Law:

Section:

Section 5 of the Income-tax Act, 1961 - Income - Accrual of - Assessment year 1970-71 - Whether where assessee received pension from Malaysian Government in India through Accountant General, in Indian currency pursuant to a block arrangement between both Governments said amount would be liable to tax in hands of assessee in India - Held, yes FACTS The assessee was a permanent resident of India. He retired from his services under the Malaysian Government and was being paid pension by that Government. The pension was paid to him in India by the Accountant General, in Indian currency, in pursuance of a block arrangement entered into between the two Governments. As a result of this arrangement, the Government of India was being credited with dollars by the Malaysian Government. During the relevant previous year, the assessee received certain amount as pension. He filed his return disclosing income inclusive of the pension amount. The assessee, however, contended that the pension was not taxable. This contention was negatived by the ITO. On appeal, the AAC held that the income was taxable under the head "Other sources." On further appeal, the Tribunal took the view that the pension which had accrued to the assessee was taxable by virtue of section 5(1)(c). On reference, the assessee contended that the pension having been received in Malaysia, it could not be assessed on accrual basis by applying section 5(1)(c). HELD It was not possible to accept the aforesaid contention of the assessee. It was also not possible to accept that the pension had not accrued at all. The pension had accrued and in fact had been received. Receipt normally follows accrual. Income must accrue first. In other words, right to receive must exist before the actual receipt takes place. The latter is only the consequence of the former. The pension was, therefore, liable to income-tax under the Act. Note : The decision was in favour of revenue. JUDGMENT Govindan Nair, CJ.-The question that has to be answered in this reference reads as follows: "Whether, on the facts and circumstances of the case, the foreign pension of Rs. 10,008 accrued abroad in foreign currency and paid to the assessee as…

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