Pension linked to exempt UN service retains tax exemption in widow's hands where the payment traces to official emoluments.

Pension paid to a widow under the United Nations Joint Staff Pension Fund was treated as exempt from income-tax because it remained a pensionary benefit traceable to the deceased official's exempt salary and emoluments. Section 18(b) of the United Nations (Privileges and Immunities) Act, 1947 was read with the Income-tax Act, 1961 on the footing that pension is part of salary and that exemption depends on the character and nexus of the payment, not on the recipient's identity. A widow receiving such a benefit was therefore placed in the same position for exemption purposes, and the receipt was not taxable in her hands.

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Issues: Whether pension received by the widow of a deceased official of the United Nations, payable under the United Nations Joint Staff Pension Fund, was exempt from income-tax under section 18(b) of the United Nations (Privileges and Immunities) Act, 1947, read with the Income-tax Act, 1961.

Analysis: Section 18(b) of the United Nations (Privileges and Immunities) Act, 1947 grants exemption to salaries and emoluments paid by the United Nations to its officials. Under section 17(1)(ii) of the Income-tax Act, 1961, salary includes pension, and the statutory scheme had already been construed liberally to extend exemption to pension received by a former official because the pension is referable to the office held and the services rendered. The pension payable to the widow under article 35 of the Pension Fund Regulations was not an independent, ex gratia payment unrelated to the employment of the deceased official, but a benefit arising from his past service and entitlement under the fund. The recipient's status as widow did not alter the nature of the receipt, because the decisive factor was the character of the payment and its nexus with the exempt emoluments of the official.

Conclusion: The pension received by the widow was exempt from income-tax and was not taxable in her hands.

Ratio Decidendi: Where a payment is a pension or pensionary benefit directly traceable to an official's exempt salary or emoluments under the United Nations (Privileges and Immunities) Act, 1947, the exemption is determined by the nature of the receipt and not by the identity of the recipient; a widow receiving such a benefit stands in the same position for exemption purposes.

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