(PER : HONOURABLE MR.JUSTICE AKIL KURESHI) Page 1 of 11 HC-NIC Page 1 of 11 Created On Fri Aug 12 00:49:47 IST 2016 C/SCA/13031/2016 JUDGMENT

1. This petition is filed by New India Assurance Company Ltd. challenging an order dated 18.06.2016 passed by the Motor Accident Claims Tribunal, Vadodara, below application Exh. 7 in MACP Execution Application No. 284 of 2015.

2. The petition arise in following background:

3. The petitioner-insurance company was liable to satisfy such decree and, therefore, deposited a sum of Rs. 5,45,027/- with the Claims Tribunal on 14.10.2005. The petitioner has presented its computation of such amount payable to satisfy the award of the Claims Tribunal which reads as under:

insurance company has deducted Rs. 45,910/- by way of tax at source and deposited the same with the Income Tax Department on or around 21.02.2016.

5. The claimants, however, disputed the amount deposited by the insurance company and filed Execution Application No. 284 of 2015 before the Claims Tribunal complaining that the insurance company had short deposit Rs. 45,910/- and, with interest, it would come to Rs. 46,630/-. On such application, the Tribunal passed impugned order dated 18.06.2016 and has issued distress attachment warrant against the petitioner- insurance company, upon which, such insurance company has filed this petition and challenged the said order of Claims Tribunal.

6. It is undisputed that the decision of Division Bench of this Court in case of Smt. Hansagauri Prafulchandra Ladhani and ors vs. The Oriental Insurance Company Ltd. reported in 2007 (2) GLR 291 governed the situation of requirement of deducting tax at source in connection with payment of compensation and interest in motor accident claims cases. The Division Bench had interpreted the provisions of Section 194A of the Income Tax Act and come to the conclusion that the amount of interest accrued each year would have to be apportioned among the claimants on year to year basis and, if the interest payable to any claimant for any financial year exceeds Rs. 50,000/-, only then the Tribunal would permit the insurance company or the owners to pay or allow to be deducted tax at source to the Income Tax Department in respect of that particular claimant for that year.

7. The sole ground raised by the petitioner-insurance company in this petition for deducting tax at source despite the judgement of this Court in case of Smt. Hansagauri Prafulchandra Ladhani and ors vs. The Oriental Insurance Company Ltd is that by virtue of amendment in Section 194A of the Income Tax Act ['the Act' for short] by Finance Act 2015 w.e.f. 1.6.2015 there had arisen a requirement of deducting tax at source on crediting of the interest on the compensation awarded by the Claims Tribunal. We may examine this contention more minutely. Before doing so, we may reproduce the directions of the High Court in case of Smt. Hansagauri Prafulchandra Ladhani and Page 4 of 11 HC-NIC Page 4 of 11 Created On Fri Aug 12 00:49:47 IST 2016 C/SCA/13031/2016 JUDGMENT ors vs. The Oriental Insurance Company Ltd (supra):

II. (i) The Tribunal shall take into account the principles laid down in this judgment and ensure that the amount of interest accrued each year is apportioned amongst the claimants on year to year basis.

(ii) If the interest payable to any claimant for any particular financial year exceeds Rs.50,000/-, the Tribunal shall permit the Insurance Companies/owners to pay over the amount liable to Page 5 of 11 HC-NIC Page 5 of 11 Created On Fri Aug 12 00:49:47 IST 2016 C/SCA/13031/2016 JUDGMENT be deducted at source under Section 193(3)(ix) of the Income- tax Department in respect of that particular claimant for that particular year, without prejudice to the claimant's case that he is not liable to pay any income-tax for that year.

(iii) for the financial year/s for which the interest payable to the concerned claimant does not exceed Rs.50,000/-, the Tribunal may permit such claimant to withdraw the amount deposited as per direction I(b) without producing the certificate from the concerned income-tax authority that there is no income-tax liability on the interest which has accrued on the compensation awarded by the Tribunal.

(iv) It is clarified that the amount other than the amount liable to be deducted at source under Section 194A(3)(ix) shall be invested/disbursed by the Tribunal.

III. When the claimants make applications/ representations before the authority under the Income-tax Act, 1961 for refund of the amount deducted under the provisions of Section 194A(3)

(ix) of the Act, the concerned authority shall decide such applications/representations within six months from the date of receipt of the applications/representations."

