Lekhuram Thakur v. Sandip Bangare

Mr. Sunil Sahu, Advocate along with Mr. Sumit Shrivastava, Advocats Mr. Sudhir Agrawal, Advocate Hon'ble Shri Justice Rakesh Mohan Pandey Order on Board

08.08.2023 Heard. 1) The petitioners have challenged the impugned order dated

26.02.2020 passed in Civil Execution Case No.94/2018, whereby, learned Motor Accident Claims Tribunal, Balodabazar, District- Balodabazar-Bhatapara (C.G.) has closed the execution proceedings after recording its satisfaction. -2- 2) The petitioners/claimants filed a Claim Case under Section 166 of the Motor Vehicles Act on account of the death of the son of the claimants, who died in a road accident on 26.12.2014. 3) Learned Motor Accident Claims Tribunal vide award dated

23.02.2018 passed an award of Rs. 37,44,024/- with interest @ 7% per annum from the date of application till its realization. 4) The Insurance Company deposited the entire amount along with interest on 06.03.2019 before the learned Claimants Tribunal and a calculation chart was also submitted. Thereafter, the petitioners moved an application for payment of the balance amount as according to them, the interest part was not paid properly. That application was replied to by the Insurance Company where it was stated that the award amount with interest has been deposited on 06.03.2019 @ 7% per annum. The interest part would be Rs.9,44,140/-. It is further stated by the Insurance Company that 20% TDS which comes to Rs.1,88,828/- has been deducted. 5) Learned Claims Tribunal vide order dated 20.6.2020 held that the Insurance Company has deposited the amount of compensation along with interest after deducting the TDS and there is no infirmity in the assessment and thus award has been satisfied. 6) Learned counsel for the petitioners would submit that the amount of the TDS i.e. Rs.1,88,828/- cannot be deducted from the amount of compensation. He would submit that the High Court of Judicature at Bombay and the various other High Courts have held that the amount of compensation is not taxable. 3 7) On the other hand, learned counsel for the Insurance Company would submit that the learned Tribunal has passed a well-reasoned order. He would further submit that the amount of TDS has been deducted according to the provisions of Section 145B of the Income Tax Act, 1961 (for short ‘the Income Tax Act’). He would submit that a Circular has been issued by the Income Tax Department where it is clearly stated that interest on compensation awarded by the Motor Accident Claims Tribunal, tax is to be deducted at the time of payment (TDS applies only if interest exceeds Rs.50,000/-). He would also submit that in the present case, the amount of interest exceeds Rs.50,000/- and there are only two claimants, therefore, 20% TDS amount on interest part has been deducted. 8) I have heard learned counsel for the parties and perused the documents. 9) An award of Rs. 37,44,024/- was passed by the learned Motor Accident Claims Tribunal in favour of the petitioners/claimants along with interest @ 7% per annum. The Insurance Company in compliance of the award passed by the learned Claims Tribunal deposited the entire amount of compensation along with the interest part through a cheque dated 08.03.2019 vide Annexure R/2 and paid a total amount of Rs. 45,40,386/-. The claimants got interest part Rs. 9,44,140.46 and the Insurance Company deducted 20% TDS i.e. Rs.1,88,828/-. 10) Section 145B of the Income Tax Act reads as under : “145B. Taxability of certain income- (1) Notwithstanding anything to the contrary contained in Section 145, the interest received by an assessee on any compensation or on enhanced compensation, as the case may be, shall be -4- deemed to be the income of the previous year in which it is received. (2) Any claim for escalation of price in a contract or export incentives shall be deemed to be the income of the previous year in which reasonable certainty of its realisation is achieved. (3) The income referred to in sub-clause (xviii) of clause (24) of Section 2 shall be deemed to be the income of the previous year in which it is received, if not charged to income-tax in any earlier previous year.” 11) From a bare reading of Section 145B of the Income Tax Act, it is manifest that the interest received by a person on compensation shall be deemed to be income of the previous year. It has been clarified by the Income Tax Department that in case of interest on compensation awarded by the Motor Accident Claims Tribunal, tax is to be deducted at the time of payment (TDS applies only if interest exceeds Rs.50,000/-) 12) In the present case, from the provisions of Section 145B of the Income Tax Act and clarification thereof, it is crystal clear that the interest received by the petitioners on compensation shall be taxable. This Court in the matter of The Oriental Insurance Co. Ltd. Vs. Smt. Bhagmati Bai and others in WP227 No.1058 of 2015 decided on

16.02.2023 while dealing with a similar issue in paras 9 & 10 relying on earlier judgments passed by the Co-ordinate Bench of this Court held as under : “9. In the present case, there are 5 claimants and the amount of interest will be divided between all the claimants, and no one would get interest amount exceeding Rs. 50,000/-. In the case of Ramesh Kumar Tamrakar (supra), there was only one claimant, therefore, this Court came to 5 conclusion that the amount of TDS has rightly been deducted, whereas, in the matter of Smt. Pramila (supra), this Court has held that the insurance company first ought to have bifurcated the entire amount awarded to the claimants and thereafter, taking into consideration the individual amount, its interest has to be calculated and if it is more than Rs. 50,000/- payable to each of the claimants, only then the income tax could have been deducted.

10. In the present case, interest component of Rs. 1,51,191/- has been assessed, but the insurance company without bifurcating the interest part between the claimants, directly deducted 20 % TDS, whereas each of the claimants would get interest part less than Rs. 50,000/-, therefore, the learned Commissioner has not committed any illegality in allowing the application moved by the claimants. Consequently, I do not find any merit in the present case, accordingly, same is dismissed.” 13) Taking into consideration the facts of the present case and the law enunciated by this Court, I am of the opinion that learned Claims Tribunal has not committed any error of law in closing the execution proceedings. Consequently, this petition fails and is hereby dismissed. No cost(s). Rekha Sd/- (Rakesh Mohan Pandey) Judge