Chennai: In a far reaching judgment, which will be beneficial to victims of road accidents, the Madras high court has held that compensation or the interest accruing from compensation awarded by Motor Accident Claims Tribunal cannot be subjected to Tax Deduction at Source (TDS).
The same cannot be insisted to be paid to the tax authorities since the compensation and the interest awarded therein do not fall under the term ‘income’ as defined under the Income Tax Act.
Justice M.V.Muralidaran gave the ruling while dismissing a petition from Tamil Nadu State Transport Corporation, which challenged an order of MACT, Dharmapuri, directing the corporation to deposit the deducted amount of TDS to the account of the claimant Chinnadurai.
“If there is a conflict between social welfare legislation and taxation legislation, then, this court is of the view that social welfare legislation should prevail since it sub-serves larger public interest. The Motor Vehicles Act is one such legislation which has been passed with a benevolent intention for compensating the accident victims who have suffered bodily disablement or loss of life and the Income Tax Act, which is primarily intended for tax collection by the State cannot put spokes in the effective and efficacious enforcement of the Motor Vehicles Act.
In fact, if one might deeply analyse, it could be seen that there is no direct conflict between any provisions of the Income Tax Act and the Motor Vehicles Act and it is only by the interpretation of the provisions the concept of compulsory payment of TDS has crept into the realm of compensation payment in motor vehicle accident cases”, the judge said.