8. This decision was rendered in the background of the provisions contained in Section 194A of the Act which pertains to interest other than interest on securities. Sub section (1) of Section 194A provides that 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 Page 6 of 11 HC-NIC Page 6 of 11 Created On Fri Aug 12 00:49:47 IST 2016 C/SCA/13031/2016 JUDGMENT 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. Thus, the requirement of deducting tax at source was attached at the stage of credit of such income to the account of the payee or at the time of payment through cash or cheque, a bank draft whichever is earlier.

9. Sub section (3) of Section 194A , however, includes those cases which would be excluded from the purview of sub section (1). Relevant portion of sub section (3) as its stood prior to 01.06.2015 amendment read as under:

10. The Gujarat High Court in case of Smt. Hansagauri Prafulchandra Ladhani and ors vs. The Oriental Insurance Company Ltd (supra) had occasion to interpret this provision. W.e.f. 01.06.2015, however, this Clause (ix) of sub section (3) of Section 194A has been omitted and is replaced by Clauses

(ix) and (ixa) which read as under:

11. Under Clause (ix) to sub section (3) of Section 194A of the Act, as it originally stood, requirement of deducting tax at source under sub section (1) would not apply in a case where any income is credited or paid by way of interest on compensation amount awarded by Motor Accident Claims Tribunal where the amount of such income or, the aggregate amounts of such income credited or paid during the financial year does not exceed fifty thousand rupees. This provision of Clause (ix) is now divide into two parts and is replaced by Clauses (ix) and (ixa). Clause (ix), in the present form, refers to such income credited by way of interest on the compensation amount awarded by the Claims Tribunal. The case of crediting of interest on compensation therefore, would fall in Clause (ix) as it stands currently. Under Clause (ixa) would fall, any payment of interest on compensation awarded by the Claims Tribunal where the amount of such income or the aggregate paid during the financial year does not exceed fifty thousand rupees.

12. It would, therefore, be wholly incorrect to read the current provision of sub section (3) of Section 194A to argue that the cases of income credited by way of interest on compensation awarded by the Claims Tribunal is no longer part of sub section (3) for exclusion from purview of sub section (1) of Section 194A . In other words, worded slightly differently. The case of credit of interest on compensation awarded by the Claims Tribunal continues to find place in the exclusion clause contained in sub section (3) of Section 194A . In fact, it would prima facie appear that the ceiling of Rs. 50,000/- per annum for such exclusion is now done away with in case of crediting of interest on compensation awarded by the Claims Tribunal while retaining such limit in cases of payment of interest on such compensation. However, we need not thresh out this last part of the issue since admittedly, in the present case, for none of the years under consideration, the interest income exceeded Rs. 50,000/-. In fact, this Court in case of Smt. Hansagauri Prafulchandra Ladhani and ors vs. The Oriental Insurance Company Ltd (supra) provided for further splitting up of this ceiling of Rs. 50,000/- per claimant basis. Looked from any angle, the insurance company was not justified in deducting tax at source while depositing the compensation in favour of the claimants. It therefore, cannot avoid liability of depositing such amount with the Claims Tribunal. The Claims Tribunal had committed no error in insisting on the insurance company in making good the shortfall.

13. At this stage, learned counsel for the petitioner drew our attention to the order dated 05.03.2012 passed by this Court in Civil Application No. 2592 of 2012, in which, the insurance company had deposited with the Income Tax Department a sum of Rs. 7, 91, 971/- by way of tax on compensation of Rs. 34,39,070/- awarded by the Claims Tribunal. This Court allowed the claimants to seek refund of such amount from the Income Tax department and permitted the insurance company to receive it back from the claimants as and when such refund would be made by the Income Tax department. However, in the present case, we are not inclined to accept such a formula. Firstly, the amount in question is not very large. Secondly, in order to provide for such formula, we would have to call upon the claimants to appear before us, a luxury which poor litigants can ill-afford. Thirdly, the insurance company should have properly adviced itself before effecting tax at source on the ground that the judgement of this Court in case of Smt. Hansagauri Prafulchandra Ladhani and ors vs. The Oriental Insurance Company Ltd (supra) was no longer good law in view of the statutory amendments. Not having done that the only course left open to the insurance company would be to approach the Income Tax department for refund, as may be adviced.

14. With these observations, the petition is dismissed.