COMMISSIONER OF INCOME-TAX VS MAJJIDUNNISA BEGUM
1997 P T D 2245
[Andhra Pradesh High Court]
Before Syed Shah Muhammad Quadri and G. Bikshapathy, JJ
COMMISSIONER OF INCOME-TAX
Versus
Smt. MAJJIDUNNISA BEGUM
Cases Referred No.55 of 1987, decided on 17/07/1995.
Income-tax----
----Exemption---United Nations---Pension received by widow of employee of the U.N.---Entitled to exemption---United Nations (Privileges and Immunities) Act, 1947.
The conventions on the privileges and immunities enjoyed by the international organisations and their representatives and officials, were adopted by the general assembly of the United Nations on February 13, 1946. To give effect to those conventions and immunities, the United Nations (Privileges and Immunities) Act, 1947, was enacted by Parliament. The Act came into force with effect from December 20, 1947. Under section 18(b) in Article V of the Schedule to the Act, officials of the United Nations would be exempt from taxation on salaries and emoluments paid to them by the United Nations. Where the widow of an official receives a pension, what the widow receives, is in consideration of the employment of her husband and not independent of that employment. There being nexus between the pension receivable by the widow after the death of her husband and the salary receivable by the employee of the U.N.O., from the funds of the United Nations from out of which the pension is paid, the principle contained in section 18(b) in Article V of the Schedule to the Act is clearly attracted. The pension received by the widow would be exempt from tax.
CIT v. Dipali Goswami (Sint.) (1985) 156 ITR 36 (Cal.) and Usha Shah (Sint.) v. CIT (1989) 175 ITR 572 (All.) fol.
CIT v. Narula (Dr.) (P.L.) (1984) 150 ITR 21 (Delhi); CIT v Ramaiah (K.) (1980) 126 ITR 638 (Kar.) ref.
S.R. Ashok for the Commissioner.
Y. Ratnakar for the Assessee
JUDGMENT
SYED SHAH MUHAMMAD QUADRI, J.---On the direction issued by this Court on the application of the Revenue filed under section 256(2) of the Income Tax Act, 1961, to state the case and refer the question of law, the Tribunal has stated the case and referred the following question of law:
"Whether, on the facts and circumstances of the case, the Income tax Appellate Tribunal was justified in holding that the pension received by a widow of an ex-employee of the U.N.O. is exempt from the Income Tax Act?"
The said question arose out of the orders of assessment for the assessment years 1972-74 (sic) to 1975-76. The assessee is a widow of one late Shri Durvesh Alam Quadri, who was in the service of the United Nations Organisation from 1961 and died in harness in 1965. His widow, the assessee, was granted pension from the United Nations Joint Staff Pension Funds. For the said years, she received Rs.19,890 as family pension. Before the Income-tax Officer she claimed exemption under section 18(b) of Article V of the United Nations (Privileges and Immunities) Act, 1947. The Income tax Officer held that she was not entitled to the exemption. That order was affirmed by the Appellate Assistant Commissioner on appeal by the assessee. However, on further appeal to the Income-tax Appellate Tribunal, it was held that the pension received by the employee of the United Nations Organisation was exempt from tax, so the amount of pension received by the assessee could also be exempt from taxation and accordingly, the three appeals for the said assessment years were allowed on May 7, 1981. It is from those orders that the said question has arisen.
Mr. S.R. Ashok, learned standing counsel for the Revenue, contends that the benefit of section 18(b) cannot be availed by the widow of an employee of the United Nations Organisation and that where the Act intended to extend the benefits to the widows or other family members of the employees of the United Nations Organisation, it was specifically stated in the provision. In the case of pension no such exemption is granted, therefore, the pension received by the widow could not be exempted from the income tax payment. Mr. Y. Ratnakar, learned counsel appearing for the respondent, submits that the amount of pension which is being paid to the widow is out of the funds of the United Nations Organisation; had the employee been alive he would have received the pension and as his widow is receiving the pension, the amount could not be treated differently, as such the Tribunal is right in holding that the pension received by the widow was exempted.
