44.  Pensions received from abroad by pensioners residing in India – Taxability under clause (iii) of sub-section (1)

1. Under section 9(1)(iii ), pension accruing abroad is taxable in India only if it is earned in India.  Pensions received in India from abroad by pensioners residing in this country, for past services rendered in the foreign countries, will be income accruing to the pensioners abroad, and will not, therefore, be liable to tax in India on the basis of accrual. These pensions will also not be liable to tax in India on receipt basis, if they are drawn and received abroad in the first instance, and thereafter remitted or brought to India.

2. It is only in cases where in pursuance of a definite agreement with the employer or former employer, the pension is received directly by the pensioner in India that the pension would become taxable in India on receipt basis.

3. While the pension earned and received abroad will not be chargeable to tax in India if the residential status of the pensioner is either “non-resident” or “resident but not ordinarily resident”, it will be so chargeable if the residential status is “resident and ordinarily resident”. The aforesaid status of “ordinarily resident” cannot, however, be acquired by a person unless he has been resident in India in at least nine out of the preceding ten years.

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Circular : No. 4 [F. No. 73A/2/69-IT(A-II)], dated 20-2-1969.

JUDICIAL ANALYSIS

APPLIED IN – The above circular was referred to and applied  in Fifth ITO v. Mrs. Lalitha Chettur [1991] 38 ITD 294 (Mad. – Trib.), with the following observations :

“. . . There is a circular of Central Board of Direct Taxes which is unequivocal in its terms dated 20-2-1979 in Circular No. 4 [F. No. 73-A/2/69-IT(A-II)]. It was fully extracted in the impugned order passed by the Commissioner (Appeals). In that circular it is stated that pensions will not also be liable to tax in India on receipt basis, if they are drawn and received abroad in the first instance and thereafter remitted or brought to India. In the case of Ms. Padmini Chettur, one of the legal heirs of the deceased, the Income-tax Officer while making the assessment for 1982-83 already agreed that the Paymaster General was acting as agent of the assessee and in his capacity as agent, first received the pension of the recipient from the Department of National Health Service and the same pension received by him was remitted to the  assessee in India through post (vide page 17 of the paper book filed by the assessee, representing  assessment order dated 7-2-1986, for the assessment year 1982-83, in the case of Padmini Chettur). Thus it can be seen that the amount of family pension was not directly received by the assessee in India but it was first received by the Paymaster General as agent of the assessee and later it was sent to India through post to the  assessee and therefore on receipt basis the family pension was not assessable in India as per the categorical terms of the CBDT circular men­tioned above. In the same CBDT circular mentioned above, it was stated that pension received in India, from abroad, by pensioners residing in this country for past services rendered in the for­eign country, will be income accruing to the pensioners abroad and the same will not, therefore be liable to tax in India on the basis of accrual. Late Balakrishna Chettur was employed in the National Health Service, U.K. He died in 1976 and by the order ­dated 29-9-1976 passed by the Department of Health  and Social Security, the following allowances were granted to the wife as well as the children of late Balakrishna Chettur (vide page 4 of the paper book filed by the assessee):—

Widow’s injury allowance
£ 2,664.27 p.a.
Children’s allowance for
Krishnan and Padmini
£ 307.42 p.a. for each child
Lump sum payment
£ 2,049.43

It is stated that the allowances are payable with effect from 25th May, 1976 and are in addition to the benefits, the assessee and her children are receiving, under the National Health Service Superannuation Scheme. It is further stated that the then minor son, Krishnan, and daughter, Padmini, will remain payable until they attain 16 years of age and beyond that date if full time education continues. Therefore, it is clear that the family pen­sion and allowance due to the assessee were received abroad for the services rendered by late Balakrishna Chettar in Department of Health and Social Security in U.K. Therefore as per the CBDT circular quoted above this amount received in India cannot be taxed even on accrual basis. . . .” (pp. 297-298).

APPLIED IN – Maganlal Ranchhodbhai Chhaya v.   ITO [1985] 11 ITD 432 (Ahd. – Trib).

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Category : Income Tax (25146)
Type : Circulars (7510) Notifications/Circulars (30277)

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