Compensation by MACT not subject to TDS : Madras HC

Keeping up the spirit of social jurisprudence evolved by writ courts in catena of cases beginning from Maneka Gandhi, the Madras High Court has ruled a commendable opinion. In Managing Director, TN State Transport Corp v Chinnadurai[1] the Court has declared compensation granted for motor accident not be subjected to TDS.

The facts leading to this permissive ruling, are straight:

“ Respondent in the instant Revision Petition  has filed an Execution Petition R.E.P.No.146 of 2010 before the Motor  Accident  Claims  Tribunal,  Dharmapuri  in  M.C.O.P.No.879  of  2006  wherein the amount that they are entitled to Rs.4,23,271/- and in the  memo filed before the Motor Accident Claims Tribunal, Rs.24,017/- has  been deducted for TDS.  R.E.P.No.146 of 2010 that has been filed was allowed by the Court below and accordingly, the bus belonging to the Revision Petitioner Corporation was attached and the Corporation was directed to deposit the balance amount of Rs.30,774.   Aggrieved by this order, the Petitioner has approached this Court”[2]

The Petitioner corporation submits that  as per Sections 194-A and 156 of  the Income Tax Act,  1961,  the  interest  portion  awarded  by  the  Motor  Accident  Claims Tribunal  should be subject  to  TDS.

The Question of Law

Q) Whether the provisions of the Income Tax  Act 1961,  and more specifically,  whether the compensation awarded  by the Motor Accident Claims Tribunal to the victim can be classified as  a taxable income under  the Income Tax law?.

The HC declines to classify compensation awarded by MACT to victim as a taxable income. To explain this conclusion the phrase compensation is first explained:

“An act  which a Court  orders  to  be done,  or  money  which a Court orders to be paid, by a person whose acts or   omissions have caused loss or injury to another in order that   thereby the person damnified may receive equal value for his  loss, or be made whole in respect of his injury; remuneration  or  satisfaction  for  injury  or  damage  of  every  description;  remuneration for loss of time, necessary expenditures and for   permanent  disability if  such be the result; remuneration for   the  injury  directly  and proximately  caused  by  a  breach  of   contract  or  duty;  remuneration  or  wages  given  to  an  employee or officer.”[3]

On the other hand the Income-Tax Act, 1961 would apply when there has been generation of taxable income, which is not the case here. In reaching to this conclusion the court cited opinions of two High Courts

·         Court on its Motion Vs. H.P.State Co-operative Bank  Ltd & Ors 2014 SCC Online HP 4273

“13.While going through the said provisions of law, one  comes to the inescapable conclusion that the mandate of the  said provisions does not apply to the accident claim cases and  the compensation  awarded  under  the  Motor  Vehicles  Act  cannot  be said to be taxable income.  The compensation is  awarded in lieu of death of a person or bodily injury suffered in a vehicular accident, which is damage and not income.”(emphasis supplied)

14.  Chapters X and XI of the Motor Vehicles Act, 1988  provides  for  grant  of  compensation  to  the  victims  of  a  vehicular accident.  The Motor Vehicles Act has undergone a  sea change and the purpose of granting compensation under  the Motor Vehicles Act is to ameliorate the sufferings of  the  victims  so  that  they  may  be  saved  from social  evils  and  starvation, and that the victims get some sort of help as early  as possible.  It is just to save them from sufferings, agony and  to  rehabilitate  them.    We  wonder  how  and  under  what  provisions of law the Income Tax Authorities have treated the  amount awarded or interest accrued on term deposits made in  Motor Accident Claims Cases as income.  Therefore, the said  Circular  is  against  the  concept  and  provisions  referred  to  hereinabove  and runs  contrary  to  the  mandate  of  granting  compensation.

