The Supreme Court has dismissed the Public Interest Litigation (PIL) challenging Tax Deducted on Source (TDS) on the interest payable under an award of the Motor Accident Claims Tribunal.
The petitioner, Amit Sahani has sought to challenge the validity of Section 194A(3)(ixa) of the Income Tax Act 1961 under which tax is deducted at source on the interest payable under an award of the Motor Accident Claims Tribunal.
The petitioner had filed a writ petition initially before the High Court of Delhi which was disposed of by granting him liberty to move the Central Board of Direct Taxes in a representation. The fresh writ petition challenging the decision of the CBDT was dismissed both on the grounds of locus and delay with liberty to file a public interest litigation.
“The compensation awarded by MACT established under Motor Vehicle Act, 1988 is meant to substitute the loss of potential income of the victim, and in most cases is in fact determined as a multiple of the victim’s income. Under tax laws, it is well settled that if a receipt is meant to substitute a source of income, it is a capital receipt. Capital receipts are generally not taxable as income unless they are specifically roped in into the definition of income as such compensations are not specifically included, they are therefore not taxable. The receipts of compensations are not taxable as income unless they are specifically roped in into the definition of income as such compensations are not specifically included, they are therefore not taxable,” the petitioner contended.
The division bench of Justice D.Y.Chandrachud and Justice A.S.Bopanna said, “the petitioner is not personally aggrieved by the award of the MACT. A challenge of this nature would have to be brought before the Court by a person aggrieved. We see no reason to entertain a petition which is styled one filed in public interest. In the circumstances, this Court is not expressing any opinion on the question of law raised. The petition is dismissed on the grounds which are set out above.”
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