Taxability of compensation in the hands of heirs of deceased

Please help me with the following.... pls give reference of case laws... if any

Q1. If the MD of a company and his wife have died in a disastar say terrorist attack and the company in which he was a M D pays Rs. 10 Cr. of compensation to the daughters of the MD. Would this reciept be taxable or not?? if yes under which head?

Q2 If in the above case the daughters are minor in whose hand the same will be taxable?

Q3. Also tell me if this exp of Rs. 10 Cr will be allowable in hands of company from income under PGBP. Please note that the MD was on company's business purpose when the grave incidence occured??

Replies (3)

Dear Chintanshah,

1) Lumpsump amount received by the legal heirs of the employee from the employer on the death of the employee is not taxable as per circular no. 573 dated 21-08-1990

2) The amount is not taxable...

3) Yes the amount will be allowed as deduction to the company..

the amount shall be a capital receipt in the hands of the daughter, hence not taxable. further, the amount accrued in the hands of teh assessee, hence no employer employee relation exists so as to tax the same in the hands of the MD

Thank u amir and pranav for the valuable info....

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