Section 194A (3) (ix) of the Income Tax Act 1961 provides for deduction of tax at source only if the interest income of the claimant paid or credited during the financial year on compensation granted by Motor Accident Claims Tribunal exceeds Rs.50,000/-. The question is whether the interest paid or credited during financial year means interest accrued till the date of payment or is it required to be bifurcated as per year of accrual for each claimant. Say e.g. Claim filed in 2005 is allowed in 2015 with interest. Whether the TDS provisions would apply for aggregate interest from 2005 till 2015 exceeding Rs.50,000/- per claimant or the interest per year has to exceed Rs.50,000/- for deductibility under said provisions?? There are conflicting judgments of ITAT as well as various High Courts and unfortunately no authoritative pronouncement of Apex Court is found. Can anybody throw light on the subject??
2 Replies
Swami Ayyappa Nuli
(TAX ADVISOR & CONSULTANT AT G.S.T SUVIDHA CENTER)
(1372 Points)
Replied 04 March 2015
Sir, As per TDS provisions u/s.194A(3)(xi), Interest credited or paid by Motor Accident Claims tribunal if exceeds Rs.50,000 liable to deduct TDS on CREDIT or PAYMENT of Claim along with interest. The term CREDITED has more relevance to decide whether TDS to be deducted or not. In your case even though claimant lodged claim in 2005, it is CONFORMED by Motor Accident Claims Tribunal in year 2015. The time lag is due to investigation carried out by such tribunal to find out the facts and circumstances of case.Once investigation completed, claim will be conformed. Unless tribunal conformed claim, Tribunal can not credit claimant for Claim and Interest amount in its books. so in your case Tribunal credited Claimant account in year 2015 and payment will be made after credit. so as per TDS provisions you have to consider actual credit entry in books. In your case as credit entry is passed in books in 2015, if such credit entry passed exceeds Rs.50000, liable to deduct TDS u/s.194A in year 2015. In TDS provisions you have to consider CREDIT (DUE) or PAYMENT but not ACCRUAL. Furthur to support above, Claimant have no right for claim unless Tribunal conforms claim and unless Tribunal conforms claim he, need not to show in his Return above income under the head Income from other sources.
DEVENDRANATH SHRIKANT JOSHI
(Advocate)
(30 Points)
Replied 04 March 2015
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