Mrs. Leila Seth, J.
1. At the instance of the Addl. Commissioner, the Income-tax Appellate tribunal has referred under s. 256(1) of the I. T. Act (1961 Act), the following question for our opinion :
'whether, on the facts and in the circumstances of the case, any part of the amount representing benefit to the assessed's children from the United Nations Joint Staff Pension Fund was liable to be excluded from the assessed's total income for the assessment year 1967-6 ?'
2. The assessed, Mr. R. S. Garg, an individual, formerly worked for the World Health Organization. He retired on 1st May, 1964. During the year in question, which is the assessment year 1967-68, the corresponding previous year being the year ending 31st March, 1967, the assessed received an amount of Rs. 12928 as pension from the United Nations Joint Staff Pension Fund ; in addition to this amount , his children Devised a benefit valued at Rs.13,500 from the same fund. He claimed that these amounts were exempt, as his salary and emoluments as an official of the WHO had been exempted from taxation.
3. However, the ITO included the amount of Rs. 12,928 and Rs. 13,500 in the assessed's total income. With regard to the latter amount, he did not accept the assessed's further contention that the entitlement was in the nature of scholarship or educational allowance and benefited only his children and as such should not be added to his income. THe ITO held that the payment was being made directly to the assessed and the payment would come within the purview profits in lieu of salary as prescribed for in s. 17(3)(ii) of the I T Act, 1961.
4. On appeal before the AAC, the assessed's contention, that as his salary as an official of the WHO was exempt from tax, these mounts received from the United Nations Joint Staff Pension Fund should also be exempt, was rejected. The AAC held that as the assessed had ceased to be an official of the WHO, the amounts received by him subsequent to his retirement hat to be taxed as income. He also rejected the further contention of the assessed that an expression 'salary' in s. 17 of the 1961 Act included pension, it should be exempt. He also noted that it was the assessed who received the amounts on account of the additional benefits for the children and as such the amount had to be taxed in his hands.
5. However, the AAC accepted the alternative contention of the assessed that one-third of each of these two amounts should be excluded from taxation under the provision of s. 17(3)(ii) of the 1961 Act. Under the rules of the United Nations Joint Staff Pension Fund, the assessed had been contributing every month 7 percent. of his pensionable remuneration and 14 percent had been contributed by his employer, the WHO.. It was only this contribution of 21 percent. which had been pooled into the United Nations Joint staff Pension Fund that was being returned to the assessed in the shape of retirement benefits. THe AAC, thereforee, directed the ITO to deduct 1/3rd of Rs. 12,928 and Rs 13,500 as consisting of the contribution by the assessed and reduce the total income by this amount.
6. The revenue appealed to the Tribunal and the assessed filed a cross objection. The Tribunal held that the pension could not be co-related to the contribution by the assessed to the United Nations Joint Staff Pension Fund. Further, pension was includible as salary in the assessed's income by virtue of the provisions of s. 17(1)(ii) and such there was no need to invoke the fiction of s. 17(3)(ii) of the 1961 Act. It, thereforee, set aside the order of the AAC directing the ITO to deduct 1/3rd of this amount of Rs. 12,928.
7. With regard to the additional benefit of Rs. 13, 500 for the assessed's children, the Tribunal upheld the exclusion of 1/3rd of the amount though for different reasons. It opined that the amount of Rs. 13,500 was strictly for the benefit of the children who had the right to receive it and could not in any sense be described as a pension receivable by the assessed; nor was it a perquisite as it did not fall within any of the categories set out in s. 17(2); it was also not permissible to include it as profit in lieu of salary as defined in s. 17(3) as the payment, strictly speaking, was not received by the assessed.
8. Being aggrieved, the Commissioner proposed a question and the assessed suggested a slightly different question. The Tribunal observed that both the questions sought to enlarge the scope of chargeability of the whole of the benefit derived by the children. It, however, proceeded to formulate the question which has been set out earlier, but which seems to be the same which had been asked for by the assessed. As such, we shall proceed to answer the question keeping in mind that the controversy before the Tribunal had been confirmed to 1/3rd of the value of the benefit and the question referred to us also only relates to that part of the children's benefit.
9. Learned counsel for the revenue has urged that the Tribunal has erred in coming to the conclusion that the child's benefit was receivable by the child and was not a perquisite or profit in lieu of salary of the assessed. Learned counsel for the assessed, however, contended that the Tribunal's conclusion and reasoning were correct and alternatively the amount is exempt in view of s. 18 (b) of the United Nations (Privileges and Immunities) Act, 1947 (1947 Act). The 1947 Act provides for the conferment of certain privileges and immunities to officers and representatives of the United Nations. Section 2 of the 1947 Act makes the provisions incorporated in the Schedule to the Act as law in India. section 3 provides for conferment of privileges and immunities on other international organizations and their representatives and officers. These have been extended to, inter alia, the WHO. section 18 (b) of the schedule provides for exempting from taxation 'the salaries and emoluments paid' to an official by it.
