employee's salary. In case if an objection is raised by any party, the objector is required to prove by producing evidence such as LPC to suggest that the employer failed to deduct the TDS from the salary of the employee.
However, there can be cases where the victim is not a salaried person i.e. his income is from sources other than salary, and the annual income falls within taxable range, in such cases, if any objection as to deduction of tax is made by a party then the claimant is required to prove that the victim has already paid income tax and no further tax has to be deducted from the income.
22. In the present case, none of the respondents brought to the notice
