Tds on compansation
amit
(Querist) 19 August 2013
This query is : Resolved
Sir,
Family of deceased received compansation in motor accident case. While depositing the compasation insurance company deducted TDS.
My question is that whether TDS can be dedcuted on compansation received under MOTOR VEHICLE ACT by insurance company?
whether minors receiving compansation are also liable for TDS?
whether widow(housewife) not assesed to Tax is also liable for TDS?
Compansation is disributed among HIERS of deceased but TDS was deducted on whole amount.whether it was justified?
Is there any CASE LAW regarding above matter?
Raj Kumar Makkad
(Expert) 19 August 2013
TDS has rightly been deducted. You shall get form 16 against deposit of such deducted amount so that you may file your IT return and if no tax liability is fastened clubbing the entire income then you may claim its refund.
Minor and widow are not exception and same rule applied for them.
Rajendra K Goyal
(Expert) 20 August 2013
Whether the compensation was paid on the basis of court order.
In this respect following is referred:
Income Tax Appellate Tribunal - Delhi
Oriental Insurance Company Ltd. vs Income Tax Officer on 27 September, 2004
Equivalent citations: (2005) 96 TTJ Delhi 589
Bench: P Parikh, B Saini
Now coming back to the facts of this case, it is clear from the above discussion that what the assessee-company has paid to the claimants through the MACT may be known as compensation or interest but the assessee-company has in fact paid the decretal amount through the Court. The assessee-company has therefore, no discretion whatsoever to deduct any TDS on the amount of decree payable to the claimants. The assessee shall have to satisfy the decree of the Court by all means. The assessee-company has to indemnify third parties, i.e., the legal heirs of the deceased or injured persons who suffered bodily injury or death by use of the motor vehicle as per insurance policy and award (decree) passed by Motor Accident Claim Tribunal.
Rajendra K Goyal
(Expert) 20 August 2013
A para of news item dated 18.12.2009. :
Insurance co can't deduct TDS on third party claim
Friday, Dec 18, 2009, 1:39 IST | Place: Mumbai | Agency: DNA
Hetal Vyas
Insurance companies, while settling third party insurance claims, cannot deduct tax at source on the interest earned on the compensation amount.
Insurance companies, while settling third party insurance claims, cannot deduct tax at source (TDS) on the interest earned on the compensation amount, ruled Bombay high court.
A division bench of justice Sharad Bobde and justice SJ Kathawalla, in an interim order, directed the New India Assurance Company not to deduct tax from the amount of interest to be paid over a compensation granted to a widow, her two children and her mother-in-law.
The court was hearing an application filed by Geeta Shah, her two children and her mother-in-law. Geeta moved the court early this month, after the insurance company, that had settled her third party claim following her husband's death in a road accident, had asked her to submit her PAN card, so that they can deduct tax at source from the interest earned on the compensation amount.
"We see no reason why the amount that is to be withdrawn by the applicants should not be taken as year to year income. Accordingly, we direct the company that the amount (of compensation) shall be deposited without deduction of tax at source," observed the court.
R.K Nanda
(Expert) 20 August 2013
nothing to add.
Raj Kumar Makkad
(Expert) 21 August 2013
There is no dispute over the satisfaction of the decree of the MACT but the querist is interested to know only about the applicability of the TDS while getting compensation by the petitioner claimants.
