Is a man supposed to pay income tax on compensation amount he received after his wife was killed in a terrorist attack, a bench of Justice JB Pardiwala and Nisha Thakore of the Gujarat High Court has sought to know from the Income Tax Department.
On Monday, the bench of the Gujarat High Court, headed by Justice JB Pardiwala, asked the Income Tax Department whether the compensation amount paid to the kin of the victim of terrorist attack during the hijacking of the plane is taxable and if the assessment notice issued under Section 141 of the Income Tax Act be revoked.
The man received compensation of Rs 20 crore and the next hearing of the case will be held on March 14. The Income Tax Department had requested more time from the high court to file its reply. On the other hand, the applicant’s advocate said the original amount of compensation was more but what he finally got was amount after paying the fee to the advocate.
Hearing the case, the bench said: “This is a unique and interesting case. The flight was going from Bombay to New York but unfortunately it was hijacked while it was still in the air. The flight was force-landed at Karachi airport and later, the hijackers attacked the passengers in which many innocent people lost their lives, including the wife of the applicant. The court in Columbia had ordered that compensation be paid to the victims of the attack. The applicant had also received the compensation amount but he did not show it as income in the year 2015-16 and 2-16-17. That is why the IT Department sent him the notice. Apart from the facts of the case, we also want to find out whether this amount could be taxed or not”.
What the Income Tax law says
Advocate of Gujarat High Court Gajendra Singh Rana said the assessment order issued under Section 141 of the Income Tax Act is meaningless in this case. He said if kin of a deceased received compensation, then this amount is not taxable. Income Tax Department can tax an income and not the amount received as compensation.
What is the issue?
America World Airways’ Pan Am flight 73-A had taken flight for New York from Mumbai on September 5, 1986. The plane was hijacked by four Palestinian terrorists belonging to the Abu Nidal Organisation backed by Libya who took it to Karachi. The plane had 365 passengers from 14 countries on board. There were also 23 crew members on board.
In the attack after the hijack, 43 passengers were killed, which also included Trupti Dalal, wife of Kalpesh Dalal, from Gujarat who was travelling to New York. After the incident, Kalpesh Dalal sued the airline. The government of Libya had paid $1.6 billion as compensation to the US government in 2006. To get more compensation, the kin of victims re-appealed in US court.
After the compensation was paid to the kin of the victim, the Income Tax Department issued a notice to the applicant who filed the reply with the Income Tax Department. But the IT Department sent a notice again, asking to pay tax on the amount received as compensation.
Flight that made Neerja Bhanot beacon of exemplary courage
A young Indian woman, Neerja Bhanot, was the senior flight purser of the fateful flight and she was also killed by the terrorists. Neerja had risked her life to save many on board the aircraft. Recognising her exemplary courage, the government of India had awarded her Ashok Chakra posthumously and the Pakistan government had also honoured her with its ‘Tamgha-e-Pakistan award.
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