SYED SHAH MOHAMMED QUADRI, J. :
On the direction issued by this Court on the application of the Revenue filed under s. 256(2) of the IT 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 Tribunal was justified in holding that the pension received by a widow of an ex-employee of the UNO is exempt from the IT Act ?'
2. The said question arose out of the orders of assessment for the asst. yrs. 1972-73 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 (UNO) 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 ITO she claimed exemption under s. 18(b) of Art. V of the United Nations (Privileges and Immunities) Act, 1947. The ITO held that she was not entitled to the exemption. That order was affirmed by the AAC on appeal by the assessee. However, on further appeal to the Tribunal, it was held that the pension received by the employee of the UNO 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 7th May, 1981. It is from those orders that the said question has arisen.
3. Mr. S. R. Ashok, learned standing counsel for the Revenue, contends that the benefit of s. 18(b) cannot be availed by the widow of an employee of the UNO and that where the Act intended to extend the benefits to the widows or other family members of the employees of the UNO, 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 UNO; 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.
4. 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 13th Feb., 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 w.e.f. 20th Dec., 1947. It contains four sections. Sec. 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. Sec. 3 gives power to the Central Government to confer certain privileges and immunities on other international organisations and their representatives and officers. The Schedule to the Act consists of VIII articles containing 30 sections. The provision relevant for our purpose is Art. V which deals with the officials of the UNO. Sec. 18(b) under which the exemption is claimed by the assessee reads as follows :
'Sec. 18. Officials of the United Nation 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 UNO shall be exempted from tax on the salaries and emoluments paid to them by the United Nations.
Secs. 15 and 16 of the IT Act deal with the head 'Salary'. For the purpose of income-tax, s. 17 of the IT Act defines the expression 'Salary, perquisite and profits in lieu of salary'. Sub-cl. (ii) of cl. (1) of s. 17 of the Act includes within the ambit of 'Salary' any annuity or pension.
On construing the abovesaid provisions, a Division Bench of the Karnataka High Court in CIT vs . Ramaiah : [1980]126ITR340(KAR) , held that the pension received by an erstwhile employee from the United Nations falls within the meaning of 'Salary' used in ss. 14 and 17 of the IT Act and the immunities granted under s. 18 of Art. 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 vs . Dr. P. L. Narula : [1984]150ITR21(Delhi) .
In CIT vs . Smt. Dipali Goswami : [1985]156ITR36(Cal) , 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 s. 18(b) of Art. 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 dependents 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 employees 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 time of retirement or thereafter. What the widow of a former employee receives is the amount 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 s. 18(b) of Art. V of the said Act, the same position should obtain with the employee who dies in harness and the widow who is granted pension from the 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 UNO from the funds of the United Nations from out of which the pension is paid, the principle contained in s. 18(b) of Art. V is clearly attracted. To the same effect is the view expressed by the Calcutta High Court in the abovesaid judgment. We 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 Bench of the Allahabad High Court in Smt. Usha Shah vs . CIT : [1989]175ITR572(All) .
5. 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.