The Income Tax Appellate Tribunal (ITAT), Jaipur has directed the Assessing Officer to wait till the Supreme Court pronounce a judgment in Sharda Pareek v. Assistant Commissioner of Income Tax & another, where the question of taxability of interest on Compensation under the Motor Vehicle Act is pending before the Court.
The return filed by the assessee was rejected by the Assessing Officer who completed the assessment u/s 143(3) wherein the interest income received from the insurance company on MACT claim amounting to Rs. 13,80,216/- was brought to tax by the Assessing Officer thereby assessing the income at Rs. 15,19,186/-.
The assessee claimed that the payment of interest received by the assessee cannot be taxed pending finalization of the dispute regarding accident insurance compensation on which the said interest was granted. However, the Officer rejected the contention on the ground that the said interest income has already been credited in favour of the assessee and TDS has been deducted.
On appeal, the CIT(A) deleted the addition by referring the decision of the Co-ordinate Bench for AY 2006-07 held that the interest received on account of delay in compensation is not taxable in this year and it will be taxed in the year in which it will reach finality.
Before the Tribunal, the assessee contended that the Hon’ble Supreme Court vide order dated 11-09-2017 was pleased to issue notices to the opposite party, Assistant Commissioner of Income Tax & Another and stayed the operation and effect of the impugned judgment dated 26.04.2017 passed by Hon’ble Rajasthan High Court.
In view of the above matter, the assessee contended that since an identical matter is pending before the Apex Court, the present Appeal is kept in abeyance till final adjudication by the Court in the said Special Leave to Appeal.
Accepting the above contentions of the assessee, the Tribunal held that “the question relating to taxability of interest on compensation awarded by the Motor Accident Claims Tribunal is identical to the question of law framed for adjudication before the Hon’ble Supreme Court in assessee’s own case. Therefore, we admit the claim of the assessee in terms of section 158A(3) of the Act. Given that the matter is currently pending adjudication before the Hon’ble Supreme Court, the Assessing officer is directed to apply the directions of the Hon’ble Supreme Court as soon as the same is pronounced in the present case. The matter is accordingly set-aside to the file of the AO with the above directions.”To Read the full text of the Order CLICK HERE