K. S. Jhaveri, J. - (1.) By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeal and confirmed the order of the CIT(A).
(2.) This count has admitted the appeal on 11.11.2009 has framed the following substantial question of law: "(i) Whether, on the facts and in the circumstances of the case the Tribunal was justified in holding penallty of Rs.384497/- u/s.217C of the Income Tax Act 1961 against the appellant and treated the appellant as defaulter u/s. 194A/201(1) of the Act, such conclusion is legally sustainable?"
(3.) Counsel for the appellant has contended that the issue is squarely covered by the decision of this Court in DB Income Tax Appeal No.137/2003 in the case of Divisional Manger, New India Assurance Company Ltd. vs. The Dy. Commissioner of Income Tax (TDS), Income Tax Office, decided on 22.11.2016 and more particularly in para 3 to 6, this court has observed as under: "3. The broad facts of the case are that appellant is Divisional Manager of Assurance Company which is engaged in the business of General Insurance (Non Life Insurance). During the course of regular business of the insurance company has to pay compensation claims to the claimants as awarded by Motor Accidents Claims Tribunal which includes the amount of claim and interest thereon from the date of claim petition to the date of award of such claim in terms of Section 171 of the Motor Vehicles Act, 1988. The CIT (A) in his order u/s 201(1) read with Section 194A observed that the company has made payment of Rs. 35,79,826/- towards interest on compensation claims awarded by the MACT to various claimants during the year under consideration. He stated that the company was liable to deduct tax at source u/s 194A on the interest payment so made. 3.1 Counsel for the appellant Mr.Jhanwar has relied upon decision of the Allahabad High Court in Commissioner of Income Tax Vs. Oriental Insurance Co. Ltd., 2012 211 Taxman 369 (Allahabad), more particularly para 43, 44 which reads as under: "43. The award under the Motor Vehicle Act is like a decree of the court. It do not come within the definition of income as mentioned in Section 194A(1) read with Section 2(28A) of the Income Tax Act. Proceedings regarding claim under Motor Vehicle Act are in the nature of a garnishee proceedings under which the MACT has a right to attach the judgment debt payable by the insurance company. Even in the MAC award, there is no direction of any court that before paying the award, the insurance company is required to deduct the tax at source. In view of All India Reporter Ltd. Vs. Ramchandra D. Datar , if no provision has been made in the decree for deduction of tax, before paying that debt, the insurance company cannot deduct the tax at source from the amount payable to the legal heirs of the deceased. 44. In Commissioner of Income Tax Vs. Chiranji Lal Multani Mal Rai Bahadur (P.) Ltd. , Ghaziabad Development Authority Vs. Dr. N.K. Gupta , Commissioner of Income-tax Vs. H.P. Housing Board , Commissioner of Income-tax Vs. Sahib Chits (Delhi) (Pvt.) Ltd. , it has been clearly held that if interest is awarded by the court for loss suffered on account of deprivation of property or paid for breach of contract by means of damages or were not paid in respect of any debt incurred or money borrowed, shall not attract the provisions of Section 2(28A) read with Section 194A(1) of the Income Tax Act." 4. Another decision of Gujarat High Court in New India Assurance Co. Ltd. Vs. Bhoyabhai Haribhai Bharvad,2016 72 Taxmann.com 335 (Gujarat) wherein it been held as under: "12. It would, therefore, be wholly incorrect to read the current provision of sub section (3) of Section 194A to argue that the cases of income credited by way of interest on compensation awarded by the Claims Tribunal is no longer part of sub section (3) for exclusion from purview of sub section (1) of Section 194A. In other words, worded slightly differently. The case of credit of interest on compensation awarded by the Claims Tribunal continues to find place in the exclusion clause contained in sub section (3) of Section 194A. In fact, it would prima facie appear that the ceiling of Rs. 50,000/- per annum for such exclusion is now done away with in case of crediting of interest on compensation awarded by the Claims Tribunal while retaining such limit in cases of payment of interest on such compensation. However, we need not thresh out this last part of the issue since admittedly, in the present case, for none of the years under consideration, the interest income exceeded Rs. 50,000/-. In fact, this Court in case of Smt. Hansagauri Prafulchandra Ladhani and ors vs. The Oriental Insurance Company Ltd provided for further splitting up of this ceiling of Rs. 50,000/- per claimant basis. Looked from any angle, the insurance company was not justified in deducting tax at source while depositing the compensation in favour of the claimants. It therefore, cannot avoid liability of depositing such amount with the Claims Tribunal. The Claims Tribunal had committed no error in insisting on the insurance company in making good the shortfall." 5. Taking into consideration the aforesaid, he contended that in view of the fact that issue relates prior to amendment, the issue is squarely covered by these two judgments. 6. However, Mr. Mathur appearing for the Department contended that in view of Division Bench judgment of this Court reported in Kailash Narain Gupta Vs. Commissioner of Income Tax, 1997 225 ITR 921 wherein it has been held that the compensation is not an income and he has also relied on decision of Single Bench of Karnataka High Court in Divisional Manager, New India Assurance Co. Ltd. Vs. IncomeTax Officer & Anr., 2005 275 ITR 227.";