TaxTMI 
TaxTMI 
2014 (7) TMI 992
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....arity in the findings, we are disposing of these appeals by this consolidated order. 3. The grounds raised by the revenue in appeals related to AY 2000-01, 2002-03, 2003-04 and 2009-10 are similar which read as under:- "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in:- 1. deleting the additions made to the total income on account of family pension received by the appellant in U.K. stating that it is covered under Article 23(3) of the DTAA between India and U.K. and since the U.K. has taxed the amount, the same cannot be taxed in India ignoring the fact that the above payment is covered under Article 23(1) of the DTAA 2. ignoring the fact that the assessee's case is duly covered under Article 23(1) of the DTAA between India and UK. 3. ignoring the fact that the Article 23(1) is specific and not residuary like Article 23(3). 4. deleting the addition as the applicability of Article 23(3) arises only when the items of income are not dealt with in the foregoing articles of the convention, which is not the case he....
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....ent w.e.f. AY 2000-01 and has been receiving the family pension regularly form RBS, UK who was employer of his deceased wife. The Assessing Officer had taxed family pension received by the assessee in U.K. and this assessment order was challenged by the assessee before the CIT(A). The CIT(A) granted relief for the assessee holding that the family pension received by the assessee was covered under Article 23(3) of the DTAA between India and UK and cannot be taxed in India when source country i.e.UK has already taxed these amounts. Against this order of the CIT(A), the revenue has preferred an appeal before the ITAT and the ITAT remitted this issue back to the file of Assessing Officer to consider the same in the light of the submissions of the assessee. During the second round, the Assessing Officer again decided the issue of pension against the assessee and held that the amount of family pension received by the assessee was taxable under Article 23(1) of the DTAA between India and UK. The aggrieved assessee again filed first appeal before the CIT(A) which was allowed by holding that the amount received by the assessee from RBS, the employer of the deceased wife of the assessee as f....
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....nsion whereas Indian Income Tax Act, 1961 defines "family pension" under Section 57(iia) r/w explanation attached thereto and section 17(1)(ii) of the Act defines that the "pension" is included under the definition of salary. 9.1 From brief written synopsis filed by the ld. Counsel of the assessee, we observe that the main written submissions, contentions and decisions relied by the assessee read as under:- "4.1 That on bare perusal of both the Articles following glaring point emerges for consideration: (a) That Article 20 of Indo - UK DTAA, is applicable only for "Pension" and not for "Family Pension", as both the terms are distinct and independent of each other. Moreover, Indo - UK treaty only defines pension under Article 20 (2) and does not define family pension, whereas, Indian Income Tax Act defines family pension under section S7(iia) read with Explanation and section 17(1)(ii) of the Act includes pension under the definition of salary. (b) That further, Article 20 is applicable only in the cases of employees who receive pension from their employers for past consideration of their employment. As c....
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....of earlier years I.e. AY 2000-01, 2002-03 and 2003-04, which had been set aside by Hon'ble ITAT vide order dated 27.01.2010 for fresh assessment. That, in pursuance to the said order of set aside by Hon'ble Tribunal, the learned assessing officer vide order dated 30.12.2011 for AY 2000-01,2002-03 and 2003-04 has held that the said family pension received by the assessee is not covered by Article 20 of the treaty rather by Article 23(1) of the treaty and as such, now the only question which remains to be answered by Hon'ble Tribunal is that whether, "Family Pension received by the assessee falls under Article 23(1) or Article 23(3) of Indo -UK treaty". 5.1 Thus, it is submitted that the basic premise of AY 2006-07 was orders of earlier assessment years namely 2000-01, 2002-03 and 2003-04, and after being set aside by the Hon'ble Tribunal, the learned officer has himself accepted that family pension received by the assessee is not covered by Article 20 of the treaty rather by Article 23(1) of the treaty and as such, the ground of the department for AY 2006-07 that the family pension received falls under Article 20 (1) of the treaty is misconc....
