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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 21ST DAY OF JANUARY 2022 BEFORE THE HON’BLE MR.JUSTICE ASHOK S. KINAGI
WRIT PETITION NO.35477 OF 2018 (GM-CPC)
BETWEEN:
1 . THE DIVISIONAL CONTROLLER KSRTC CHICKBALLAPUR DEPOT., CHIKKABALLAPURA-562 101
2 . INTERNAL INSURANCE CO., KSRTC CHICKBALLAPUR DEPOT, CHIKKABALLAPURA – 562 101
BOTH THE PETITIONERS ARE REP. BY ITS CHIEF LAW OFFICER, KSRTC CENTRAL OFFICES, K.H.ROAD BENGALURU-560 027. ...PETITIONERS (BY SRI. F S DABALI, ADVOCATE)
AND:
1 . KUMARI ANJU MATHEW D/O MATHEW SAMUEL, AGED ABOUT 39 YEARS NOW R/AT OLD NO.25, (NEW NO.49)
2 GANDHI ROAD, GILL NAGAR EXTENSION, CHOOLAIMEDU CHENNAI – 600 094.
2 . NARASIMHA S/O MUNISWAMAPPA, AGED ABOUT 58 YEARS KSRTC DRIVER, BADGE NO.5000 KGF DEPOT, K.G.F - 563 122. …..RESPONDENTS
(BY SRI. BENEDICT ANAND, ADVOCATE FOR R-1 VIDE ORDER DATED 27.8.2018 NOTICE TO R-2 IS DISPENSED WITH)
THIS WRIT PETITION IS FILED UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED ORDERS PASSED BY THE COURT OF CIVIL JUDGE (SR.DN.) & CJM AT CHICKBALLAPUR DATED 20.7.2016 AND THE ORDER DATED 6.4.2018 IN EX. NO. 37/2010 VIDE ANNEX-D AND ANNEX-J RESPECTIVELY BY DECLARING THE SAME AS CLEARLY ILLEGAL AND ARBITRARY; AND ETC.
THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 30.08.2021, COMING ON FOR PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:
3 O R D E R
The petitioners-Corporation has filed this writ petition being aggrieved by the orders passed by the Court of Civil Judge (Sr.Dn.) & CJM at Chickaballapur dated 20.7.2016 and the order dated 6.4.2018 in Ex.No.37/2010 vide Annexure-D and Annexure-J respectively.
Brief facts leading to filing of this petition are as under: [Respondent No.1 has sustained injuries in the road accident occurred on 2.5.1993 due to rash and negligent driving of the driver of the bus belonging to the Corporation. Respondent No.1 filed a claim petition in MVC No.291/1995 before MACT, Chikkaballapur claiming compensation of Rs.75,00,000/- from the Corporation. The Tribunal vide judgment and award dated 24.8.2002 awarded a compensation of Rs.11,30,200/- with interest at the
4 rate of 9% p.a. from the date of petition till the date of realisation and liability was saddled on the Corporation. 2.1. The Corporation aggrieved by the judgment and award filed appeal in MFA No.6655/2002 before this Court. Respondent No.1 also filed MFA CROB No.18/2003 seeking for enhancement of compensation amount. This Court vide judgment and award dated 24.8.2007 dismissed the appeal filed by the Corporation and also the cross objection filed by respondent No.1. 2.2. After the disposal of the appeal and cross objection, respondent No.1 filed a Execution Petition in Ex.No.37/2010 for recovery of compensation amount as awarded by the MACT. The Corporation had deposited the amount of Rs.6,00,000/- on 13.12.2002 in pursuance of the conditional interim order of stay granted in the aforesaid appeal. The
5 Corporation filed a memo of calculation showing the balance amount of Rs.32,357/- after deducting the amount deposited before the Tribunal and income tax TDS amount of Rs.2,54,860/- which has been deposited in the Central Government Account on 4.5.2011. 2.3. The Executing Court directed the CMO of the Executing Court to file a memo of calculation. Accordingly, memo of calculation was filed showing the balance amount of Rs.9,30,039/- as on 29.4.2014. The Corporation have filed calculation memo vide Annexure-B. It is contended that the CMO has not deducted the TDS amount deposited by the Corporation in the memo of calculation. The Executing Court has passed an order dated 20.7.2016 holding that the Corporation have to pay balance amount of Rs.7,25,492/-. The Corporation filed I.A.3 for review of order dated 20.7.2016 and also
6 application for condonation of delay in filing I.A.No.3 which is numbered as I.A.No.4. The Executing court dismissed I.A.Nos. 3 and 4 vide order dated 6.4.2018. Hence, the Corporation have filed this writ petition challenging the impugned orders .
