High Court (India)

April 16, 2019

CBDT asked by Delhi HC to consider if interest on compensation by Motor Accident Claim Tribunal is non-taxable

Delhi High Court

The Central Board of Direct Taxation (CBDT) has been directed by the Delhi High Court to consider if the interest accrued upon compensation awarded by the Motor Accident Claim Tribunal (MACT) can be declared non-taxable.

A petition seeking to quash Section 194 A (3) (ix) of the Income Tax Act, 1961, was being heard by a Division Bench of Justices S Muralidhar and IS Mehta.. Deduction of tax on interest accrued upon the award granted by the MACT is mandated by the Section.

The CBDT has been directed by the Court to consider the plea as a representation and decide on the same before June 30.

Advocate Amit Sahni filed the petition stating that the Section is unconstitutional and in direct conflict with the object and spirit of the Motor Vehicles Act, 1988, a social welfare legislation.

The petition argued that as compensation receipts are not taxable under the Income Tax Act, interest under Motor Accident claims should not be made taxable.

The Court has asked the CBDT to also consider a former representation dated December 14, 2018.

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