...23.   Having said so,  the Circular,  dated 14.10.2011,  issued by the Income Tax Authorities,  whereby deduction of  income  Tax  has  been  ordered  on  the  award  amount  and  interest accrued on the deposits made under the orders of the Court in Motor Accident Claims Cases, is quashed and in case any such deduction has been made by respondents, they are  directed to refund the same, with interest at the rate of 12%  from the date of deduction till payment, within six weeks from  today”.[4]

·         Further in New India  Assurance  Company  Ltd.  Vs.Sudesh  Chawla  and  others[5], the P&H HC ruled:

“award of compensation is on the principle of  restitution to place the  claimant in the same position in which he would have been loss of life  or  injury has not  been suffered and accordingly held that  the orders  calling upon the Insurance Company to pay TDS/deduct  Tds on the  interest part are not sustainable.”[6] (emphasis supplied)

In HC’s view the above line of thought is in consonance with the social objective of legislations like Motor Vehicles Act which provided compensation to victims as sort of solatium which is in form of remedy. A remedy cannot be treated as income for purposes of Income-Tax Act

Also when there a conflict of interpretation arises between a social welfare legislation and a taxation legislation, the latter must give way for former. Courts will always approve interpretation which involves larger public interest which is in line with ensuring public good.

moreover the courts avoid any pedantic or hypertechnical understanding of issues to rule something which is against larger social interest

All these factors move on to one stable conclusion that as far as compensation awarded to victims by MACT is concerned it cannot be treated as taxable income  for purposes of Income-Tax Act, 1961

---

[1] Decided on June 2^nd 2016

[2] Managing Director, TNSTC  v Chinnadurai [CRP (PD) No 1343 of 2012; decided on June 2, 2016]

[3] R.Ramanatha Aiyar law dictionary referring to Black’s Law dictionary

[4] Supra Note 3

[5] CR.No.430 of 2015 (O&M)

[6] Supra Note 3

Transfer of Malice[Sec 301 IPC]: Intention to Cause death completes all

Section 301- Culpable homicide by causing death of person other than person whose death was intended-

The doctrine requires following:

If a person by doing anything which he intends/knows to be likely to cause death commits culpable homicide by causing death of any person Whose death he neither intends nor knows himself to be likely to cause Culpable homicide committed by offender is of description of which it would have been If he had caused the death of the person whose death he intended/knew himself to be likely to cause

Thus offender must have intention/knowledge to cause death of someone

+

He kills somebody else whose death he had not intended/known

Such offender would still be convicted under same degree of CH, he would have been if he would have succeeded in killing the person he intended/knows to kill.

The provision is founded on a doctrine called by Hale and Foster, a transfer of malice. Others describe it as a transmigration of motive. Coke calls it coupling the event with the intention and the end with the cause. If the killing takes place in the course of doing an act which a person intends or knows to be likely to cause death, it ought to be treated as if the real intention of the killer had been actually carried out.

When any factual matrix wherein death has been caused, the 1^st step is to ascertain whether the act of the offender has been the cause of death, thereafter inspection moves to determine whether the act of accused falls under Sec 299 or Sec 300. If it is affirmed that the act does fall in any one of these sections than further dissection has to be done.

 Sec 301 merely fixes the liability either under Sec 299 or Sec 300. What is to be seen is the intention/knowledge of accused in committing act which would have led to death of someone. The  section underlines that the accused did have the intention/knowledge  to commit death, it is only the intended person did not die. Therefore what is primarily to be ascertained is whether the act of accused falls under Sec 299 or 300.   

In case of transfer of motive the most crucial aspect is highlighted by Supreme Court in Shankarlal Kachrabhai & Ors vs State Of Gujarat (AIR 1965 SC 1260)

“Under the section if A intends to kill B, but kills C whose death he neither intends nor knows himself to be likely to cause, the intention to kill C is by law attributed to him. If A aims his shot at B, but it misses B either because B moves out of the range of the shot or because the shot misses the mark and hits some other person C, whether within sight or out of sight, under S. 301, A is deemed to have hit C with the intention to kill him. What is to be noticed is that to invoke s. 301 of the Indian Penal Code A shall not have any intention to cause the death or the knowledge that he is likely to cause the death of C.” 

Most recently in a case SC again invoked this doctrine to nail the accused [St of Rajasthan v Ram Kailash Decided on Jan 28, 2016]

Two men were going on a motorcycle. Suddenly the pillion driver noticed that accused was firing on them while chasing on other motorcycle. The pillion rider succumbed to injuries after identifying the accused in DD.

