Thursday 8 November 2012

Is Salary or Pension Received By Employees Of United Nations Tax Free?

Yes is the emphatice answer .
The provision given under the United Nations (Privileges And Immunities) Act, 1947 shall override all other laws passed in India , is given in section 2 which is as under :


2. Conferment on United Nations and its representatives and officers
and certain privileges and immunities.
(1) Notwithstanding anything to the country contained in any other law, the provisions set out in the Schedule to this Act of the Convention on the Privileges and Immunities, adopted by the General Assembly of the United Nations on the 13th day of February, 1946, shall have the force of Law in India.
The salary or emoluments received by employees of United Nations organization are not taxable because of the express provision u/s 18(b) of the United Nations (Privileges And Immunities) Act, 1947 . The said section provides as under
SECTION 18.
Officials of the United Nations shall;
(a) ……………..
(b)
Be exempt from taxation on the salaries and emoluments paid of them by the
United Nations;
Is pension received by widow of UN employee tax free?Yes. This issue was before Calcutta High Court in CIT vs Smt Dipali Goswami [1985] 156 ITR 36 (CAL.)
Facts of the caseSmt. Dipali Goswami, the respondent assessee, is the widow of the late Gurdas Goswami, an I.A.S. Officer of West Bengal Cadre, who had been employed under the United Nations Organisation. During his service with the United Nations Organisation, Shri Goswami had been contributing to the United Nations joint Staff Pension Fund (hereinafter referred to as “the Pension Fund”). On the death of Shri Goswami, the assessee became entitled to a pension from the United Nations Organisation. During the course of the assessment proceeding for the assessment years 1971-72, 1972-73 and 1973-74, it was claimed by the assessee that the pension received by her from the United Nations Organisation was exempt from tax. In support of this claim, the assessee relied on section 18(b) of the United Nations (Privileges and Immunities) Act, 1947. The ITO rejected this claim and held that, in terms of section 17(1)(ii) of the I.T. Act, 1961, the amounts were includible in the assessee’s total income inasmuch as the expression “salary” included any annuity or pension and, as such, pension received by the assessee from the Pension Fund was a taxable receipt.
Issue before the court was to decide the question “when the pension is received by the widow of an employee who died in harness, can it be treated as pension exempt from taxation.”
Calcutta High Court held
What is received by the widow is in effect the benefit earned by the assessee’s husband as an official of the United Nations. That is the reason why such benefit is assessed under the head ” Salaries ” although there is no contractual relationship of employer and employee between the widow and the United Nations. Even if pension is not a deferred payment of salary, since the pension in this case is deemed to be salary under section 17 and is sought to be taxed under section 15, it must be held to be exempt under the Privileges and Immunities Act, whether received by the official himself or his heir or nominee. It is the nature and character of the receipt and not the character of the recipient that would determine the question whether the receipt is exempt from taxation. What would have been exempt from the hands of the deceased official would necessarily be exempt in the hands of the widow. We are, therefore, of the opinion that the pension paid to the widow of the deceased employee of the UN.

The CBDT Circular No. 293, dated February 10, 1981
, in this regard states:


” …………. Apart from salary received by the employees of the United
Nations Organisation or any person covered under the U.N. (Privileges and
Immunities) Act, 1947, pension received by them from the U.N. will also be
exempt from income-tax.”
Other case laws .
T
he Karnataka High Court in the case of
CIT v. Ramaiah [1980] 126 ITR 638
considered the effect of section 18(b) of article V of the Schedule to the United Nations (Privileges and Immunities) Act, 1947. There the assessee was a former employee of the United Nations Organisation who had been receiving pension from the United Nations. The question was whether such pension was exempt from taxation. The Karnataka High Court held that the amount of pension received is chargeable to tax under the head “Salary” and the meaning of the expression “salary” given in section 17 automatically applies to any amount of pension received by a person which is chargeable to tax under the head “Salary”. The amount of pension received by an employee from the United Nations Organisation falls within the description of the word “salary” and the immunity granted under the said Privileges and Immunities Act becomes applicable. Therefore, the pension received by any former employee from the United Nations was exempt from taxation.
In the case of Addl. CIT v. Garg [1982] 133 ITR 1,the Delhi High Court was considering the assessability of the amount allowable as a child benefit under art VIII(1) of the Regulations of the United Nations Joint Staff Pension Fund. The ITO included the said benefit in the hands of the assessee who was a former employee of the World Health Organisation. It was held in that case that the child benefit is the income of the child and not of the participant. The amount of benefit derived by the child did not fall within the provision of section 17 of the Act.
In the case of CIT v. Dr. Narula [1984] 150 ITR 21, the Delhi High Court held that section 2 of the United Nations (Privileges and Immunities) Act, 1947, read with section 18, clause (b) of article V of the Schedule thereto, inter alia, grants exemption from taxation in respect of salaries and emoluments paid by the United Nations to its officials. Since under section 17 of the I.T. Act, 1961, “salary” has been defined to include pension, the pension received by the officials of the UNO, after retirement, from the United Nations joint Staff Pension Fund will also be exempt from tax. There, the pension was received by the assessee, a former employee of the United Nations.

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