In a significant case, the Gujarat High Court will decide if compensation received for death of kin in a terrorist attack can be considered an 'income' for tax under the Income Tax Act.
The matter came up before the court on Monday after the Income Tax Department sought to tax the compensation of a whopping Rs 20 crore received by a man for the death of his wife who was killed by terrorists in the infamous 1986 Pan Am flight hijack.
A division bench of Justice JB Pardiwala and Justice Nisha Thakore wanted to know from the department whether it was serious in contesting the claim of the petitioner that the compensation amount could not be taxed.
The court asked, "Is the revenue department seriously contesting? Something that has been received as compensation, can it be taxed?” The bench framed two moot questions: One, “Whether this compensation can be termed as income for the purpose of Income Tax Act?” and second, “Whether notice issued for assessment under 141 is a nullity?"
The petitioner's wife was shot dead by terrorists while onboard Pan American World Airways flight 73 which was on its way from Mumbai to New York with a stopover at Karachi. The aircraft was taken over by terrorists when it had landed at the Karachi airport.
More than 50 people were killed by the hijackers, including the wife of the petitioner in the present case. A New York court had awarded him ₹20 crore compensation. However, the petitioner did not show the compensation as income in the tax returns filed for the assessment year 2014-15.
When the court remarked that the, “Compensation amount is very huge”, the petitioner’s advocate replied, "The original compensation was $10 million. But after lawyer fees, this was the balance amount."
The next hearing has been posted for March 14.
