1978 (5) TMI 45 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of pension received by the widow of a United Nations employee.
2. Interpretation of the term "salary" and "emoluments" under the Income-tax Act, 1961.
3. Applicability of exemption provisions under the United Nations (Privileges and Immunities) Act, 1967.

Issue-wise Detailed Analysis:

1. Taxability of Pension Received by the Widow of a United Nations Employee:
The primary issue revolves around whether the pension received by the widow of a United Nations employee is taxable. The Income-tax Officer initially included the pension in the assessee's total income under section 17(1)(ii) of the Income-tax Act, 1961, which defines salary to include any annuity or pension. However, the Appellate Assistant Commissioner held that the pension received from the United Nations should be excluded from the assessments, emphasizing that the immunity from taxation granted to the assessee's husband should extend to his beneficiaries. The Tribunal upheld this view, stating that the pension received by the widow should not be considered taxable income as it was part of a Social Security Benefit Scheme, and the amount received was essentially a return of contributions made by her husband.

2. Interpretation of the Term "Salary" and "Emoluments" Under the Income-tax Act, 1961:
The Tribunal referred to the case of Dr. P.L. Narula, where it was established that pensionable remuneration paid to United Nations officials is quid pro quo for past services and should be treated as "emoluments." The Tribunal noted that the term "emoluments" includes any profit or advantage derived from employment and that pensionable remuneration falls under this category. The Tribunal rejected the Department's argument that the exemption clause should be construed strictly, emphasizing that the same meaning should be assigned to the term "pension" for both taxation and exemption purposes.

3. Applicability of Exemption Provisions Under the United Nations (Privileges and Immunities) Act, 1967:
The Tribunal examined the provisions of the United Nations Joint Staff Pension Fund Regulations, which provide retirement, death, disability, and related benefits to staff members. The Tribunal noted that the assessee's husband had made contributions to the Pension Fund, which were deducted from his salary, indicating a debtor-creditor relationship between the United Nations and the employee. The Tribunal concluded that the pension received by the widow was not her income alone but a return of the contributions made by her husband, thus falling outside the purview of taxable income. The Tribunal emphasized that tax cannot be imposed by implication and that a common-sense view should be applied while construing taxing provisions.

Conclusion:
The Tribunal confirmed the view taken by the Appellate Assistant Commissioner, holding that the pension received by the widow of a United Nations employee is exempt from taxation. The Tribunal dismissed the Departmental appeals, reinforcing the principle that the exemption granted to the employee should extend to his beneficiaries, and the pension received should not be considered taxable income.