Treaty protection for Malaysian government pension prevents Indian tax as salary under the India-Malaysia double taxation agreement.

Pension received by an assessee from the Malaysian Government was treated as a government-source payment under articles 18(3) and 18(5) of the India-Malaysia Double Taxation Avoidance Agreement. Because the pension was liable to tax in Malaysia, taxing it again in India would amount to double taxation. The Tribunal's view that the University of Malaysia functioned as a statutory authority within the treaty framework was accepted, and the pension was therefore held not taxable in India as salary.

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Issues: Whether pension received by the assessee from the Malaysian Government was assessable as salary under the Income-tax Act, 1961 in view of the Double Taxation Avoidance Agreement between India and Malaysia.

Analysis: The pension was examined in the light of articles 18(3) and 18(5) of the Double Taxation Avoidance Agreement. The pension was treated as a payment falling within the Governmental source contemplated by the treaty, and since it was liable to tax in Malaysia, the Contracting State, taxation in India would amount to double taxation. The Tribunal's view that the University of Malaysia functioned as a statutory authority within the meaning of the treaty was accepted.

Conclusion: The pension was not taxable in India as salary, and the question was answered in favour of the assessee and against the Revenue.

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