Petitioner when he was 8 years old while crossing the Road knocked down by a speeding vehicle. He was in coma for six months.  Compensation was determined after 36 years after the accident. Motor Accident Tribunal awarded compensation within three months and the rate of interest payable was 12 percent per annum on the unpaid amount. The insurance company before depositing the tax deducted the tax at source at 10 percent on interest component. The petitioner filed the return and claimed the refund on the ground that the tax was wrongly deducted. The petitioner moved the petition challenging the vires of sections 194A(3)(ix), and (ixa) as also section 145A(b) and 56(2) (viii) of the Act. When the petition was pending the AO has passed the order. The petition was amended accordingly. Allowing the petition the Court held that   ,awarding interest for delayed computation of compensation is therefore an integral part of this exercise. Interest awarded in motor accident claims cases is, thus, compensatory in nature and forms part of the compensation itself hence not taxable. Court also held that  clause (viii) of sub-section (2) of section 56 by itself would not make the receipt of interest on compensation chargeable to tax as income from other sources, if such receipt is not income. Clause (b) of section 145A of the Act does not make interest on compensation or enhanced compensation taxable if it is otherwise not exigible to tax. It merely provides for the point of time when it would be subjected to tax if otherwise taxable. The provision for deduction of tax at source is not a charging provision. It only provides for deduction of tax at source on payment of a sum, which, in the hands of the payee, is income. If the payee has no liability to tax on such income, the liability to deduct tax at source in the hands of the payer cannot be fastened. The provision for deducting tax at source cannot govern the taxability of the amount which is being paid. Accordingly the question of deduction of tax at source would arise only if the payment is in the nature of income of the payee. (AY. 2016-17)