No Income Tax Liability on Compensation Awarded by MACT: Kerala HC directs to Refund TDS Deducted [Read Order]

The Kerala High Court directed to refund Tax Deducted at Source (TDS) which was deducted and deposited by the Insurance Company from the compensation paid to the petitioners as no Income Tax liability arose on compensation awarded by the Motor Accidents Claims Tribunal (MACT).

Malini, Abhin and, Amrutha, the petitioners filed the writ petition for a direction to the 1st respondent to refund Rs. 5,67,939/- (Rupees Five lakh sixty-seven thousand nine hundred and thirty-nine only) being the total TDS amount deducted from the amount of compensation awarded to the three petitioners by the MACT, Perumbavoor vide the award dated 31.08.2017 passed in O.P.(MV) No.392 of 2014.

The petitioners are not the assessees under the provisions of the Income Tax Act.  They don’t even possess PAN cards.  The 3rd respondent Insurance Company, while paying compensation to the petitioners, had deducted the TDS amount of Rs.1,89,313/- (Rupees One lakh eighty-nine thousand three hundred and thirteen only) from each of the three petitioners.

The petitioners stated that the petitioners are not liable to file a return of income as they are not the assessees under the provisions of the Income Tax Act.  It is not in dispute that no amount of income tax is payable on the compensation awarded by the Motor Accidents Claims Tribunal.

TDS is nothing but an advance tax on the income of the assessees. It is deducted at source by the persons making payment to an assessee.  When no income tax is payable and the petitioners are not assessees, there is no question of them filing the returns on their income.

Mr. Christopher Abraham, Counsel for the 1st respondent that unless the petitioners file a return of their income, their application for return of the TDS amount cannot be processed.  When the petitioners are neither assessees nor have an income for which the return can be filed, the refund of the TDS  amount deducted and deposited by the Insurance Company on the compensation awarded by the MACT has to be processed on a simple application by the petitioners.

A single-judge bench comprising Justice Dinesh Kumar Singh granted liberty to the petitioners to apply to the 1st respondent within ten days from today and the 1st respondent Commissioner of Income Tax (TDS), Kerala shall process the said application and refund the TDS amount deducted and deposited by the Insurance Company from the compensation paid to the petitioners.  Such refund should be processed within one month after applying by the petitioners.

To Read the full text of the Order CLICK HERE

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