Madras High Court
B.R. Sundaram (Decd.) (By Lrs.) vs Commissioner Of Income-Tax on 30 January, 1978
Equivalent citations: [1979]117ITR960(MAD)
JUDGMENT Govindan Nair, C.J.
1. 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 stated above is liable to be taxed under the Income-tax Act, 1961?"
2. The facts as stated in para. 2 of the statement of the case read thus: "The assessee is a permanent resident of Madras. He was formerly employed as a teacher under the Malaysian Government and retired from that service on 27th July, 1951. He is being paid pension by the said Government. The pension is paid to him in India by the Accountant-General, Madras, in Indian currency, in pursuance of a block arrangement entered into between the Government of India and the Government of Malaysia. As a result of this arrangement, the Government of India is being credited with dollars by the Malaysian Government. During the relevant previous year, the assessee received Rs. 10,008 as pension. He filed the return disclosing income of Rs. 10,240 inclusive of the pension amount, for the assessment year 1970-71, the relevant previous year ending with March 3f, 1970." The assessee, however, contended that the pension was not taxable. This contention was negatived by the ITO. On appeal by the assessee before the AAC, it was contended that only pension earned in India was liable to be included in the total income under Section 9(2) of the I.T. Act of 1961, and this contention was rejected by the appellate authority which held that the income was taxable under the head "Other sources."
3. On further appeal before the Tribunal, the Tribunal took the view that the pension which had accrued to the assessee was taxable by virtue of Section 5(1)(c) of the Act.
4. Counsel appearing on behalf of the assessee contended before us that the pension having been received in Malaysia, it could not be assessed on accrual basis by applying Section 5(1)(c) of the Act. We are unable to accept this submission. As regards a resident, tax will be attracted as soon as the ingredients of Section 5(1)(c) are satisfied. There was a vague suggestion that the pension had not accrued at all. But this suggestion also we are unable to accept. The pension had accrued. In fact, it was further submitted that it had been received. Receipt normally follows accrual. Income, generally speaking, 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 I.T. Act, 1961.
5. Except the contention that there was no accrual and the receipt was outside India, no other contention was raised.
6. In the light of the above, we answer the question in the affirmative, against the assessee. The assessee will pay costs to the revenue. Counsel's fee Rs. 500.