IT for deceased, Bulk money after court case

This is a complicated case. My Father worked in the state Electricity Board and was wrongly suspended and then dismissed from work for a period of 3 years. Then we fought the case and won. Court ordered to reinstate him into the service and pay the salary for the 3 years of dismissal and 2 years of suspension.

But the electricity board did not pay the pending salary until 2012 (4 years after court judgement) and kept citing missing files etc. as reason. Actual reason is they wanted bribe. My Father did not budge but unfortunately the stress got to him and he passed away due to Stroke in 2012. Finally my mother got all the pending money in 2014 amounting to around 30 Lakhs (Salary for 3+2=5 Years).

Now, regarding the taxation for this amount, some auditors say that since my Father has passed away before he got the arrears salary, there is no need to pay any tax. Others say that the tax will be calculated 30% of the full amount paid to my mother. But this is the arrears salary which would have fallen only into the 10% bracket if it was paid in those years. Now the amount is paid in full, so it is not fair to pay 30%.

Could you please suggest how to proceed now ? Thanks in advance.
Asked 6 months ago in Income Tax from Bangalore, Karnataka
Dear Sir,

While I need to check on whether the amount is taxable or not, but you will not be liable to pay tax @30%. You will get rebate because of the unfairness mentioned by you in the question.

Thanks and Regards
CA Abhishek Dugar
Abhishek Dugar
CA, Mumbai
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Need to check as the Board will deduct TDS while paying. Please get a Form 16 for this. Then we can comment and guide you.
Shyam Sunder Modani
CA, Hyderabad
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Please get us the letter from them regarding the amount received so that we can arrive at a solution
Shyam Sunder Modani
CA, Hyderabad
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Dear Sir,

The Amount you have received is arrears of Salary and hence will be taxable on a Year to Year Basis and not on a lumpsum 30%. You can claim relief u/s 89(1) for the arrears of salary .

Trust this clarifies your query. 

Please feel free to call/ get back in case of any further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP
Rohit R Sharma
CA, Mumbai
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