‘Can’t treat accident relief as income and levy tax’

Justice MV Muralidharan, while dismissing a civil revision petition moved by the TNSTC, Salem, said “This court arrives at the conclusion that the compensation awarded or the interest accruing therein from the compensation awarded by Motor Accidents Claims Tribunal (MCAT) cannot be subjected to TDS.” 

He also held that “the same cannot be insisted to be paid to the tax authorities since the compensation and the interest awarded therein does not fall under the term ‘income’ as defined under the Income Tax (I-T) Act,1961.” 

The matter relates to the Rs 4.23 lakh compensation awarded by the lower court to one Chinnadurai. But, TNSTC filed a memo deducting Rs 24,017 as TDS (tax deducted at source). This was objected by the claimant in the lower court, which in turn, directed TNSTC to deposit Rs 30,774 towards the account of the claimant. Aggrieved by the order, TNSTC filed the present Civil Revision Petition arguing that as per section 194A and 156 of the I-T Act,1961 the interest portion awarded by the MCAT should be subject to TDS. 

However, Justice Muralidharan said, “The MVAct is one such legislation which has been passed with a benevolent intention for compensating the victims who have suffered bodily disablement or loss of life and the I-T Act which is intended for tax collection by the State cannot put spokes in the effective enforcement of the act.”