Applicability of income tax on the award of the tribunal

Vasudevan (Querist) 07 June 2024 This query is : Resolved
Respected Learned Experts. I had awarded with a sum of Rs.3 lakhs towards the loss of interest on the belated payment of pension. The award was granted by Central Administrative Tribunal after filing a case. Whether, this award of Rs.3 lakhs is subjected for income tax.? Any exemption is permissible as it is an award granted after a case filed before the Tribunal. Advance thanks to all the Learned Experts in anticipation.

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This discussion explores whether an award of Rs. 3 lakhs granted by the Central Administrative Tribunal for loss of interest on delayed pension payments is subject to income tax. Generally, compensation for loss of income is taxable, but provisions exist to apportion the interest over previous assessment years to potentially reduce your tax liability. It's advised to consult a tax professional to determine the best course of action, including filing revised tax returns. The specific case discussed originated from an order by the CAT, Madras Bench, which the department reportedly complied with without appeal, and no tax was deducted at source on the interest paid.

SIVARAMAPRASAD KAPPAGANTU (Expert) 07 June 2024
Generally, the taxability of such awards depends on the nature of the compensation.

If the award is a revenue receipt (e.g., compensation for loss of income), it is generally taxable as income.

Privision is available for apportionment of the interest amount under the income for various assessment years and resubmit IT returns for those years provided such income can be divided beloning to different assessment years.

This provision is available to avoid higher tax liability, as adding entire amount in current year may get you into higher bracket tax percentage. It again depends upon how was your income in those previous years and what would be the revised tax payable for those assessment years after the apportioned interest income is added.

Therefore, you may contact a CA or IT Practitioner to advise you and to make those calculations and help you in filing revised IT returns if it reduces your overall tax liability or add entire amount to your current year income and pay tax thereon.

SIVARAMAPRASAD KAPPAGANTU (Expert) 07 June 2024
Repeat reply removed.

T. Kalaiselvan, Advocate (Expert) 07 June 2024
Whenever there is increase in gross pension by way of receipt of arrears due to revision of pension, DA arrears etc, the IT will rise proportionately. The income tax calculated on such increase would be deducted before the end of the financial year concerned.
Tax is calculated on a taxpayer's total income earned or received during the financial year. If the assessee has received a potion of his salary 'in arreas or in advance', or received a Family Pension in arrears, the Income Tax Act allows you to claim tax relief under section 89(1).

P. Venu

(Expert) 07 June 2024
Is this query in the context of the Order dated 22/03/2023 of the CAT, Madras Bench in OA 382/2020? If so, had the Department moved High Court under Article 227?

Vasudevan (Querist) 08 June 2024
Respected Learned Expert Shri Sivaramaprasad Kappagantu, my sincere thanks to your detailed advice. I shall surely contact a Tax Assistant to claim the revised return as the month wise/year wise break up available. Learned Expert Shri P. Venu, exactly it is the out come of OA 382/2020. The department has not preferred any appeal. They had obliged the order passed by the CAT. Once again my sincere thanks to one and all Learned Experts who has spared their valuable time in giving advice for this query.

P. Venu

(Expert) 08 June 2024
As seen from the CAT Order, interest sanction includes not only the interest on delayed payment of pension, but also that on delayed payment of leave encashment which requires to be exempted while calculation income tax.

So also, in accordance of the extant procedure, the amount would have been paid by the Department. If the amount happens to taxable, it is their responsibility to deduct tax at source and furnish the particulars through Form 16. Please verify.

Vasudevan (Querist) 09 June 2024
Much obliged by the response of Learned Expert Shri P. Venu. The department has not deducted any tax on the interest paid. Once again thank you very much sir.

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