Case Law Details
Kavya Shaji Vs Union of India (Kerala High Court)
Material Facts: The petitioners, children of late K.A. Shaji, sought a writ directing the respondents to return TDS deducted from interest earned on fixed deposits created from compensation awarded by the Motor Accidents Claims Tribunal (MACT), along with interest at 12%.
Following the death of their father in a motor accident on 01.08.2005, the petitioners and their mother filed O.P.(MV) No.373/2006 before the Motor Accidents Claims Tribunal, Ernakulam. The Tribunal awarded compensation and directed the Insurance Company to deposit specified amounts in the names of the petitioners, who were minors. Fixed deposits were created with the second respondent bank on 18.01.2011.
After attaining majority, the petitioners withdrew the deposits in 2021 and 2022 and found that TDS had been deducted from the interest accrued on the deposits for the relevant periods.
Procedural History
The petitioners filed the present writ petition seeking return of the TDS amount with interest and other appropriate reliefs.
Legal Issue(s)
Whether TDS could be deducted from the interest earned on bank fixed deposits created from compensation awarded by the Motor Accidents Claims Tribunal, in view of Section 194A(3)(ix) and (ixa) of the Income Tax Act.
Relevant Statutory Provisions
- Section 194A(3)(ix) of the Income Tax Act
- Section 194A(3)(ixa) of the Income Tax Act
Petitioners’ Submissions
The petitioners contended that the income arose from compensation awarded by the Motor Accidents Claims Tribunal and was therefore exempt from TDS under Section 194A(3)(ix) and (ixa) of the Income Tax Act.
Respondents’ Submissions
The respondent bank submitted that once the compensation amount was deposited with the bank, the interest subsequently earned on those deposits constituted separate income.
Court’s Findings and Reasoning
The Court examined Section 194A(3)(ix) and (ixa) and observed that the exemption from TDS applies only to income credited by way of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal.
The Court found that the TDS in the present case had been deducted not from the interest awarded by the Tribunal, but from the interest earned on the fixed deposits maintained with the bank after the compensation amount, inclusive of the Tribunal-awarded interest, had been deposited.
The Court held that once the compensation amount was deposited with the bank, it lost its character as an amount awarded by the Tribunal and the interest subsequently accruing on the deposit became “other income” of the petitioners. Consequently, such interest did not fall within the exemption provided under Section 194A(3)(ix) and (ixa).
The Court also noted that the bank had deducted TDS at 20% since the petitioners had not furnished Form 15G declarations. The deducted amount had already been deposited with the Income Tax Authorities.
Final Ruling
The Kerala High Court dismissed the writ petition, holding that the exemption under Section 194A(3)(ix) and (ixa) did not apply to interest earned on bank deposits created from MACT compensation. The dismissal was without prejudice to the petitioners’ right to pursue appropriate statutory remedies for refund after complying with the applicable statutory requirements.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
This writ petition is submitted by the petitioners seeking the following reliefs:
“i. Issue a writ of Mandamus or other appropriate writ order or direction commanding the respondents to return the money collected under the head of TDS to the petitioners with interest of 12% till the realization.
ii. Issue such other writ, direction or order that this Hon’ble Court may deem fit, just and necessary in the facts and circumstances of the case.”
2. The facts which led to the filing of this writ petition are as follows:
The petitioners are the children of late K.A. Shaji, who died in a motor accident occurred on 01.08.2005. Claiming compensation, the petitioners along with their mother filed 0.P(MV) No.373/2006 before the Motor Accidents Claims Tribunal, Ernakulam. The Tribunal awarded compensation and accordingly, the Insurance Company was directed to deposit Rs.2,21,870/- and Rs.18,581/- in the name of each petitioner, since they were minors. Exts.P1 and P2 are the F.D. receipts dated 18.01.2011, evidencing the fixed deposits made by the Tribunal with 2nd respondent.
3. Later, on attaining majority, the petitioners have withdrawn the fixed deposits in the year 2021 and 2022 respectively. Thereupon, the petitioners came to be aware that, the TDS has been deducted from the interest accrued on the said deposits, for the period from 2011 to 2021 and 2013 to 2020. According to the petitioners, since this is an income obtained by way of compensation as per the award passed by the Motor Accidents Claims Tribunal, the same is exempted from TDS in the light of Section 194A(3)(ix) and (ixa) of the Income Tax Act. It was in these circumstances this writ petition was submitted seeking the above reliefs.
4. I have heard the learned Counsel for the petitioners and the learned Standing Counsel for the Income Tax Department and the learned Counsel for the respondent Bank.
5. The contentions raised by the petitioners are by placing reliance upon Section 194A(3)(ix) and (ixa) of the Income Tax Act, which reads as follows:
“(ix) to such income credited by way of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal;
(ixa) 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;”
The crucial aspect to be noticed with respect to the stipulations contained in the aforesaid provision is that, the said provision contemplates an exemption from TDS, only in respect of income credited by way of interest on compensation awarded by the Motor Accidents Claims Tribunal. However, in this case, the TDS deducted as evidenced by Exts.P5 and P6, is in respect of the interest accrued on the deposit made by the Tribunal with bank, as compensation for the death of the father of the petitioners along with interest. As rightly pointed out by the learned Counsel for the respondent Bank, the moment the said amount is deposited with the Bank account, it is liable to be treated as “other income”. What is contemplated under Section 194A(3)(ix) and (ixa) is the amount credited as interest on the compensation amount awarded by the Motor Accidents Claims Tribunal. As far as the interest accrued on the deposit made with the respondent Bank is concerned, the same would not come within the category of the income of interest referred to in Sub-clause(ix) and (ixa) of Section 194A(3) of the Act, as it is an income on the deposit and as it is not an interest on the amount awarded by the Motor Accidents Claims Tribunal. The deposit already made with the respondent Bank, is inclusive of the interest awarded by the Motor Accident Claims Tribunal and therefore, as mentioned above, upon deposit of the same with the respondent Bank, it losses its character of being an amount awarded by the Tribunal and the same becomes the ‘other income’ of the petitioners and the exemption contemplated under the aforesaid provision would no longer be applicable to the same.
In such circumstances, I do not find any scope for granting the reliefs sought for. It is also to be noted in this regard that, the Bank has already deducted the amount at 20%, as the petitioners failed to provide the Bank details of Form 15G declaration, as required. Moreover, the said amount is already deposited by the Bank with the Income Tax Authorities. In such circumstances, it is for the petitioners to invoke appropriate remedies for getting the refund of the said amounts after complying with the statutory requirements. Accordingly, this writ petition is dismissed without prejudice to those rights if any, available .
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