Law:

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Section 194A of the Income-tax Act, 1961 - Deduction of tax at source - Interest other than interest on securities - Motor Accidents Claims Tribunal had passed a decree against petitioner-insurance company - In ensuing execution proceeding, petitioner contended that it was not liable to deposit entire amount of outstanding dues since it had deducted an amount as tax deducted at source from amount of interest payable by it - However, Tribunal directed petitioner to deposit entire outstanding dues as awarded to claimants - Whether in view of specific provision contained in section 194A(3)(ix), petitioner was duty-bound to deduct amount of income-tax from amount of interest payable by it - Held, yes FACTS The Motor Accidents Claims Tribunal had passed a decree against the petitioner-insurance company. In the ensuing execution proceeding, the petitioner contended that it was not liable to deposit the entire amount of outstanding dues since it had deducted an amount as tax deducted at source under section 194A from amount of interest payable by it. The Tribunal held that the amount of interest awarded to the claimants became the debt and lost its character as interest and, therefore the petitioner was duty bound to deposit the entire amount of debt. On petition : HELD Section 194A(3)(ix) has been specifically made applicable to the interest payable on the amount of compensation awarded by the Motor Accidents Claims Tribunal. [Para 8] Section 194A(3)(ix) has been inserted with effect from 1-6-2003. Admittedly, the amount of interest had been deposited by the petitioner-insurance company after the said provision came into effect. In view of the aforesaid specific provision, the insurance company was duty bound to deduct the amount of income-tax from the amount of interest payable by it. In view of the express statutory provision in section 194A(3)(ix), the decree passed against the petitioner should be modified accordingly. [Para 9] CASES REFERRED TO Islamic Investment Co. v. Union of India [2002] 122 Taxman 719 (Bom.) [Para 4] and All India Reporter Ltd. v. Ramchandra D. DatarAIR 1961 SC 943 [Para 6]. P.V. Nanavati for the Applicant. Zubin F. Bharda for the…

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