Insurance company to pay TDS in accident cases: HC
Saurabh Malik
Chandigarh, August 8
In a significant judgment, the Punjab and Haryana High Court has made it clear that the insurance company will pay the amount of tax deducted at source (TDS) to claimants in motor accident cases, if the interest on compensation is paid prior to June 1, 2015 ndash; when an amendment was carried out in a clause of the Income Tax Act.
Justice Arvind Singh Sangwan also made it clear that the insurance company, in turn, may seek refund from the income tax authorities by filing a revised income tax return.
Justice Sangwan asserted: “Where the interest on the compensation is actually paid after June 1, 2015, which is exceeding Rs 50,000 per claimant per financial year, the insurance firm will pay on securing ‘Form 15-G’ of Rule 29-C of the Income Tax Act/Rules”. An insurance company is relieved of its obligation of TDS payment when the claimant has furnished a declaration in Form 15-G for each financial year.
The directions came on a bunch of petitions filed by insurance firms. The common question of law involved in the pleas before Justice Sangwan was: “Can the directions be issued to judgment debtor-insurance company to deduct TDS at source on the amount of interest paid on the compensation under the Income Tax Act, 1961, read with Motor Vehicles Act, 1988.” The question arose out of the different orders passed by the Motor Accident Claims Tribunal.
Justice Sangwan asserted the insurance firm, while depositing interest exceeding Rs 50, 000 per claimant per year would file a “calculation” before the Motor Accident Claims Tribunal (MACT) as to how much TDS was to be deducted.
At the first instance, the insurance firm would apply to the MACT for obtaining “declaration ‘Form 15-G'” from the claimants at the time of making payment with interest in order to get “relief of responsibility or obligation towards the income tax department”. The MACT would release payment in favour of claimants after the requisite form was signed or thumb-marked by claimants or guardian.
Justice Sangwan added prior to the amendment of the Income Tax Act with effect from June 1, 2015, no interest would be deductable at source even if the interest was beyond Rs 50, 000. As such, the insurance firm was required to pay “the interest of compensation accrued to the claimants prior to June 1, 2015, even if the TDS is deposited with the income tax authorities at that time and the claimants cannot be burdened with filing of return for seeking refund for any fault of the insurance company”.
