ADITYA NATH MITTAL, J. - (1.) THESE Income Tax Appeals have been admitted on the following substantial questions of law:- "1. Whether on the facts and circumstances of the case, the Tribunal is legally correct in allowing relief to the tax deductor by cancelling the TDS liability imposed by the ITO (TDS) on the amount of interest paid on delayed payment of compensation for all the assessment years 1998-99 to 2002-03? 2. Whether on the facts and circumstances of the case the Hon'ble Tribunal is legally correct in holding that the interest paid on delayed payment of compensation under MACT does not come with in the ambit of section 2(28A) of the Income-tax Act, 1961 and therefore, the tax deductor was not under any legal obligation to deduct Income-tax at source (TDS) on the amount of decree which is known as interest on delayed payment of compensation?"
(2.) THE brief facts of the case are that the respondent Insurance Company paid compensation and interest thereon under the Motor Vehicle Act to the claimants without complying with the provision of Section 194A of the Income Tax Act, 1961. It was the legal obligation of the respondent to deduct tax on the amount of interest under Section 194A of the Income Tax Act, 1961. THE Assessing Authority established that the respondent has failed to deduct the income tax on the amount of interest and accordingly they were liable to deposit the amount of short deduction of tax (TDS) under Section 201(1) along with interest under Section 201(1)A of the Act. The respondent preferred an appeal being Appeal No.223 to 227/ CIT (A)-1/ ITO (TDS)/ Agra/ 2002-2003/ 187 before the Commissioner, Income Tax (Appeals)-1, Agra, who vide dated 28.3.2003 confirmed the action of the Assessing Authority for all the five assessment years. The Insurance Company filed second appeals before the I.T.A.T., Agra, who decided the appeals in favour of the respondent and the issue was decided against the revenue and in favour of assessee. The decision of the I.T.A.T. has been challenged before us by the revenue.
(3.) HEARD Sri Shambhu Chopra, learned counsel for the appellant and Sri R.R. Agarwal for the respondent. Learned counsel for the revenue has submitted that it was the responsibility of the payer of interest to deduct the tax on such payment of interest because Section 2(28A) clearly envisages that interest means interest payable at any manner in respect of money borrowed or debts incurred (including a deposit, claim or other similar right or obligation) and includes any services fee or other charges in respect of the money borrowed or debt incurred or in respect of any credit facility which has not been utilized. The Tribunal has not gone through the citation in Bikram Singh and others. Land Acquisition Collector and others reported in 224 ITR 551(SC), in which it was held that "interest paid on the delayed payment of the compensation is a revenue receipt eligible to tax under Section 4 of the Income Tax Act, 1961". It has further been submitted that the decisions of the I.T.A.T. in the cases of New India Assurance Company Limited and the Oriental Insurance Company Limited have not been accepted by the revenue thus the I.T.A.T. is not legally correct in allowing relief to the tax deduction and holding that the interest paid on delayed payment of compensation under M.A.C.T. does not come within the ambit of Section 2 (28A) of the Income Tax Act, 1961.;