Foreign pension of a resident is taxable on accrual basis even if paid in India under income-tax law.

For a resident assessee, foreign pension that had accrued abroad in foreign currency was taxable under section 5(1)(c) of the Income-tax Act, 1961. The relevant tax liability arose once the statutory ingredients of resident taxation were met, and the fact that the pension was paid in India did not displace taxation on an accrual basis. The contention that the income escaped tax because it was received outside India was rejected, and the pension was treated as taxable in India in the assessee's hands.

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Issues: Whether the foreign pension received by a resident assessee, having accrued abroad in foreign currency and being paid in India, was taxable under the Income-tax Act, 1961.

Analysis: For a resident, tax liability arises once the ingredients of section 5(1)(c) of the Income-tax Act, 1961 are satisfied. The pension had accrued to the assessee, and receipt ordinarily follows accrual; the fact that the pension was paid in India did not prevent taxation on accrual basis. The contention that the income could not be taxed because it was received outside India was rejected.

Conclusion: The foreign pension was taxable in the hands of the assessee under section 5(1)(c) of the Income-tax Act, 1961, and the answer to the reference was in the affirmative, against the assessee.

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