NEW DELHI: The Delhi High Court on Tuesday asked the Centre and the Central Board of Direct Taxes (CBDT) to come to a decision the problem of deduction of tax at the passion received on reimbursement through a road accident victim.
A bench of justices S Muralidhar and I S Mehta stated that the petition, which came up for hearing on Tuesday, searching for quashing of a provision beneath the Income Tax regulation which mandates deduction of tax at the passion on reimbursement be treated as a supplementary representation through the authorities.
The courtroom asked the Ministry of Finance and the CBDT to come to a decision through June 30 the supplementary representation and a representation given through the petitioner in December 2018, and move an in depth order.
It also asked the authorities to provide a non-public hearing to petitioner recommend and activist Amit Sahni, if required, and inform him concerning the choice taken.
The courtroom's order came after the counsel for the CBDT stated that the petitioner's earlier representation was pending prior to the authorities.
The plea stated that the receipts of reimbursement are non-taxable beneath the Income Tax Act and due to this fact, the passion beneath the motor accident claims should not be made taxable.
"But the insurance companies deduct TDS on the interest accrued upon the compensation awarded by the Motor Accident Claims Tribunal (MACT) in view of section ... of the Income Tax Act, 1961," it stated.
It stated the reimbursement awarded through the MACT established beneath the Motor Vehicle Act, 1988 is supposed to change the lack of potential source of revenue of the victim, and typically, is in truth made up our minds as a multiple of the victim's source of revenue.
"Under tax laws, it is well settled that if a receipt is meant to substitute a source of income, it is a capital receipt. Capital receipts are generally not taxable as income unless they are specifically roped in into the definition of income as such compensations is not specifically included, they are therefore not taxable," the petition stated.
It added that the target of reimbursement through the tribunal is to mitigate the impact of the distress due to the accident, so that the injured or the dependents do not have to face compulsions of lifestyles on account of discontinuance of the source of revenue earned through the victim.
"The insurance companies do not readily admit the claim of a person under the Motor Vehicle Act and the victim has to approach the MACT and many times it takes years and some time decades either before the tribunal or before the higher courts to finally determine the compensation payable to the victim. Therefore, the victim cannot be made liable for delayed payment of compensation," it stated.
The plea, which has arrayed the Ministry of Finance and the CBDT as events, stated it has also made a representation to the respondents in December 2018 but no motion was taken in this regard.
A bench of justices S Muralidhar and I S Mehta stated that the petition, which came up for hearing on Tuesday, searching for quashing of a provision beneath the Income Tax regulation which mandates deduction of tax at the passion on reimbursement be treated as a supplementary representation through the authorities.
The courtroom asked the Ministry of Finance and the CBDT to come to a decision through June 30 the supplementary representation and a representation given through the petitioner in December 2018, and move an in depth order.
It also asked the authorities to provide a non-public hearing to petitioner recommend and activist Amit Sahni, if required, and inform him concerning the choice taken.
The courtroom's order came after the counsel for the CBDT stated that the petitioner's earlier representation was pending prior to the authorities.
The plea stated that the receipts of reimbursement are non-taxable beneath the Income Tax Act and due to this fact, the passion beneath the motor accident claims should not be made taxable.
"But the insurance companies deduct TDS on the interest accrued upon the compensation awarded by the Motor Accident Claims Tribunal (MACT) in view of section ... of the Income Tax Act, 1961," it stated.
It stated the reimbursement awarded through the MACT established beneath the Motor Vehicle Act, 1988 is supposed to change the lack of potential source of revenue of the victim, and typically, is in truth made up our minds as a multiple of the victim's source of revenue.
"Under tax laws, it is well settled that if a receipt is meant to substitute a source of income, it is a capital receipt. Capital receipts are generally not taxable as income unless they are specifically roped in into the definition of income as such compensations is not specifically included, they are therefore not taxable," the petition stated.
It added that the target of reimbursement through the tribunal is to mitigate the impact of the distress due to the accident, so that the injured or the dependents do not have to face compulsions of lifestyles on account of discontinuance of the source of revenue earned through the victim.
"The insurance companies do not readily admit the claim of a person under the Motor Vehicle Act and the victim has to approach the MACT and many times it takes years and some time decades either before the tribunal or before the higher courts to finally determine the compensation payable to the victim. Therefore, the victim cannot be made liable for delayed payment of compensation," it stated.
The plea, which has arrayed the Ministry of Finance and the CBDT as events, stated it has also made a representation to the respondents in December 2018 but no motion was taken in this regard.
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Reviewed by Kailash
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April 16, 2019
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