High court asks govt to reply on tax deduction on compensation in MACT cases

  • | Friday | 12th July, 2019

New Delhi: The Delhi High Court on Friday sought response from the Centre on a plea seeking seting aside of its June 26 order which mandates deduction of tax on the interest accrued on compensation granted by a Motor Accident Claims Tribunal (MACT). Advocate and social activist Amit Sahni sought passing further directions to hold that the interest accrued upon the compensation awarded by a MACT is not taxable. “The compensation awarded by a MACT is meant to substitute the loss of potential income of the victim and in most cases is in fact determined as a multiple of the victim’s income,” it said. “Under tax laws, it is well settled that if a receipt is meant to substitute a source of income, it is a capital receipt. Capital receipts are generally not taxable as income unless they are specifically roped into the definition of income.

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