Oriental Insurance Co. Ltd. V. Union of India and Others and Income Tax Department and K. Aboobecker Sidhiqe and State Consumer Disputes Redressal Commission

WP(C)/26393/2011

AI Insights

The case revolves around the Oriental Insurance Company Ltd., which was directed by the Consumer Redressal Forum to pay compensation along with interest to a complainant whose vehicle was stolen. The main legal question was whether TDS should be deducted from the interest component of the compensation. The Consumer Redressal Forum and subsequently the SCDRC had ruled that the interest is part of the compensation and not a taxable revenue receipt, leading to the insurance company's appeal to the High Court of Kerala. The High Court upheld the lower forums' decisions, emphasizing that the interest awarded in this context is not subject to TDS as it is part of the compensation for the loss suffered by the complainant.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 816517 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 12-06-2023
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v. Ghanshyam (HUF), Commissioner of Income tax, Rajkot v. Govindbhai Mamaiya
• Laws Referred To: Income Tax Act, 1961, Land Acquisition Act, 1894
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH
• Assessee Lawyers: K N SIVASANKARAN; SUNIL SHANKER
• Keywords: Compensation; Consumer Redressal; Interest; Taxability; TDS
• Section: 28A; 34

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE AMIT RAWAL MONDAY, THE 12TH DAY OF JUNE 2023 / 22ND JYAISHTA, 1945 WP(C) NO. 26393 OF 2011 PETITIONER/S: M/S.ORIENTAL INSURANCE CO.LTD. JASEELA COMPLEX, NILAMBUR ROAD, MANJERI, REPRESENTED BY DIVISIONAL MANAGER. BY ADVS. SRI.K.N.SIVASANKARAN SRI.SUNIL SHANKER RESPONDENT/S: 1 UNION OF INDIA AND OTHERS SECRETARY, MINISTRY OF FINANCE,, NEW DELHI- 110 001. 2 INCOME TAX DEPARTMENT DEPARTMENT OF REVENUE,, MINISTRY OF FINANCE, REPRESENTED BYITS, SECRETARY, NEW DELHI - 110 001. 3 K. ABOOBECKER SIDHIQUE PALLIYALIL HOUSE, KUNNIPARAMBA,, P.O. KONDOTTY, MALAPPURAM - 676 505. 4 STATE CONSUMER DISPUTES REDRESSAL COMMISSION, THIRUVANANTHAPURAM - 695 001. BY ADV SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 12.06.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 26393 OF 2011 2 JUDGMENT The issue involved in the present case is whether the opposite party in a dispute raised before the consumer redressal forum by an affected party when directed to pay compensation along with the future interest, is liable to deduct the TDS on the payment of the interest or not. 2. In the present case the petitioner is Oriental Insurance Company Ltd. It was arrayed as respondents in OP No.3 of 2001 preferred by the respondent No.3 regarding the theft of the vehicle. Consumer Redressal Forum vide judgment dated 21.5.2003 held that the complainant was entitled to compensation of Rs.1,25,655/-. The aforementioned order was assailed before the Kerala State Consumer Disputes Redressal Commission (SCDRC). In an appeal bearing No.754 of 2003. SCDRC vide judgment dated 7.9.2010, partly allowed the appeal and modified the order of the CDRF whereby the opposite party ie., the petitioner was held liable to pay sum of Rs.98,235/- to the complainant with interest at the rate of 9% from 10.10.2000 till realization and cost of Rs.2000/- to be paid within a period of 3 months from the receipt of copy of the order and on account of failure it would entail into interest at 12% per annum from the WP(C) NO. 26393 OF 2011 3 date of order of the Commission. Petitioner, opposite party on 7.12.2010 is stated to have deposited an amount of Rs.1,72,766/- before the Consumer Redressal forum which has been received by the complainant. 