TDS cannot be deducted from interest payable under a decree since the decree must be executed as it stands without statutory deductions where the decree itself does not provide for any.

T.R. RAVI, J.

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O.P.(C)No.3359 of 2025 --------------------------------------------

Dated this the 19^th day of May, 2026

JUDGMENT

The question involved in this original petition is whether the petitioner/judgment debtor is liable to deduct TDS from the interest amount payable by them to a decree holder. The 2^nd Additional District Court, Ernakulam by Exhibit P11 order dated 10.11.2025 in EP No.202 of 2023 directed the petitioner to pay the amount deducted as TDS under Section 195 of the Income Tax Act, 1961 to the respondents/decree holders and the said order is challenged.

2. The dispute between the petitioner and the respondents was referred to an Arbitrator and the Arbitrator by award dated 16.07.2018 directed the petitioner to refund the amount paid by the respondents with interest at the rate of 9% per annum from 05.10.2010 to 30.4.2018 and thereafter future interest at the rate of 9% per annum on the principal amount till the date of realisation. The petitioner challenged the award in Arbitration Appeal No.8 of 2021 before this Court. By judgment dated 31.05.2021, the appeal was dismissed. The petitioners challenged the judgment of this Court in SLP Nos. 2085 - 2090 of 2023. The Hon'ble Supreme Court initially granted a stay regarding the interest component payable to the respondents, but later the Special Leave Petition was dismissed by judgment dated 02.04.2025. Thereafter, the petitioner submitted a calculation statement regarding the balance payable to the respondents after deducting the TDS. The respondents raised a dispute regarding the deduction of TDS from the interest amount payable. The amount as stated in the balance statement was directed to be deposited and the same has been deposited. The District Court heard the parties on the issue regarding the deduction of TDS and by the impugned order dated 10.11.2025 directed the petitioner to pay an amount of ₹62,06,006.50/- to the respondents, which had been deducted from the amount payable. Aggrieved by the said order, this original petition has been filed. Since a question relating to deduction of TDS had been raised, this Court had directed the petitioner to give a copy of the original petition to the Standing Counsel for the Income Tax Department.

3. Heard the counsel for the petitioner, the Standing Counsel for the Income Tax Department and the counsel for the respondents.

4. The counsel for the petitioner submitted that there is a statutory obligation to deduct TDS from the interest payable to an NRI and since the respondents are NRIs, necessarily such amounts have to be deducted, failing which the Income Tax Department is entitled to initiate action against the petitioner. The relevant provisions of the Income tax Act, were placed before the Court. The Standing Counsel for the Income Tax Department submitted that tax is leviable on the interest accrued. Reference was made to various decisions on the said aspect. The question that is involved is not regarding the tax payable on interest in the usual course. In the case on hand, the interest is part of a decree of a court and is hence a decretal amount which is being paid in execution proceedings initiated before the court. Hence the real question is whether the judgment debtor making the payment is liable to deduct TDS, on interest payable under a decree. The counsel for the respondents placed before me the judgment of a learned Single Judge of the High Court of Delhi in Voith Hydro Ltd. & Ors. v. NTPC Ltd. [2021 SCC OnLine Del. 1325] to submit that, TDS was not liable to be deducted on amounts payable under a decree. The Delhi High Court in the said judgment has relied on the judgment of the Hon'ble Supreme Court in A