Section 194A of Income Tax Act, 1961—TDS u/s 194A on interest as accidental claim—In the instant case,  the insurance company has deducted TDS u/s 194A on interest component payable on the compensation amount.

Held that—interest awarded by the Motor Accident Claims Tribunal on a compensation is also a part of compensation upon which income tax is not chargeable as also held by the Division Bench of this Court in Court on its own motion vs. The H.P. State Cooperative Bank Ltd. and others reported in 2014 (Suppl.) Him.L.R. (DB) 2575 and reiterated in CWP No. 460 of 2014, titled Shiv Ram Sharma vs. Union of India and others, and other connected matters vide decision dated 3rd June, 2015..

In view of above said decision, deduction of income tax by petitioner/Insurance Company on the awarded compensation and interest accrued thereon is illegal and is contrary to the law of land.

In view of above discussion, this petition is disposed of directing respondent No. 3Income Tax Officer, Sector2, Panchkula to refund the TDS to the petitioner/Insurance Company within ten weeks from date of receiving information thereof, which shall be supplied by petitioner/Insurance Company within two weeks from today, as per Rules applicable.[NATIONAL INSURANCE COMPANY LIMITED VERSUS INDRA DEVI AND OTHERS] [2018] 6 ITCD Online (141) [ HIMACHAL PRADESH HIGH COURT]