Foreign family pension remitted to India was not taxable where first received abroad and protected by the India-UK tax arrangement.

Family pension received from the United Kingdom by a resident but not ordinarily resident assessee was held not taxable in India where it was first received abroad by the Paymaster General and later remitted to India. The text relies on the Board circular that pension drawn and received abroad is not taxable in India on receipt basis, and pension accruing abroad is not taxable in India on accrual basis. It also notes that the India-UK tax arrangement taxes a government pension for services rendered to that government only in the paying state, so the addition was deleted.

---

---

Issues: Whether family pension received in India from the United Kingdom by an assessee resident but not ordinarily resident was taxable in India under the Income-tax Act, 1961.

Analysis: The pension was first received abroad by the Paymaster General on behalf of the recipient and thereafter remitted to India. The assessment records for earlier years showed that the same pension was not treated as taxable, and the Board circular stated that pension drawn and received abroad and later remitted to India is not liable to tax in India on receipt basis, while pension accruing abroad is not taxable in India on accrual basis. The relevant Indo-UK double taxation arrangement further provided that a pension paid by the government of a contracting state for services rendered to that government is taxable only in that state.

Conclusion: The pension was not taxable in India and the addition was rightly deleted.

---