The HC has noticed that  the  “ gunshot injury was of-course of such a nature as opined by the doctor was likely to cause death and was fired with an intention, but the offender was not knowing that as to whom he is causing harm out of the two on the motorcycle.”

The HC convicted the accused under Sec 299 secondly punishable under Sec 304 para 1 degrading from punishment inflicted by lower court under Sec 302 IPC.

The SC reversed the conviction ordered by HC, thereby upholding the 302 IPC charge awarded by trial court. The SC emphasized that the accused was fully conscious of the fact that his act of firing would result in death and hence was fully aware of ‘likelihood of death’.

Further the evidences fix culpability under sec 302. There was eye-witness account by driver of motorcycle on which victim was driving, than there was DD by victim himself, also empty bag of 12 bore cartoos was recovered from accused. All these confirm that accused had complete predetermined intention to kill and even though he may not be knowing as to whom he was firing, still by effect of Sec 301 and his intention to kill evident by circumstances lead to his conviction under sec 302

In all, Sec 301 in a rare asset which aims at fixing the responsibility when death is caused.  

Emperor vs Mushnooru Suryanarayana Murthy[ Madras HC 1912]

The Murthy case is considered as leading authority on Sec 301  

The accused with intention of killing A gives him some halva mixed with poison. A eats some of halva and throws the rest. The thrown part is picked up and consumed by R aged 8 or 9. Due to its consumption R dies but A though severely effected from poison, recovers.  

The question before court was whether accused is responsible for death of R.

The majority opinion convicted the accused for causing death of R. and this was in terms of Sec 301 IPC as death was caused and accused had intention to kill, though not R. An English case of Agnes Gore is cited by Benson J

“ In that case Agnes Gore mixed poison in some medicine sent by an Apothecary, Martin, to her husband, which he ate but which did not kill him, but afterwards killed the Apothecary, who to vindicate his reputation, tasted it himself, having first stirred it about. " It was resolved by all the Judges that the said Agnes was guilty of the murder of the said Martin, for the law conjoins the murderous intention of Agnes in putting the poison into the electuary to kill her husband, with the event which thence ensued; i.e., the death of the said Martin; for the putting of the poison into the electuary is the occasion and cause ; and the poisoning and death of the said Martin is the event, quia eventus est qui ex causa sequitur, et dicuntur eventus quia ex causis eveniunt, and the stirring of the electuary by Martin with his knife without the putting in of the poison by Agnes could not have been the cause of his death." (King's Bench 77 English Reports, p.853 at page 854)”

Thus emphasis is laid on final ensuing of event, i.e., death. Bensen J further explained the operation of Sec 301

“ 9. The section does not enact any rule not deducible from the two preceding sections, but it declares in plain language an important rule deducible, as we have seen, from those sections, just as an explanation to a section does. The rule could not well be stated as an explanation to either Section 299 or Section 300 as it relates to both. It was, therefore, most convenient to state the rule by means of a fresh section., The rule makes it clear that culpable homicide may be committed by causing the death of a person whom the offender neither intended, nor knew himself to be likely, to kill, a rule which though it does not lie on the surface of Section 299, yet is, as we have seen, deducible from the generality of the words '' causes death" and from the illustration to the section ; and the rule then goes on to state that the quality of the homicide, that is, whether it amounts to murder or not, will depend on the intention or knowledge which the offender had in regard to the person intended or known to be likely to be killed or injured, and not with reference to his intention or knowledge with reference to the person actually killed, a rule deducible from the language of the Sections 299 and 300 though not, perhaps, lying on their very surface. The conclusion, then, at which I arrive is that the accused in this case is guilty of murder as defined in Sections 299 to 301, Indian Penal Code.”

Though in Murthy court also drew from Sec 299/300 where the actus is ‘causing death’ and such ‘causing death’ is ‘with the intention of causing death’.

Since in all facts discussed above death has been caused and accused certainly possessed intention/ knowledge that death of victim would be the natural consequence of his acts, he cannot escape liability but since the person dead is not the one accused intended to kill his culpability shifts to sec 301.  

“It is sufficient if death is actually, even though involuntarily, caused to one person by an act intended to cause the death of another. It is the criminality of the intention with regard to the latter that makes the act done and the consequence which follows from it an offence.”