• 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.