Drawing & Disbursing Officer, Office of General Manager, Punjab Roadways, Ropar V. Income Tax Officer Ward 6(5) TDS Chandigarh

ITA/171/2010

AI Insights

The case involves the Drawing & Disbursing Officer, Office of General Manager, Punjab Roadways, Ropar (appellant) against the Income Tax Officer Ward 6(5) TDS Chandigarh (respondent). The dispute arose from the appellant's failure to deduct tax at source on interest from compensation payments deposited in court following accidents involving their buses. The Income Tax Officer found the appellant in default, a decision upheld by the Commissioner of Income Tax (Appeals) and initially by the Tribunal, which later remitted the matter to the Assessing Officer to determine the interest component. The High Court, referencing a prior decision, ruled that the interest accrued by the State on compensation amounts is not taxable, leading to the acceptance of the appellant's appeal.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 677706 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 18-11-2011
• Assessment Year: misc
• Other Referred Cases: Dwaring and Disbursing Officer v. Income Tax Officer
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: YOGESH PUTNEY
• Assessee Lawyers: APS MANN
• Keywords: Income Tax; Interest on compensation; Motor Accident Claims Tribunal; Tax deduction at source
• Section: 260-A

Judgement Text

"ITA No.171 of 2010 -: 1 :- IN THE HIGH COURT FOR THE STATES OF PUNJAB AND HARYANA AT CHANDIGARH 1. ITA No.171 of 2010 Drawing & Disbursing Officer, Office of General Manager, Punjab Roadways, Ropar ... Appellant v. Income Tax Officer Ward 6(5) TDS Chandigarh ... Respondent(s) 2. ITA No.173 of 2010 Drawing & Disbursing Officer, Office of General Manager, Punjab Roadways, Ropar ... Appellant v. Income Tax Officer Ward 6(5) TDS Chandigarh ... Respondent(s) Date of decision: November 18, 2011. CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MR. JUSTICE G.S. SANDHAWALIA Present: Shri APS Mann, Additional Advocate General, Punjab for the appellant. Shri Yogesh Putney, Sr. Standing Counsel for the respondent. Hemant Gupta , J. (Oral): The State is in appeal under Section 260-A of the Income Tax Act, 1961 aggrieved against the order passed by Income Tax Appellate Tribunal (for short the Tribunal) arising out of the order dated 19.12.2008 passed in ITA No.737/Chandi/2006, pertaining to the assessment year 1999- 2000. The assessee has raised the following substantial question of law. ITA No.171 of 2010 -: 2 :- The appellant assessee provides transport facilities to the general public and some times, some of the buses are involved in accidents. The victim and/or his legal heirs claim compensation before the Motor Accident Claims Tribunal (MACT). Such compensation is deposited by the appellant/assessee along with interest in terms of the award passed by the MACT/Court. The Income Tax Officer returned a finding that the appellant/assessee is in default for not deducting the tax at source and passed a consequential order thereon. The stand of the assessee before the Income Tax Officer was that after preparing the draft of the payments to the claimants, the drafts are forwarded to the court for disbursement to the claimants and no direct payment was made to any individual. Since the assessee has not deducted the tax on the interest of such compensation, such an order was passed. The appeal against the said order was dismissed by the Commissioner of Income Tax (Appeals). The learned Tribunal remitted the matter to the Assessing Officer to determine the component of interest on delayed payment of compensation of accident claims. Still aggrieved, the assessee is in appeal before this Court. Learned counsel for the assessee has relied upon a Division bench judgment of this Court in ITA No.495 of 2009 (Dwaring and Disbursing Officer v. Income Tax Officer), decided on 30.3.2011. It has been held that the interest by the State along with amount of compensation is not taxable but the interest earned, by the victim and/or or his legal heirs stand on a different consideration on the amount so received. Learned counsel for the respondent has vehemently argued that the Tribunal has remitted the matter to the Assessing Officer to determine the amount of interest, if any, earned by the claimants after the amount was deposited. Hence, no interference is called for. The said argument is untenable. As per the stand of the assessee before the Assessing Officer, the amount of compensation along with interest has been deposited in court. Such amount does not include any interest earned by the claimants. In view of the said fact, the order passed by the Tribunal remitting the matter to the Assessing Officer runs counter to the judgment of this Court in ITA No.495 of 2009. ITA No.171 of 2010 -: 3 :- Therefore, the appeals are accepted. The order of Tribunal remitting the matter to the Assessing Officer is set aside. The questions of law are decided in favour of the assessee and against the revenue. [ Hemant Gupta ] Judge [ G.S. Sandhawalia ] November 16, 2011. Judge kadyan "