Pan Am terror strike: Can compensation be taxed?



AHMEDABAD: The income tax department told the Gujarat high court on Tuesday that its highest officials are seriously considering whether money received as compensation can be treated as taxable income. The case pertains to Rs 18.6 crore received as compensation for the death of a woman in the terrorist attack on a Pan Am flight in September 1986.
The I-T department’s lawyer then requested the court to adjourn the hearing for at least three weeks so the department can take a decision. The bench adjourned the case till April 19, observing, “Let this adjudication wait for some time. If the department on its own deems it fit to withdraw its notices, that should be the end of the matter. Otherwise, this court will proceed to answer the main issue.”
Earlier this month, the HC had asked whether money received as compensation for death could be considered income taxable under the law.
The issue arose when one Kalpesh Dalal filed two petitions in HC challenging notices by the I-T department by which it demanded tax on the Rs 18.6 crore compensation received for the death of his wife in a terrorist attack in which Pan Am Flight 73 from Mumbai to New York was hijacked in Karachi and 43 passengers were killed.
The Libyan government took responsibility and paid $1.6 billion in compensation to the US in 2004. The victims filed lawsuits and the Dalal family received Rs 18.6 crore in three instalments. The I-T department demanded tax on this money. The HC was moved with the contention that compensation money cannot be treated as income and is hence not taxable.


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