JAYASHREE SURENDRA BHOIR,URAN vs. INCOME TAX OFFICER, WARD 3, PANVEL

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “SMC”, PUNE BEFORE SHRI DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपील सं. / ITA No.66/PUN/2026 िनधा�रण वष� / Assessment Year : 2019-20 Jayashree Surendra Bhoir, Vs. ITO, Ward-3, Panvel. 465-B, Jaskhar, JNPT Uran, Raigad- 400707. PAN : BNTPB1883P Appellant Respondent Assessee by : Shri Sachin Bharat Maheshwari & Shri Gaurab Dinesh Shah : Shri Sandeep Sathe Revenue by Date of hearing : 08.04.2026 Date of pronouncement : 18.05.2026 आदेश / ORDER PER VINAY BHAMORE, JM: This appeal filed by the assessee is directed against the order dated 12.12.2025 passed by Ld. CIT(A)/NFAC for the assessment year 2019-20. 2. The appellant has raised the following grounds of appeal :- “1. The Hon'ble Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs. 19,18,633/-made by the Learned Assessing Officer by wrongly invoking the provisions of section 56(2)(viii) read with section 57(iv) and section 145A(b) of the

2 ITA No.66/PUN/2026 Income-tax Act, 1961, without appreciating the fact that the said amount represents interest awarded under section 171 of the Motor Vehicles Act, 1988, which is inextricably linked to compensation and therefore partakes the character of capital receipt, not chargeable to tax. The Hon'ble CIT(A) failed to appreciate that such interest is compensatory in nature and does not constitute income exigible to tax, and hence the addition sustained is bad in law, contrary to facts, and liable to be deleted. The entire issue is squarely covered in favour of the Appellant by the judgment of the Jurisdictional Hon'ble Bombay High Court in the case of Shri Rupesh Rashmikant Shah vs. Union of India & Others (Writ Petition No. 2902 of 2016). 2. The Appellant craves leave to add, amend, alter, substitute or withdraw any of the above grounds of appeal at or before the time of hearing, as may be deemed necessary.” 3. Facts of the case, in brief, are that the assessee is an individual and has not furnished her return of income for the year under consideration. On the basis of information that the assessee is in receipt of interest income of Rs.31,519/- and is also in receipt of Rs.38,05,747/- from ICICI Lombard General Insurance Co. Ltd., however has not shown the receipts in her return of income therefore, the Assessing Officer after following the procedure of section 148A(d) of the IT Act reopened the case u/s 147 of the IT act and issued notice dated 31.03.2023 u/s 148 of the IT Act to the assessee. The assessee furnished return of income on 13.02.2024 in response to the above notice by declaring an income of

3 ITA No.66/PUN/2026 Rs.2,54,830/-. Subsequently, the statutory notices u/s 143(2) and 142(1) and show cause notices respectively were issued to the assessee. The assessee in response submitted that her husband Surendra Gajanan Bhoir died in an accident on 01.06.2013 and the Motor Accident Claim Tribunal decided the case on 27.04.2018 and awarded her compensation of Rs.1,22,66,800/- along with interest of Rs.38,37,266/- on account of interest on compensation in the month of December, 2018. The assessee explained that the interest is also part of compensation and therefore not form part of taxable income hence not shown in the return of income. Not being satisfied with the reply of the assessee, the Assessing Officer added the above interest received on compensation as income from other sources u/s 56(2)(viii) of the IT Act in the hands of the assessee, however the Assessing Officer allowed deduction u/s 57(iv) of the IT Act at the rate of 50% of Rs.38,37,266/- which comes to Rs.19,18,633/- and accordingly the balance amount of Rs.19,18,633/- was added to the income of the assessee. Accordingly, vide order dated 29.03.2024 assessment order was passed u/s 147 r.w.s. 144 of the IT Act by determining income of the assessee at Rs.21,73,460/- as against the income of

4 ITA No.66/PUN/2026 Rs.2,54,830/- returned by the assessee. The above assessed income includes addition of Rs.19,18,633/- interest income received on compensation on the death of the husband of the assessee. 4. Being aggrieved with the above assessment order, the assessee preferred an appeal before Ld. CIT(A)/NFAC. After considering the reply and submissions of the assessee, Ld. CIT(A)/NFAC confirmed the order passed by the Assessing Officer and dismissed the appeal filed by the assessee by observing as under :- 6.2 The appellant relied on the judgment of the Hon'ble Bombay High Court in the case of Rupesh Rashmikant Shah v. Union of India, contending that interest awarded under section 171 for the period between filing of the claim petition and passing of the award is compensatory in nature and forms part of the compensation. However, the said decision was rendered in the context of assessment years prior to the introduction of section 145B(1). The Hon'ble Court itself has noted that its conclusions were based on the statutory position prevailing at the relevant time. After the insertion of section 145B(1), the legal position stands materially altered, and the statutory mandate overrides judicial interpretation that was based on the pre-amended law. It is a settled principle that when the Act contains a specific charging provision with a deeming clause, such legislative intent prevails and must be given full effect. 6.3 The appellant has also attempted to attribute the interest received between pre-award and post-award period based on a hypothetical computation. However, the interest actually received by the appellant is a composite amount of Rs.38,05,747. The MACT order does not provide any bifurcation of interest between the pre-award and post-award period. Therefore, such artificial allocation cannot be accepted. In the absence of any specific direction by the Tribunal in this regard, the deeming provision under section 145B(1) squarely applies to the entire amount of interest received. 6.4 The contention that the Assessing Officer did not discuss the Bombay High Court decision or did not properly appreciate the

