Gujarat HC Ruled That Interest Awarded by MACT not Chargeable Under Income Tax

Motor Accident Vehicle Law Insider

Shivani Thakur

Published on: May 6, 2022 at 17:28 IST

The Gujarat High Court Bench of Justices JB Pardiwala and Justice Nisha M Thakore have ruled that interest awarded by MACT (Motor Accident Claim Tribunal) under Section 171 of Motor Vehicles Act of 1988 will not be Taxable under the Income Tax Act of 1961.

In this Case, the insurance company had deposited the Tax Deducted at Source Amount with the Income Tax Department on 26/03/2019 and had also filed the correction statement for 26Q for Quarter 1 of FY 2017-18 and this resulted in a demand of interest of Rs 69,741 under Section 201(1A) of Income Tax Act of 1961.

As per the insurance company, in view of the Amendment to Section 194A, the Tax Deducted at Source would have to be deducted from the actual payment of interest of compensation and despite this amendment, the insurance companies complained to deposit the amount with the Tribunal itself.

After hearing the Submissions, the Court ruled that interest awarded in a motor accident claim matters from the date of Claim Petition till the passing of award or in Case of Appeal, till High Court’s Judgment to such Appeal will not be eligible for Taxation as it is not income.

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