9911796707
TMI Blog1985 (4) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... laim and held that, in terms of section 17(1)(ii) of the I.T. Act, 1961, the amounts were includible in the assessee's total income inasmuch as the expression " salary " included any annuity or pension and, as such, pension received by the assessee from the Pension Fund was a taxable receipt. In appeal, the AAC held that the pension received by the assessee from the United Nations was to be excluded from the assessment. The Revenue, being dissatisfied with the order of the AAC, filed an appeal before the Tribunal and argued that the amount received by the assessee could not be treated as salary or emoluments in her hands and, as such, the assessee was not entitled to the exemption claimed. It was also argued that the exemption clause is to be construed strictly and since the assessee was not an " official " of the UNO, exemption was wrongly allowed to her by the AAC. The Tribunal observed that when salary includes pension and when salary is exempt from taxation in the hands of the officials of the United Nations, a fortiori, it could be held that recompense of the amount received by the beneficiary as a result of the contribution by her husband should not come within the purview o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the United Nations shall:.... (b) be exempt from taxation on the salaries and emoluments paid to them by the United Nations: . ...... )" It is also necessary to refer to article 35 of the Rules and Regulations of the United Nations joint Staff Pension Fund. The provisions of article 35, which are material for our purpose, are as follows: Article 35 "Widow's benefit, (a) A widow's benefit shall, subject to article 42 and to (b) below, be payable to the surviving female spouse of a participant who was entitled to a retirement, early retirement, deferred retirement or disability benefit at the date of his death, or who died in service, if she was married to him at the date of his death in service or, if he was separated prior to his death, she was married to him at the date of separation and remained married to him until his death. (b) A benefit shall nevertheless not be payable if the participant had commuted his widow's prospective benefit under article 29 or article 30, or had commuted a deferred retirement benefit under article 31(c). (c) The benefit shall, if the participant died in service or during entitlement to a retirement, early retirement or disability benefit, be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. The Karnataka High Court has accepted the interpretation given by the Tribunal in the case of Dr. P. L. Narula. In the case of Addl. CIT v. Garg [1982] 133 ITR 1, the Delhi High Court was considering the assessability of the amount allowable as a child benefit under art VIII(1) of the Regulations of the United Nations joint Staff Pension Fund. The ITO included the said benefit in the hands of the assessee who was a former employee of the World Health Organisation. It was held in that case that the child benefit is the income of the child and not of the participant. The amount of benefit derived by the child did not fall within the provision of s. 17 of the Act. In the case of CIT v. Dr. Narula [1984] 150 ITR 21, the Delhi High Court held that s. 2 of the United Nations (Privileges and Immunities) Act, 1947, read with s. 18, cl. (b) of art. V of the Schedule thereto, inter alia, grants exemption from taxation in respect of salaries and emoluments paid by the United Nations to its officials. Since under s. 17 of the I.T. Act, 1961, "salary" has been defined to include pension, the pension received by the officials of the UNO, after retirement, from the United Nations joint S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose the employer had also to pay some contribution. The assessee's husband had been making contributions to the Pension Fund. Out of the said contributions under the relevant Rules, the widow and the child were being paid the benefit. The widow was receiving the benefit under art. 35. It has not been disputed that the benefit received by the assessee under art. 35 of the said Regulations is pension. The ITO disallowed the claim of the assessee for exemption on the ground that it is the salary of the officials of the United Nations that was exempt from taxation, and what was being paid to the assessee was not refund of her husband's contribution but a pension out of the Pension Fund. It cannot be disputed that salary under s. 17(1)(ii) of the I.T. Act, 1961, includes pension and if the salary is exempt so shall be the pension. Thus, where a former employee receives pension from the said pension fund, it is exempted. The Board, in Circular No. 293, dated February 10, 1981, accepted the view taken by the Karnataka High Court in Ramaiah's case [1980] 126 ITR 638 and decided as follows: " ............. Apart from salary received by the employees of the United Nations Organisation or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the widow receives is in effect the pension which was receivable by the husband had he been alive. If the pension received by the former employee of the United Nations is exempt because salary itself is exempt under the provisions of the Privileges and Immunities Act then, on a parity of reasoning, pension receivable by widow of an employee of the United Nations who died in harness should also be exempt from income-tax. Section 17(1) of the I.T. Act, 1961, defines the expression "salary " for the purpose of sections 15, 16 and 17 by way of an inclusive definition. Salary for tax purposes includes any pension. Section 15 enumerates the income which shall be chargeable to income-tax under the head " Salaries Section 16 provides that income chargeable under the head " Salaries shall be computed after making deductions mentioned in section 16. Section 17 has nothing to do either with deductions or with exemptions. It is merely a provision defining the expression " salary " (see CIT v. G. Hyatt [1971] 80 ITR 177 (SC)). Under section 15, all payments made to the holder of an office or employment as such by way of remuneration for services would be treated as salary. The sine qua non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee's husband. It flows as part of the consideration of the contract of employment and not de hors, or independent of, the contract of employment. Thus, this pension payable to the assessee is referable to the entitlement of the assessee's husband. What is received by the widow is in effect the benefit earned by the assessee's husband as an official of the United Nations. That is the reason why such benefit is assessed under the head " Salaries " although there is no contractual relationship of employer and employee between the widow and the United Nations. Even if pension is not a deferred payment of salary, since the pension in this case is deemed to be salary under section 17 and is sought to be taxed under section 15, it must be held to be exempt under the Privileges and Immunities Act, whether received by the official himself or his heir or nominee. It is the nature and character of the receipt and not the character of the recipient that would determine the question whether the receipt is exempt from taxation. What would have been exempt from the hands of the deceased official would necessarily be exempt in the hands of the widow. We are, therefore, of the opinion that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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