5 ITA No.66/PUN/2026 submissions of the appellant does not affect the validity of the addition. The addition has been made strictly in accordance with the explicit statutory provisions which are fully applicable to the year under appeal. In light of these facts and the clear mandate of the law, I find no infirmity in the action of the Assessing Officer in bringing to tax the interest received by the appellant under section 56(2)(vi) of the Act after allowing deduction under section 57(iv) of the Act. 6.5 In view of the above discussion, I hold that the ground raised by the appellant is devoid of merit and does not warrant any interference. 7. Accordingly, the addition made by the Assessing Officer is upheld and the appeal is dismissed on merits.” 5. It is the above order against which the assessee is in appeal before this Tribunal. 6. We have heard Ld. counsels from both the sides and perused the material available on record including the paper book & copy of case laws furnished by the assessee. In this regard, we find that the husband of the assessee died in a motor accident in the year 2013 and the assessee filed a petition before the Motor Accident Tribunal. The Motor Accident Tribunal in the year 2018 decided the compensation of Rs.1,22,66,800/- regarding which there is no dispute since the Assessing Officer has accepted it as non-taxable income. The dispute is only with regard to the interest amount of Rs.38,37,266/- awarded by the Motor Accident Tribunal on the compensation amount & out of which the Assessing Officer after

6 ITA No.66/PUN/2026 allowing 50% deduction u/s 57(iv) of the IT Act taxed remaining interest amount of Rs.19,18,633/-. In this regard, we find that the husband of the assessee died in the year 2013 and the petition for award of death compensation remained pending till the year 2018 until when the Motor Accident Tribunal decided the amount of compensation and also awarded the interest on the compensation for the period it was not paid to the assessee. It is an admitted fact that the death compensation was received in the year 2018 itself precisely in the month of December, 2018 i.e. during assessment year 2019-20 and the interest was also paid on the above pending amount during the year under consideration. The assessee in support of its contentions that the interest on death compensation is exempt from tax relied on judgement passed by Hon’ble High Court of Bombay in the case of Rupesh Rashmikant Shah vs. Union of India [2019] 108 taxmann.com 181 (Bombay) wherein under identical facts the petition of assessee was allowed by observing as under :- “56. The issue can be looked from a slightly different angle. In the context of interest, there are three crucial dates. The date of the accident is a date in reference to which the entire compensation is calculated. The date of filing of the claim petition is the date from which the claimant can seek interest on the compensation awarded by

7 ITA No.66/PUN/2026 the Claims Tribunal. Under section 170 of the Motor Vehicles Act, the interest cannot be awarded for a period prior to filing of the Claim Petition. The date of passing of the award by Claims Tribunal is the date on which the compensation is determined and the right to receive interest pendentelite ceases. The interest for the period between the filing of the claim petition and passing of the award thus, is for the period when the claimant for the first time approached the Claims Tribunal asking the Tribunal to assess and award compensation and the time consumed in disposing of the Claim Petition. We may also recall, the interest can be awarded even though part of the compensation would comprise of future loss of income. This is so because, the multiplier method factors this aspect also. At the same time, as noted, the Courts do not award interest on future expenditure since the amount is being paid to the claimant for an expenditure which may be incurred at a later point of time. This dichotomy, thus, between awarding interest on future income while not awarding interest for future expenditure brings out the true character of the interest being awarded. 57. We, therefore, hold that the interest awarded in the motor accident claim cases from the date of the Claim Petition till the passing of the award or in case of Appeal, till the judgment of the High Court in such Appeal, would not be exigible to tax, not being an income. This position would not change on account of clause (b) of section 145A of the Act as it stood at the relevant time amended by Finance Act, 2009 which provision now finds place in sub-section (1) of section 145B of the Act. Neither clause (b) of section 145A, as it stood at the relevant time, nor clause (viii) of sub-section (2) of section 56 of the Act make the interest chargeable to tax whether such interest is income of the recipient or not. Section 194A of the Act is only a provision for deduction of tax at source. Any provision for deduction of tax at source in the said section would not govern the taxability of the receipt. The question of deduction of tax at source would arise only if the payment is in the nature of income of the payee.” 7. Respectfully following the above judgement passed by Hon’ble Jurisdictional High Court under identical facts in the case of Rupesh Rashmikant Shah vs. Union of India [supra], we find force in the arguments of Ld. counsel of the assessee and

8 ITA No.66/PUN/2026 accordingly deem it appropriate to set-aside the order passed by Ld. CIT(A)/NFAC and direct the Assessing Officer to delete the addition of Rs.19,18,633/-. Thus, the grounds of appeal raised by the assessee are allowed. 8. In the result, the appeal filed by the assessee is allowed. Order pronounced on this 18th day of May, 2026. Sd/- Sd/- (DR. DIPAK P. RIPOTE) (VINAY BHAMORE) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; �दनांक / Dated : 18th May, 2026. Sujeet/DOC Sujeet Kumar Digitally signed by Sujeet Kumar Sharma Sharma Date: 2026.05.19 12:40:03 आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : +05'30' अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The Pr. CIT concerned. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “SMC” ब�च, 4. पुणे / DR, ITAT, “SMC” Bench, Pune. गाड� फ़ाइल / Guard File. 5. आदेशानुसार / BY ORDER, // True Copy // Assistant Registrar आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.