In a major relief to those who are yet to receive long-pending insurance claims with interest, the Punjab and Haryana High Court has held that TDS cannot be deducted by the insurance companies on the interest on the compensation amount till 1.06.2015.
Justice Arvind Singh Sangwan was considering a revision petition by the New India Assurance Company challenging an order dated 23.4.2019 passed by the MACT, Kurukshetra, whereby the Insurance Company was directed to deposit the deducted amount of TDS of Rs.44,903/-.
The income tax department contended that the interest which has accrued on thecompensation awarded in terms of an award by the Motor Accidents Claims Tribunal is taxable.
The Court referred the judicial precedents and observed that the Insurance Company while depositing the interest exceeding Rs.50,000/- per claimant per year will file a calculation before the MACT as to how much TDS is to be deducted.
In view of the judgment in Janki’s case (supra) passed by the Single Bench of this Court, prior to the amendment of Clause IX and after insertion of Clause IX-A under Section 194(A)(3) of the Income Tax Act, 1961 w.e.f. 1.6.2015 no interest will be deductible at source even if the interest is beyond Rs.50,000/- in a particular year. Therefore, the Insurance Company has to pay the interest of compensation accrued to the claimants prior to 1.6.2015 even if the TDS is deposited with the Income Tax Authorities at that time and the claimants cannot be burdened with filing of return for seeking refund for any fault of the Insurance Company.
set aside the impugned orders and remanded back the cases to the concerned Motor Accident Claims Tribunal with a direction that if the interest on compensation is paid prior to 1.6.2015, then the Insurance Company will pay the amount of tax deducted at source to claimants and the Insurance Company may seek refund from the Income Tax Authorities by filing a revised income tax return.
“Where the interest on the compensation is actually paid after 1.6.2015, which is exceeding Rs.50,000/- per claimant per financial year, the Insurance Company will pay on securing the ‘Form 15-G’ of Rule 29-C of the Income Tax Act/Rules,” the Court said.
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