The Gujarat High Court has sought to know whether compensation received by the kin of a victim can be termed as income and if it is liable to be taxed under the Income Tax Act.

The Court was on Monday hearing a plea filed by the husband of a woman who was killed during the hijacking of the Pan American World Airways flight in 1986.

A Division Bench of Justice JB Pardiwala and Justice Nisha Thakore posed a question to the I-T department, whether the amount received as compensation can be termed as income to be taxed under the Act.

"Your principal argument is that this compensation is not income and cannot be taxed...We will not go by sympathy, but it makes sense that something which has been received by way of compensation, can we term it as an income so as to tax it?" the Court asked.

It posted the matter for further hearing on March 14.

Petitioner Kalpesh Dalal had approached the HC after receiving a notice from the I-T department for payment of the income tax on Rs 20 crore which he received as compensation for the death of his wife Trupti in the hijack of the ill-fated Pan Am flight by terrorists in 1986, when it was on way to New York from Mumbai, and was forced to land in Karachi.

The High Court asked the I-T department whether it sought to contest the petitioner's claim that the compensation amount could not be taxed.

The petitioner's wife was shot dead by terrorists on the flight after it was hijacked. She was among the over 50 people killed by hijackers.

A New York court had awarded a compensation of Rs 20 crore to Dalal between 2013-14 and 2014-15, but he had not shown the compensation as income in the tax returns filed for the assessment year 2014-15.

The I-T department first issued summons to the petitioner in 2014, to which Dalal had responded saying the amount was compensation received as a result of a lawsuit in the US.

The department reopened the case last year, seeking to reassess Dalal's income and issued him a notice, after which he moved the High Court.

In his plea, Dalal objected to the notice sent to him by the I-T department last year, seeking to levy tax on the compensation amount.

With PTI inputs