The Madras High Court has said compensation awarded by the Motor Accident Claims Tribunal or the interest accruing therein cannot be subjected to tax deducted at source (TDS).
A civil revision plea was filed by the Managing Director, Tamil Nadu State Transport Corporation (Salem) Limited, Dharmapuri, against an order passed by Additional District Judge, Fast Track Court, directing the corporation to deposit the amount deducted as TDS to the MACT claimant.
“The question is whether the provisions of Income Tax Act,1961, and more specifically, whether the compensation awarded by the MACT to the victim can be classified as a taxable income under the Income Tax Law? The answer to this question in the opinion of this court is in the negative,” Justice MV Muralidaran said, dismissing the petition.
The matter relates to Rs 4,23,271 as compensation awarded by the lower court to Chinnadurai and a memo was filed by the Transport Corporation deducting Rs 24,017 as TDS which was challenged following which the lower court directed the corporation to deposit Rs 30,774 in the victim’s account.
Aggrieved by the order, the Transport Corporation filed the civil revision petition.
Counsel for the Corporation argued that as per section 194-A and 156 of the Income Tax Act,1961, interest awarded by the MACT should be subject to TDS and justified the deduction.
Justice Muralidaran, who referred to a order of Himachal Pradesh High Court, said, “The Motor Vehicles Act is one such legislation which has been passed with a benevolent intention for compensating the accident victims who have suffered bodily disablement or loss of life and the Income Tax Act which is primarily intended for Tax Collection by the state cannot put spokes in the effective and efficacious enforcement of the Motor Vehicles Act….”
“…This court arrives at the conclusion that the compensation awarded or the interest accruing therein from the compensation that has been awarded by the MACT cannot be subjected to TDS and the same cannot be insisted to be paid to the Tax Authorities since the compensation and the interest awarded therein does not fall under the term ‘Income’ as defined under the Income tax act, 1961.”
The judge directed the Transport Corporation not to deduct any amount towards TDS and to deposit the same also inaddition to the amount that was already deposited on the file of MACT, Dharmapuri within a period of four weeks.