The conventions on the privileges and immunities enjoyed by the international organisations and their representatives and officials, were adopted by the general assembly of the United Nations of February 13, 1946. To give effect to those conventions and immunities, the United Nations (Privileges and Immunities) Act, 1947, was enacted by Parliament. The Act came into force with effect from December 20, 1947. It contains four sections. Section 2 of the Act provides that notwithstanding anything to the contrary contained in any other law, the provisions set out in the Schedule to the Act of the convention of the privileges and immunities shall have the force of law in India. Section 3 gives power to the Central Government to confer certain privileges and immunities on other international organisation and their representatives and officers. The Schedule to the Act consists of VIII Articles containing 30 sections. The provision relevant for our purpose is Article V which deals with the officials of the United Nations Organisation. Section 18(b) under which the exemption is claimed by the assessee reads as follows:
"Section 18. Officials of the United Nations shall,---
(b) be exempt from taxation on the salaries and emoluments paid to them by the United Nations".
A plain reading of the provision extracted above, shows that the officials of the United Nations Organisation shall be exempted from tax on the salaries and emoluments paid to them by the United Nations.
Sections 15 and 16 of the Income Tax Act, deal with the head "Salary". For the purpose of income-tax, section 17 of the Income-tax Act defines the expression "Salary, perquisite and profits in lieu of salary". Sub clause (ii) of clause (1) of section 17 of the Act includes within the ambit of "salary" any annuity or pension.
On construing the above said provisions, a Division Bench of the Karnataka High Court in CIT v. K. Ramaiah (1980) 126 ITR 638 held that the pension received by an erstwhile employee from the United Nations falls within the meaning of "salary" used in sections 14 and 17 of the Income Tax Act and the immunities granted under section 18 of Article V of the Schedule to the Act, would become applicable and accordingly the pension received by such an employee from the United Nations was exempted from taxation. On identical facts dealing with the question of taxability of an erstwhile employee of the United Nations, a Division Bench of the Delhi High Court has also taken the same view in CIT v. Dr. P.L. Narula (1984) 150 ITR 21.
In CIT v. Smt. Dipali Goswami (1985) 156 ITR 36, the question before a Division Bench of the Calcutta High Court was, whether the pension payable to a widow of an official of the United Nations who died in harness would be exempt under section 18(b) of Article V of the Act. The Calcutta High Court took the view that the payment of pension was generally in consideration of past services and is paid to an employee following his retirement from service due to age or disability or to the surviving dependants of an employee entitled to the said pension. It also took note of the fact that in some cases the pension represents a portion of the employee's retirement income accumulated in the pension fund to which the employee had contributed. It being one of the important terms and conditions of employment which was earned by an employee by rendering requisite period of service, was one of the incidents of employment. It was of the view that the benefits by way of pension and gratuity are in the nature of deferred wages which are paid at the fine of retirement or thereafter. What the widow of a former employee receives is the astound which was payable to the former employee or a portion of it; in either case, it is a part of the pension that was payable to the employee and the salary as well as the pension receivable by a former employee was exempted. In view of section 13(b) of Article V of the said Act, the same position should obtain with them employee who dies in harness and the widow who is granted pension from be funds of the United Nations. The fact remains that what the widow received, is in consideration of the employment of her husband and not de hors or independent of that employment. There being nexus in the pension receivable by the widow after the death of her husband and the salary receivable by the employee of the United Nations Organisation from the funds of the United Nations from out of which the pension is paid, the principle cont4io in section 18(b) of Article V is clearly attracted. To the same effect is the view expressed by the Calcutta High Court in the abovesaid judgment. Were respectfully agree with the observations of the Division Bench of the Calcutta High Court in the abovesaid case. We may also point out here that the said judgment of the Calcutta High Court was followed by a Division Rench of the Allahabad High Court in Sint. Usha Shah v. CIT (1989) 175 ITR572.
For the above reasons, we approve the judgment of the Tribunal and accordingly answer the question in the affirmative, i.e., in favour of the assessee and against the Revenue. The question is accordingly answered.
M.B.A./1448/FC Reference answered.