Date:29/12/2008 URL: http://www.thehindu.com/2008/12/29/stories/2008122950031300.htm

Business

Taxation of arbitration award

In the answer to my query regarding liability to tax on amount received from arbitrator’s award, you have given a general reply that if it were damages, it would be a capital receipt or it would otherwise be taxable and that the answer would depend on the nature of the amount given in the award. I am now enclosing a copy of the award requiring your precise answer.

Since the amount is given in restitution of the loss suffered on account of appropriation of the shares entrusted for sale to the share broker, such amount awarded with reference to the value of the shares lost should probably be treated on a par with the sale value and not damages so as to avoid tax. But then, such a view is only an opinion with which there can probably be a dissent. No precise answer is possible as it is a matter of appreciation of facts. Such opinions with reference to specific cases are not given in these columns, since these are not matters of general interest. However, such requests for solution on complex facts are received from time to time, sometimes along with self-paid envelopes.

Such requests are not answered. Opinions given generally are no substitute for professional opinion with reference to all the relevant facts and the law.

S. RAJARATNAM