The Rajasthan High Court has referred the issue of interest on compensation for motor accident claims exigible to tax, does the insurance companies are required to deduct TDS to Larger Bench.
The petitioner, Satya Narayan is the claimants of motor accident compensation. Their claim petition was allowed by the Motor Accident Claims Tribunal awarding compensation with interest. At the time of payment of such compensation the insurance company had deducted tax at source on the interest component.
The petitioners contend that the interest is not taxable and insurance companies ought not to have deducted tax at source thereon.
The division bench of Chief Justice Akil Kureshi and Justice Uma Shanker Vyas has observed that divergent views amongst different High Courts on the point. In writ petition No.2902/2016-Shri Rupesh Rashmikant Shah Vs. Union of India and Ors. decided on 08.08.2019, a Division Bench of Bombay High Court has dealt with this issue at length and come to the conclusion that interest on the compensation awarded for motor accident claim cases upto the date of award is not exigible to tax. Madras High Court in case of Cholamandalam General Insurance Co. Ltd Vs. M. Ashok Kumar and Ors. reported in 2020 (4) CTC 53 has referred the issue to the Larger Bench.
“In view of this position and also considering the importance of the issue as also the fact that the issue is a recurring one arising in large number of motor accident claim cases, it is desirable that there is an authoritative pronouncement on this question by Larger Bench,” the court said.
Under the circumstances reference may be made to the Larger Bench on question “Whether the interest payable on motor accident claim compensation is exigible to tax and resultantly is the insurance company required to deduct tax at source while making such payment to the claimants?”
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