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Plea to scrap TDS on compensation to accident victims
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SME Times News Bureau | 16 Apr, 2019
A petition was filed in the Delhi High Court on Monday seeking quashing
of a provision which mandates deduction of tax on the interest accrued
upon the award or compensation granted by Motor Accident Claim Tribunal
(MACT) to the accident victims.
The plea was filed by advocate
Amit Sahni, who has sought quashing of Section 194A(3)(ix) of the Income
Tax Act, 1961 (as amended up-to-date), which mandates to deduct tax
upon the interest accrued upon the award and compensation granted by the
MACT.
He has sought to declare the provision as unconstitutional
as, according to him, it is in the direct conflict with the object and
spirit of the Social Welfare Legislation, Motor Vehicles Act, 1988.
"Hold
that no authority can deduct TDS upon the interest accrued upon the
award/ compensation awarded by Motor Accident Claim Tribunal (MACT)
under Section 194A(3)(ix) of Income Tax Act, 1961 and pass necessary
directions to the respondents in this regard," the plea said.
The Central Board of Direct Taxes (CBDT) is the body responsible for imposition of tax in the country, the petitioner said.
He
has sought direction to the insurance companies as well as banks not to
effect tax deduction at source (TDS) upon such interest on compensation
amount.
The plea is likely to come up for hearing on Tuesday.
"Normally,
interest received by a person is treated as income. However, in cases
of motor accident compensation, the interest is awarded because the
claims are awarded with some delay, which may be due to: late filing of
the compensation claim, investigation adjudication of claim and various
other factors, or because such claims are challenged before superior
courts," the plea read.
"Therefore, the interest awarded in a
motor accident claim is really an enhancement of the claim to compensate
for delays in awarding and finalising the claim it is, thus, a part and
parcel of the claim unlike in the case of a land acquisition
compensation where there are specific provisions under the Land
Acquisition Act for payment of interest on delayed payment of
compensation. The character of the interest in motor accident cases is
therefore the same as the compensation, that is, a personal receipt to
alleviate the suffering of the victims."
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