DRAWING & DISBURSING OFFICER vs. INCOME TAX OFFICER

ITA/171/2010HC Punjab & HaryanaPHHC01093077201018 November 2011Author: MR. JUSTICE M.M. KUMAR,MR. JUSTICE JITENDRA CHAUHAN3 pages
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What were the facts?

The appellant, Drawing & Disbursing Officer, Office of General Manager, Punjab Roadways, Ropar, provides transport services. When buses are involved in accidents, victims or their legal heirs claim compensation before the Motor Accident Claims Tribunal (MACT). The appellant deposits the awarded compensation along with interest. The Income Tax Officer found the appellant in default for not deducting tax at source on the interest component of these deposits. The Commissioner of Income Tax (Appeals) dismissed the appeal. The Income Tax Appellate Tribunal (ITAT) remitted the matter back to the Assessing Officer to determine the interest component on delayed payment of compensation. The appellant is in appeal before the High Court against the ITAT's order for the assessment year 1999-2000.

What did the High Court hold?

The High Court held that the order of the Tribunal remitting the matter to the Assessing Officer was untenable and ran counter to the Division Bench judgment of the same court in ITA No. 495 of 2009. The assessee's stand before the Assessing Officer was that the compensation along with interest was deposited in court, and such amount did not include any interest earned by the claimants after deposit. Therefore, the Tribunal's direction to determine the interest component was incorrect. The questions of law were decided in favour of the assessee and against the revenue. The appeals were accepted, and the order of the Tribunal remitting the matter to the Assessing Officer was set aside.

What were the issues?

1. Whether the interest deposited by the appellant along with the compensation awarded by the MACT is taxable in the hands of the appellant for failure to deduct tax at source, turning on Section 194A of the Income Tax Act, 1961. Assessee's contention: The assessee argued that the compensation amount along with interest was deposited directly with the court for disbursement to the claimants, and no direct payment was made to individuals. They relied on the Division Bench judgment in ITA No. 495 of 2009 (Drawing and Disbursing Officer v. Income Tax Officer) which held that interest by the State along with compensation is not taxable, though interest earned by the victim stands on a different footing. Revenue's contention: The revenue argued that the ITAT remitted the matter to the Assessing Officer to determine the amount of interest, if any, earned by the claimants after the deposit, and therefore, no interference was called for.

Which sections of the Income-tax Act were involved?

Section 194A,Section 260-A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT FOR THE STATES OF PUNJAB AND HARYANA AT CHANDIGARH

1.

Drawing & Disbursing Officer, Office of General Manager, Punjab Roadways, Ropar ... Appellant v. Income Tax Officer Ward 6(5) TDS Chandigarh ... Respondent(s)

2.

ITA No.173 of 2010

Drawing & Disbursing Officer, Office of General Manager, Punjab Roadways, Ropar ... Appellant v. Income Tax Officer Ward 6(5) TDS Chandigarh ... Respondent(s) Date of decision: November 18, 2011. CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MR. JUSTICE G.S. SANDHAWALIA Present: Shri APS Mann, Additional Advocate General, Punjab for the appellant. Shri Yogesh Putney, Sr. Standing Counsel for the respondent. Hemant Gupta

, J. (Oral): The State is in appeal under Section 260-A of the Income Tax Act, 1961 aggrieved against the order passed by Income Tax Appellate Tribunal (for short the Tribunal) arising out of the order dated 19.12.2008 passed in ITA No.737/Chandi/2006, pertaining to the assessment year 1999- 2000. The assessee has raised the following substantial question of law. The appellant assessee provides transport facil

The order continues below.

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