Supreme Court Seeks Union's View On TDS Liability On Interest Accrued On Motor Accident Compensation

The Supreme Court on October 1 sought the views of the Union and Income Tax Department on the applicability of Tax Deduction at Source (TDS) on the interest liability over and above Rs. 50,000 compensation awarded in Motor Accident Claims. 

A bench of Justices M.M. Sundresh and Justice Aravind Kumar was hearing a writ petition which sought a slew of directions to facilitate the process of disbursement of compensation as well as expediting the matter before the Motor Accident Claim Tribunal (MACT).

The amicus curiae appointed by the Court, N. Vijayaraghavan informed the Court of the view taken by the Bombay High Court in Rupesh Rashmikant Shah v. UOI, that interest awarded in the motor accident claim from the date of the Claim Petition till the passing of the award or appeal, would not be eligible to tax, not being an income. He submitted that the Union/Income Tax Dept has not challenged this decision according to his knowledge.

The Court sought the response of the Union on this aspect. 

By an order dated November 16, 2021, the Supreme Court had acknowledged the disparity in the TDS rate in Motor Accident Claims. As per it, TDS is either 10% to 20% depending on whether the claimants have a Pan Card or not.

The Court stated that this issue can be redressed by the direction that the Legal Services Authority or any agency or Mediation Group should assist the claimant in obtaining a Pan Card, where the claimant does not have one, to avoid a 20% deduction of tax at source.

In 2022, the Court had asked the Centre to examine the issue of money deduced from motor accident compensation awards as Tax Deducted at Source (TDS) lying as unclaimed refunds with respect to claimants who may not come within the bracket of Income Tax assesses.

Case Details: BAJAJ ALLIANZ GENERAL INSURANCE COMPANY PRIVATE LTD.v. UOI & Ors, W.P.(C) No. 534/2020