Law: Income Tax Act, 1961

Section: 5

Income-tax------Income---Accrual or arising of income in India---Pension---Assessee resident but not ordinarily resident in India---Pension received from Government of Malaysia---Amount credited in Bank in Malaysia and remitted, thereafter, through Bank in India---Income did not accrue or arise in India---Indian Income Tax Act, 1961, S.5---Indian Double Taxation Agreement between India and Malaysia. Art. 18. The assessee was a resident but not ordinarily resident in India. He was a pensioner of the Government of Malaysia and on retirement settled permanently in India. In the assessment order, Article 18(3) of the Agreement for Avoidance of Double Taxation between India and Malaysia was considered. It is as follows: "Any pension paid by the Government of one of the contracting States to any individual may be taxed in that contracting State. The Assessing Authority assessed the pension. The Appellate Authority observed that pension received in India from abroad by pensioners residing in this country for past services rendered in the foreign country could not be charged to tax in India on receipt basis. Apart therefrom the Appellate Authority, on evidence, found that the pension was first credited in the United Asia Bank, Bernard, Malaysia, and thereafter, remitted to India to the pensioner through the United Commercial Bank. On the basis of this factual position, the Appellate Authority observed that the pension could be deemed to have been received abroad in the first instance. Accordingly, it was held that the amount should be exempted from Indian tax. This was upheld by the Tribunal. On a reference: Held, that the amount of pension in the first instance had already been treated as income in Malaysia and received as such as .far as the assessee was concerned. Article 18(3) of the Agreement for Avoidance of Double Taxation between India and Malaysia emphasised that the am6unt was not taxable in India. Additionally, apart from the provisions of section 5(°l)(a) of the Indian Income Tax Act, 1961, the provisions of section 5(1)(c) relating to income and source in regard thereto would clearly show, on the basis of the proviso thereto that any income accruing or…

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