“damages and compensation”
The decision most relied on for damages and compensation is GENERAL INSURANCE CO. LTD. v. NANU RAM & ORS. (18 SCC 130), cited in 41 judgments on BharatTax.
Leading authorities on damages and compensation
In motor accident claims, this case established fixed compensation amounts, including Rs. 40,000 for each claimant towards loss of consortium and loss of love and affection, and Rs. 30,000 for loss of estate and funeral expenses.
Insurance compensation received for damage to stock-in-trade or raw materials is considered profit or loss from an industrial undertaking and is eligible for deduction under sections 80IA and 80IB of the Income Tax Act, 1961.
Payments made to compensate for environmental damage, even if recovered by a Pollution Control Board on the 'polluter pays' principle, are not allowable as business expenditure if treated as a penalty by the Assessing Officer and the assessee failed to install a pollution control device within the prescribed time.
Demurrage paid by a trader is by way of compensation for the use of port facilities beyond the allowed period, not a penalty for violating a law, and is therefore deductible as a business expense.
The multiplier method is a sound and legally established principle for computing compensation in motor accident claim cases, including future losses. Calculations for such losses necessarily involve hypotheses and imponderables, requiring courts to assess the overall picture.
Compensation received for breach of an agreement to sell, where the assessee had the right to sue for specific performance and damages, is considered a capital receipt not chargeable to tax as it arises from the 'right to sue,' which cannot be transferred.
The Supreme Court has established that compensation for loss of love and affection should be a uniform amount, often cited as ₹25,000, to ensure consistency across judgments.
Mesne profits received by an assessee for unauthorized occupation of property constitute a capital receipt and are not chargeable to income tax. This receipt is characterized as damages for dispossession or loss of a right to use the property.
