COMPENSATORY DAMAGES

[RAVINDER GAMBHIR]

My client got badly injured while travelling in a lift.Now he will be getting compensation from the Company, the manufacturer of the lift. Whether the amount recd will be taxble or not. If yes under which section and if No under which section. is there any case law in support of the decision. Thanks.

[CA Rachit Agarwal]

In my opinion the said receipt will be taxable.

Section 10BC, exempts the amount received from State Government/State Government if the amount received on account of disaster. As the amount received is on accountant of injury caused due to mishappening of the lift, and the same is not covered under the definition of disaster. Further the amount is not niether receivable from the State Government nor Central Government.

AI Summary

Taxability of personal injury compensation: manufacturer-paid damages are taxable, not covered by disaster-relief exemption. Compensation from a private manufacturer for personal injuries is treated as taxable income; the disaster-relief exemption under Section 10BC (limited to government-provided amounts for disasters) does not apply to non governmental compensation for injury, so such receipts fall for assessment under the general income tax provisions.