Towards the exemption for individuals who have not yet received long-pending insurance claims with interest, the Punjab and Haryana High Court ruled that TDS does not get deducted by the insurance companies on the interest on the compensation amount till 1.06.2015.
Justice Arvind Singh Sangwan acknowledged a modification plea by the New India Assurance Company challenging an order on 23.4.2019 passed by the MACT, Kurukshetra, in which the Insurance Company was rendered to deposit the deducted amount of TDS of Rs.44,903.
The income tax department ruled that the interest that would get levied on the compensation provided by the Motor Accidents Claims Tribunal will be taxed.
The Court directed the judicial precedents and sees that the Insurance Company while depositing the interest surpassing Rs.50,000 per person per year, furnishes a computation to MACT for the amount of Tax Deducted at Source (TDS) needed to get deducted.
In view of the judgment in Janki’s case (supra) issued via the Single Bench of this Court, before the revision of Clause IX and after the insertion of Clause IX-A under Section 194(A)(3) of the Income Tax Act, 1961 incorporated from 1.6.2015 no interest would be deductible at source even if the interest is beyond Rs.50,000 in a particular year.
Hence, the Insurance Company is obligated to pay the interest of compensation to the people who had claimed for the claim before 1.6.2015 even when the TDS is deposited with the Income Tax heads at that time and the people shall not get loaded with the return filing for a refund for any shortcoming of the Insurance Company.
Tribunal set aside the impugned orders and remanded back the cases to the related Motor Accident Claims with a direction that if the interest on compensation is filed before 1.6.2015, the Insurance Company would file the amount of tax deducted at source to the people who claimed the refund and the Insurance Company may seek a refund from the Income Tax heads, furnishing an amended income tax return.
“Where the interest on the compensation is actually paid after 1.6.2015, which is exceeding Rs.50,000/- per claimant per financial year, the Insurance Company will pay on securing the ‘Form 15-G’ of Rule 29-C of the Income Tax Act/Rules,” the Court articulated.
