"Supreme Court Seeks Union's Stand on TDS Liability for Interest on Motor Accident Compensation"

On October 1, the Supreme Court asked the Union and the Income Tax Department to give their views on whether Tax Deduction at Source (TDS) applies to interest exceeding ₹50,000 on compensation awarded in Motor Accident Claims. A bench of Justices M.M. Sundresh and Aravind Kumar heard a petition seeking directions to speed up compensation disbursement and cases before the Motor Accident Claims Tribunal (MACT). The amicus curiae, N. Vijayaraghavan, informed the Court about a Bombay High Court ruling in the case of Rupesh Rashmikant Shah v. UOI. The court had decided that interest awarded from the date of the claim petition until the final award or appeal is not taxable since it's not considered income. Vijayaraghavan noted that, to his knowledge, this decision hasn’t been challenged by the Union or Income Tax Department. The Supreme Court had previously addressed TDS disparities in Motor Accident Claims, where the deduction ranges from 10% to 20%, depending on whether the claimant has a PAN card. The Court suggested that claimants without a PAN card should receive help from the Legal Services Authority or other agencies to obtain one, avoiding a higher TDS rate. In 2022, the Court also asked the Centre to look into unclaimed TDS refunds from motor accident compensation awards for those not liable to pay income tax. Case: BAJAJ ALLIANZ GENERAL INSURANCE COMPANY PRIVATE LTD.v. UOI & Ors, W.P.(C) No. 534/2020 www.legalmeet.in