Heard learned counsel for Corporation and learned counsel for respondent No.1
Learned counsel for the Corporation submits that Corporation have deducted TDS amount of Rs.2,54,860/- and deposited in the Central Government Account on 4.5.2011 and the Corporation have specifically mentioned about deducting TDS in the memo of calculation dated 4.6.2016 and further submits that the Executing Court is not justified in calculating the balance amount without excluding TDS amount. He further contends that as per Section 194- A of the Income Tax Act (for short hereinafter referred
7 to as 'the IT Act' for brevity), it is mandatory on the part of the Corporation to deduct TDS Amount on the interest amount paid when it exceeds Rs.50,000/-. He further submits that the Executing court without considering Section 194-A (1) and Section 194-A (3)(ix) of Chapter 17 of the IT Act and circulars issued by the RBI, has committed an error in rejecting I.A.3 and 4. He further places reliance on the judgment rendered by the Co-ordinate Bench of this Court in The Oriental Insurance Co. Ltd. Vs. Chennabasavaiah and others reported in 2016 ACJ 78 (Karnataka). Hence, on these grounds he prays to allow the writ petition
Per contra, learned counsel for the respondent No.1 submits that compensation to be paid under the Motor Vehicles Act, 1988 (hereinafter referred to as 'the M.V. Act' for brevity) is not taxable as income. She further submits that the interest on
8 the compensation awarded by the Tribunal or enhanced compensation awarded by the Appellate Court cannot be taken to have been accrued as on the date of award granting compensation. She places reliance on the judgment of the Bombay High Court in Shri Rupesh Rashmikant Shah v. Union of India & Ors. (W.P.No.2902/2016 disposed of on 8.8.2019) and also on the judgment of the Gujarat High Court in the case of Smt. Hansaguri Prafulchandra v. The Orieintal Insurance Company reported in 2007 ACJ 1897 and also the judgment of the Bombay High Court in Mrs Gowri Deepak Patel and Ors. V. New India Assurance Co. Ltd. & Anr. reported in 2010 (2) ALL.MR 176 and prays to dismiss the writ petition.
Perused the records and considered the submissions made by learned counsel for the parties.
9 7. Before dealing with the submission of the learned counsel for the parties, it is necessary to refer first to the undisputed legal position that, whether the compensation to be paid under the MV Act is not taxable as income?
The relevant provisions of Section 194-A of the IT Act reads as under : "194A : (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income [by way of interest on securities], shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force: [Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed [One crore rupees in case of business or fifty lakh rupees
10 in case of profession] during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this section]
(3) The provisions of sub-section (1) shall not apply -
(i) to (viii) xxxx
(ix) to such income paid by way of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal where the amount of such income or, as the case may be, the aggregate of the amounts of such income paid during the financial year does not exceed fifty thousand rupees;]"
That, while considering the provisions may prima facie justify the deduction of tax at source by the Corporation. It cannot be overlooked that the interest is ultimately a tax on income tax. In a similar case arising under the Land Acquisition Act 1894 in Ramabai v. Commissioner of Income Tax AP, the Hon'ble Apex Court has held that interest on the
11 enhanced compensation for the land, compulsorily acquired under the Land Acquisition Act, 1894 awarded by the Court on reference under Section 18 of the Act or on further appeal has to be taken to have accrued not on the date of the order of the Court granting enhanced compensation but as having accrued year after year from the date of delivery of possession of land till the date of such order and that such interest cannot be assessed to income tax in only one lump sum in the year in which order is made.
The same principle will also apply to the interest on the compensation awarded by the MACT in a claim petition under the MV Act or on further appeal before this Court or the Apex Court. Section 171 of the MV Act 1988 reads as under :
"171 Award of interest where any claim is allowed.—Where any Claims Tribunal allows a claim for compensation made under this Act, such Tribunal may direct that in
12 addition to the amount of compensation simple interest shall also be paid at such rate and from such date not earlier than the date of making the claim as it may specify in this behalf."
The interest on the compensation awarded by the Tribunal or enhanced compensation awarded by the Appellate court cannot be taken as accrued as on the date of award of the Tribunal granting compensation or from the date of the award of the Appellate Court granting enhanced compensation but has to be taken as having accrued year after year from the date of filing of the claim petition till the date of deposit by the Corporation.
It was in view of the above legal position, this Court has examined the case in hand. In the present case, respondent No.1 has filed a claim petition in the year 1995 and the claim petition came
13 to be disposed of by the MACT on 24.8.2002 and MACT awarded a compensation of Rs.11,30,200/- with interest at the rate of 9%. The Corporation being aggrieved by the judgment and award passed by the Tribunal filed appeal before this Court. Respondent No.1 also filed cross objection. This Court dismissed the appeal as well as the cross objection. Thereafter, respondent No.1 filed Execution Petition in Ex.No.37/2010.
The Executing Court directed the CMO of the said Court to file a memo of calculation. As per the memo of calculation filed by the CMO, a sum of Rs.9,30,039/- is still due from the Corporation as on 29.4.2014 without deducting amount deposited by the Corporation. The CMO has committed an error in not deducting the amount deposited by the Corporation towards TDS.
14 14. The Corporation deducted a sum of Rs.2,54,860/- towards TDS and the same was deposited in the Central Government Account on 4.5.2011. The Corporation produced Form-16A to establish that amount of Rs.2,54,860/- was deposited towards TDS in the Central Government Account.
The income tax liability on respondent No.1 to pay tax on the interest accrued on the compensation awarded to him shall arise if such interest on income accrues in the concerned financial year together with other income of respondent No.1 in the financial year exceeds the chargeable limit as specified in the provisions of the Income Tax 1961 in force for the relevant years. Therefore, it will be open for respondent No.1 to make appropriate application/representation before the concerned Authority for refund of such amount as may be due to him of Rs.2,54,860/- which has been already
15 deducted by the Corporation as a tax deducted at source under the provisions of Section 194-A of the Income Tax Act, 1961. If such a representation is made by respondent No.1, the Authorities shall decide the same within six months from the date of receipt thereof.
In view of the above discussion, subject to such liberty the writ petition is disposed of. However parties are at liberty to file fresh memo of calculation before the Executing Court. If memo of calculation is filed by the parties, the Executing Court after considering the same, shall pass appropriate order in accordance with law.
SD/- JUDGE