2008 (12) TMI 14 - HC - Income Tax

Addition in respect of the amount of compensation and interest received by the assessee from the Government of the USA CIT & ITAT have rightly concluded that said amounts received by the assessee were in the nature of capital receipts because the amount was received by way of compensation for not being offered the job on the basis of gender discrimination - decision of the tribunal, therefore, does not call for any interference appeal of revenue are dismissed

Summary

In this judgment from the Delhi High Court, the revenue appealed against an order by the Income-tax Appellate Tribunal regarding compensation and interest received by the assessee from the United States government. The assessee had applied for a job in 1982 but was never offered the position due to alleged gender discrimination. A settlement offer of US$ 508 million was made to resolve a class action lawsuit, which the assessee accepted. The question at hand was whether the amount received by the assessee fell under the category of 'profits in lieu of salary' as per Section 17(3)(iii) of the Income-tax Act, 1961.

The Commissioner of Income-tax and the tribunal both found that there was no employer-employee relationship and that the amount received was compensation for not being offered the job. The court agreed that the received amounts were capital receipts, not 'profits in lieu of salary', as the assessee had not performed any services. Therefore, the appeals were dismissed, with the court concluding that no substantial question of law arose for consideration.