Oriental Insurance Co. Ltd. vs G.S. Diwakar and Others

Samudrala Govindarajulu, J.—The respondents-claimants filed E.P. in the lower Court for recovery of balance amount of Rs. 19,618/- from the insurance company which amount was said to have been not deposited in pursuance of the Award passed by the lower Tribunal. According to the revision petitioner, the said balance amount was remitted by the insurance company to the Income Tax Department in pursuance of Section 194A(3)(ix) of the Income Tax Act, 1961 (in short ''the Act''). The relevant portion of the said provision reads as follows: Interest other than "Interest on securities".

194A(3)(ix):

to such income credited or paid by way of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid during the financial year does not exceed fifty thousand rupees.

It is contended by the respondents'' Counsel placing reliance on Mrs. Gauri Deepak Patel and Others Vs. New India Assurance Co. Ltd. and Another, of the Bombay High Court and Smt. Hansaguri Prafulchandra Ladhani and Others Vs. The Oriental Insurance Company Ltd. and Others, of the Gujarat High Court that the interest accrued for that financial year should exceed Rs. 50,000/- in order to apply Section 194A of the Act. It is further contended that interest awarded by the Motor Accidents Claims Tribunal is only 7.5% per annum and that if interest is calculated for each person separately for each year, then interest payable for each claimant in each financial year will not exceed Rs. 50,000/- and that therefore income tax is not deductible at source in this case. On the other hand, the revision petitioner''s Counsel placed reliance on decision of Single Judge of this Court in The New India Assurance Company Limited, Srikakulam v. Savara Paramma, CRP No. 4809 of 2009, dated 22.2.2010 and contended that the amount of interest paid to the claimant has to be spread over during the period for which the interest paid was accrued. This Court observed: as rightly held by the Gujarat and Madras High Courts, income tax payable by each of the claimants would arise only on the interest from compensation having accrued year after year from the date of filing of the claim application till the date of deposit it is for the claimants to approach the concerned Income Tax Authority and request that the income be spread over the period for which payment of interest came to be made. So that the income for the purpose of assessing tax for the relevant assessment year could be computed. The Court below has exceeded its jurisdiction in'' directing the petitioner to deposit the TDS amount deducted from the compensation payable to the respondents-claimants.

Total amount of interest on the compensation amount of Rs. 4,87,000/- came to Rs. 1,45,349/-. The entire amount was deposited by the insurance company deducting Rs. 19,618/- towards TDS paid by the Insurance Company to Income Tax Department on the compensation amount. In case the claimants are interested in spreading over the interest during several financial years, it is for them to make claim petition before the Income Tax Assessing Authority and claim the same and consequently obtain refund of income tax deducted at source. Therefore, when once the insurance company has deducted and remitted the amount to Income Tax Department, the insurance company is once again not liable to remit the said amount in execution proceedings. The revision petitioner gave income tax deduction certificate to the above effect. No doubt, the revision petitioner company should not have deducted and remitted TDS on total interest amount of all J. Drs. put together, but should have divided interest relating to each of the D. Hrs. and should have remitted TDS only in respect of interest payable to that J. Dr. whose amount exceeded Rs. 50,000/-. It is stated that there is no provision under the Act to claim refund by the garnishee who remitted the amount as TDS amount in case the garnishee had wrongly remitted the said amount. Therefore, remedy of the respondents lies before the Income Tax Assessing Authority and not before the executing Court. The lower Court in the circumstances committed error in directing the insurance company to remit TDS amount once against into Court and erred in entrusting warrant of attachment for the said amount to the bailiff for execution against the revision petitioner company. In the result, the civil revision petition is allowed setting aside order passed by the lower Court together with warrant entrusted to the bailiff in this regard.