3. Learned counsel appearing on behalf of the petitioner submitted that on the basis of the order of the SCDRC, the amount was calculated as Rs.1,90,899/- TDS of Rs.18,133/- was deducted which was paid by Challan No.782411 dated 2.2.2011 and Challan Sl. No.13, TAN No.CHNTO1157C. 4. Complainant instituted an execution proceedings No.46/2010 before the CDRF. CDRF vide order dated 23.2.2011 held that the interest is part of the compensation and therefore capital receipt was not taxable. I.A was filed requesting for further grant of the time which was rejected by the CDRF vide order dated 28.2.2011. The order of the CDRF was challenged before the SCDRC in a revision petition bearing No.21 of 2011. The same was affirmed vide order dated 4.5.2011. It is in these circumstances, the petitioners have approached this Court for adjudication of the controversy involved in this case under Article 226 of the Constitution of India. 5. I have heard the learned counsel for the parties and appraised the paperbook. For answering the question raised in WP(C) NO. 26393 OF 2011 4 the present petition it would be appropriate to extract the relevant portion of the order of the State Consumer Disputes Redressal Commission. In the circumstances the order of the Forum is modified as follows. The 2nd opposite party/appellant would be liable to pay sum of Rs.98,235/- to the complainant with interest at 9% per annum from 10.10.2000 til realization and cost of Rs.2000/-. The amount is to be paid within 3 months from the date of receipt of copy of this order failing which the complainant would be entitled for interest at 12% per annum from the date of this order of this Commission. In the circumstances the appeal is allowed in part as above. 6. On the perusal of the same, amount of compensation awarded by the Disputes Forum was reduced from one lakh and odd amount to 98,235/- with interest at 9% per annum from 10.10.2000 till realization and cost of Rs.2000/- and in case of failure to deposit further interest of 12% per annum. The interest @ 9% has been awarded as the petitioner insurance company/opposite party before the State Consumer Forum rejected the claim of the respondent No.3 claimant, for compensation on account of the theft of his vehicle. It is not a bounty but on account of rejection of his claim. No doubt the expression interest occurring in sub Section 28A of Section 2 of the Income Tax Act, 1961 widens the scope of the interest for the purpose of the Act. The amended definition of interest was though not intended to exclude the revenue receipt of interest on delayed WP(C) NO. 26393 OF 2011 5 payment of compensation from taxability but unless there is an exemption, there cannot be any deduction of TDS. In the instant case, it was not a compensation as the compensation along with the statutory provisions of the interest has been granted under Section 28 of the erstwhile Land acquisition Act, 1894. That interest would obviously be a revenue receipt. But in case interest is paid under Section 34 for a delay, it would not be construed to be revenue receipt but a compensation amount. 7. Supreme Court in Commissioner of Income Tax v. Ghanshyam (HUF) 2009 (315) ITR 1 (SC) and Commissioner of Income tax, Rajkot v. Govindbhai Mamaiya (Civil Appeal No.8103 of 2009 decided on 4.9.2014, held that if the compensation is granted under Section 28, it would be a revenue receipt. But in the instant case, for the sake of repetition, it was not compensation, therefore would not be exigible to deduction of tax. Orders of the authority ordering that the compensation would not be exigible to TDS are perfectly legal and justified. It is not known whether the petitioner has deposited the amount deducted as the revenue, for, this Court vide interim order dated 4.10.2011 while admitting the aforementioned writ petition directed the petitioner to deposit the TDS with the CDRF. In case the petitioner has not credited the amount in the revenue, then the WP(C) NO. 26393 OF 2011 6 amount of TDS deposited with the CDRF is ordered to be paid to the consumer/respondent No.3, party respondent. If at all, the petitioner have over and above the amount deposited the same may be ordered to be refunded to the petitioner. With the aforementioned observation, the writ petition stands disposed of. Sd/- sab AMIT RAWAL JUDGE WP(C) NO. 26393 OF 2011 7 PETITIONER'S EXHIBITS: Exhibit P1: True copy of judgment of the SCDRC in Appeal No. 754 of 2003 07-09-2010 Exhibit P2: True copy of order of the CDRF, Malappuram in EA 46/2011 23-02-201 Exhibit P3: True copy of CDRF order in IA 54/2011 7. "