1994 (11) TMI 124 - HC - Income Tax

Summary

Issues:
Interpretation of section 18(b) of article V of the United Nations (Privileges and Immunities) Act, 1947 regarding tax exemption on pension received by a United Nations official.

Analysis:
The judgment of the High Court of Bombay pertains to a reference under section 256(1) of the Income-tax Act, 1961, regarding the taxability of pension received by an individual from the United Nations Joint Staff Pension Fund. The controversy revolved around whether the pension amount is exempt from tax under section 18(b) of article V of the United Nations (Privileges and Immunities) Act, 1947. The assessee, a former United Nations employee, received pension during the relevant assessment years and claimed exemption based on the Act's provisions. The Income-tax Officer initially allowed the exemption, but the Commissioner of Income-tax initiated revision proceedings under section 263, challenging the exemption. The Tribunal later upheld the assessee's claim, leading to the reference to the High Court.

The High Court analyzed the relevant provisions of the United Nations (Privileges and Immunities) Act, 1947, which confers privileges and immunities on United Nations officials. The Act's overriding effect over other laws was emphasized. Section 2 of the Act confers privileges and immunities as per the Schedule, which includes exemption from taxation on salaries and emoluments paid by the United Nations to its officials. The crucial provision in question was clause (b) of section 18 of article V, which exempts officials from taxation on salaries and emoluments. The primary issue was whether "pension" falls under the ambit of "salary or emoluments."

The High Court concluded that the term "salary" under the Income-tax Act encompasses "pension" for income computation purposes. Additionally, the broader term "emoluments" would naturally include pension as well. Citing precedents from the Karnataka High Court and the Delhi High Court, the High Court affirmed that the exemption under section 18(b) of article V applies to pensions paid by the United Nations to its officials. Consequently, the Court answered the referred question affirmatively in favor of the assessee, ruling that the pension received is indeed exempt from tax under the Act. The judgment did not award costs considering the circumstances of the case.