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....eration of above submissions and decisions relied by both the parties, specially provisions of Indo-UK DTAA and provisions of the Act, we observe that the "pension" is received from the ex-employer by the assessee in his life time while "family pension" is received by the spouse or family members or legal dependent of the deceased employee from the employer of that deceased employee. From the facts of the present case, we clearly observe that the assessee received "family pension" from employer of asesseee's deceased wife, therefore the present case is not related to the pension but it is a clear case of family pension. 11. From the impugned order dated 30.4.2012 for four assessment years, we observe that the CIT(A) granted relief for the assessee with following observations and findings:- "5. After hearing both the sides I have carefully considered the contention of the AO as well as the assessee and have come to the following conclusion: 1. On the issue of as to whether the claim of the assessee can be rejected merely on the plea of filing of an appeal before the higher authority, I agree with the contention of the assessee....
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....d this term and have clearly stated that it is the source state which has the right to tax in such a situation. The appellant has also reproduced above what the Hon'ble Mumbai Tribunal in the case of Ms Pooja Bhatt v. DCIT [2008] 26 SOT 574 has stated at page 580 in this regard. It has also been be pointed out that the Hon'ble Supreme Court in the case of CIT v. P.V.A.L. Kulandagan Chettiar [2004] 267 ITR 654 as well as the decision of DCIT v. Torquoise Investment and Finance Ltd. [2008] 310 ITR . I have relied on the decision of Madras High Court in the case of CIT v. VR.S.R.M. Firm [1994] 208 lTR 400 wherein the expression "may be taxed" was interpreted to mean that the other contracting state was precluded from taxing the income. 1 am in agreement with the contention of the appellant and respectfully following the above mentioned decision of the courts 1 hold that the amount received by the appellant from RBS as family pension cannot be taxed in India in view of the provisions of Article 23(3) of the India-U.K treaty." 12. In the case of DCIT v. Mideast India Ltd. [2009] 124 TTJ 924 (Del) 'G' Bench held that wh....
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....ing State of source to tax such income and by necessary implication the contracting State of residence is precluded from taxing such income. Reliance is placed on the judgments of the Hon'ble Supreme Court in the case of P.V.A.I. Kuladagan Chettiar (supra) and Torquoise Investment & Finance Ltd. (supra)." 14. In the present case, undisputedly, the assessee received amount of family pension from the employer of the deceased wife of the assessee from RBS, UK and the source country i.e. UK also deducted tax thereon at source. The authorities below have not disputed this fact that the assessee received amount of family pension from UK after deduction of tax at source. From bare reading of Article 20(1), we observed that any pension other than a pension referred to in Article 19(2) of this Convention, or annuity paid to a resident of a Contracting State shall be taxable only in that State. We also observe that Article 20(2) is pertaining to a periodic payment made in consideration of past employment or by way of compensation for injuries received in the course of performance of employment or any payments made under the social security legislation of either Contracting State. Thus, ....
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....opinion that the present case of the assessee is squarely covered by the decision of ITAT Delhi Bench in the case of DCIT v. Mideast India Ltd. (supra), decision of ITAT, Mumbai in the case of Ms Pooja Bhatt v. DCIT (supra) and respectfully following the same, we hold that the expression "may be taxed in that other state" mentioned in Article 23(3) authorizes only the contracting state of source to tax such income and by necessary implication, the contracting state of resident is precluded from taxing such income, specially when the tax has been deducted by the contracting state of source and contracting state of the residence cannot tax it again in the hands of resident assessee. If analogy advanced by the revenue and the Assessing Officer is accepted and the country of source as well as country of receipt, both are allowed to tax the same income twice, then an object of double tax avoidance agreement would become infructuous and the provisions stipulated in the Indo-UK DTAA would be otiose. Accordingly, interpretation adopted by the Assessing Officer was perverse and wrong which was rightly corrected by the CIT(A) by holding that the income received by the assessee from employer ....