Retrospectively revised pension is taxable only when arrears crystallise, not on the original pension period.

Retrospectively revised pension became chargeable to tax only when the later Government order created an enforceable entitlement, so the arrears crystallised on 2 April 1959 and were assessable in the assessment year 1960-61. The earlier monthly payment retained its character as pension, and the tax could be levied only on the actual excess between the revised pension and the amount previously paid for the relevant periods. The entire sum, or the amount earlier adjusted as gratuity, was not taxable on the Revenue's basis. Relief under section 89(1) was also recognised for the legal representative, and the taxable arrears were to be recomputed accordingly.

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Issues: Whether the arrears arising from retrospective refixation of pension were assessable to income-tax in the assessment year 1960-61, and to what extent.

Analysis: The later Government order of 2 April 1959, having retrospective effect from 28 March 1952, displaced the earlier fixation and created enforceable entitlement only on the date of the later order. The income became chargeable when the arrears became due, not when the underlying pension period originally arose. The earlier payment at Rs. 484.87 per month remained pension and did not lose that character merely because of the intervening adjustment under the earlier order. Accordingly, only the excess between the revised pension of Rs. 526.94 and the pension actually paid for the relevant periods could be treated as arrears due on 2 April 1959 and brought to tax in the assessment year 1960-61. The claim that the entire amount or the amount originally adjusted as gratuity was taxable was not accepted. The legal representative's entitlement to relief under section 89(1) was also recognised.

Conclusion: The arrears of pension attributable to the retrospective revision were taxable in the assessment year 1960-61 only to the extent of the actual difference between the revised pension and the pension earlier paid; the reference was answered substantially in favour of the assessee.

Final Conclusion: The decision confined taxability to the arrears that crystallised on the later revision order and rejected inclusion of the entire amount on the Revenue's basis, while directing recomputation of the exact taxable arrears.

Ratio Decidendi: Retrospectively revised pension becomes taxable when the revised entitlement crystallises and only the actual arrears that become due on that date are chargeable in the relevant assessment year.

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