Is compensation for death taxable, Gujarat high court asks I-T dept

Ahmedabad: The Gujarat high court on Monday questioned the income tax department whether the amount received as compensation for death can be considered an income taxable under the law. Compensation was received for a death during hijacking of Pan Am flight 73 that was hijacked in 1986.

The taxation department sought time to address the court on this issue and the court has posted hearing on this subject on March 14. When the issue of law arose, the court said, “This is a unique case. This is something interesting.”

The case pertains to the I-T department’s demand of tax on certain amount of Rs 18.6 crore compensation received for death of one Trupti Dalal in a terrorist attack. The compensation was awarded by a court in Columbia in the US. Trupti’s husband, Kalpesh Dalal, has filed the petition objecting to I-T department’s notices issued last year seeking to levy tax on the amount he received towards compensation for his wife’s death and for reopening an assessment for the year 2013-14 and 2014-15.

Trupti was one of 43 victims in the terror attack on the flight that took off from Mumbai for New York and landed in Karachi for a layover, where four gunmen entered the flight and shed blood of the passengers in September 1986. Libyan government took responsibility of the incident and paid $1.6 billion in compensation to the US in 2004. The victims’ families filed lawsuits and the Dalal family received Rs 18.60 crore in three instalments between 2012 and 2014, Dalal’s lawyer submitted and added that such an amount received as death compensation cannot be considered an income taxable under the I-T Act. The bench of Justice J B Pardiwala and Justice Nisha Thakore questioned the I-T department whether it is seriously contesting the matter. To this,the department’s lawyer said, “We have full sympathy that is a different issue, but..” The court interjected, “We will not go by sympathy, but it makes sense in what the petitioner’s advocate is submitting that something received as compensation, can it be taxed?”

After a brief discussion on facts of the case, the department’s lawyer submitted, “In order to decide whether this amount is taxable or not, would it not be proper to go into sufficiency of reasons?”