10. However, in order to appreciate the nature of the payment from the United Nations Joint Staff Pension Fund benefiting the assessed's children, it is necessary to examine the regulations of the United Nations Joint Staff Pension Fund as they stood at the relevant time.
11. The United Nations Joint Staff Pension Fund was maintained by contributions of participants and contributions of member organizations and the yield from the investment of the funds and other receipts (art. XV). Seven percent of the pensionable remuneration of each participant was deducted from his remuneration and paid each month to the pension fund (art, XVI). Each member organisation including the WHO paid into the pension fund, monthly, a contribution equal to 14 percent. of the total monthly pensionable remuneration of the participant employed by it (art.XVII).As a result, a participant wasentitles, on retirement, to receive for the remainder of his life an annual retirement benefit payable monthly equal to one fifty-fifth of his final average remuneration multiplied by the number of years of his contributory service not exceeding thirty years (art IV). Each unmarried child of a participant who died, or, inter alia, became entitled to the retirement benefit under art. IV, was entitled to a child's benefit. This benefit was payable monthly till the child attained the age of eighteen and was extended till the age of twenty-one, if the child was in full time attendance at a school or university (art. VII).
12. Article VIII (1) of the Regulations of the United Nations Joint Staff Pension Fund which were adopted by the General Assembly by resolution. 248 (III), effective 23rd January, 1949, and amended by subsequent resolutions, reads :
'Subject to paragraph 4 below, each unmarried child of a participant who dies or on whose account a benefit becomes payable under articles IV, V or VII shall be entitled to a child's benefit. The child's benefit shall be payable monthly up to an including the month in which the child shall attain the age of eighteen or, if the child is in full-time attendance at a school or university or similar educational institution the age of twenty-one. If the child is totally disabled by reason of physical or mental incapacity, there shall be no age limit so long as the disability continues.'
13. The other paragraphs of art. VIII deal with the computation, etc., of the child's benefit. Paragraphs 36 and 37 of the Explanatory Booklet of the United Nations Joint Staff Pension Fund provide :
'36. each unmarried child of a participant who retires with pension under paragraph 29-31 is entitled, if he (or she is dependent on the participant and is under the age of eighteen (or under twenty-one, if in full-time attendance at a school or university, to a childs benefit, payable monthly until the child reaches the age limit (or, of course, marries or dies). If the child is totally disabled by reason of physical or mental incapacity, there is no age limit so long as the disability continues.
37. The amount of each child's benefit is in principle one-third of the participant's own pension, but is subject to a minimum of $300 and a maximum of $600 a year for each child.Thetotalamount of children benefits is also subject to an overall maximum of $1,800 a year , and there is a further overriding condition that the participant's own Rs. s nld. The totalna year, and there is a further overriding condition that the participants own pension,plus the total, children's benefits, must not exceed the final average remuneration plus the children's allowance which he was receiving at the date his service ceased.'
14. Article 1(3) defines pensionable remuneration as follows :
'Pensionable remuneration' means the remuneration of a participant which is pensionable in accordance with the terms of employment. It shall not include any special grants, or allowances, such as children's allowances, education grants expense allowances, cost of living allowances, payments for overtime, fees, honoraria, and payments for nay expenses incurred in the service of a member organization. If part or the whole of the pensionable remuneration is paid in kind, the valid of such payments, if not stated in the terms of employment shall be determined by the Joint staff Pension Board.'
15. The Explanatory Booklet in Chap. II para. 19, provides that 'pensionable remuneration'means that the part of the total pay which serves as the basis for calculating contributions and benefits. It does not include children's allowances, education grants, expense allowances, cost of living allowances, payments for overtime, fees honoraria or payments of expenses, or anything not specifically mentioned in this chapter.
16. From a perusal of the above definition and the explanatory booklet, it is clear that the children's allowances, etc., are not to be included as pensionable remuneration for the purpose of calculating contributions. However, it is a factor to be considered in determining the maximum child benefit.
17. Chapter III of the Explanatory Booklet deals with the benefits payable on retirement. These are pension, additional with the benefits for children (which continue even if the pensioner dies), widow's benefit, disabled widower's benefit and secondary dependants benefit (in certain cases, a parent or brother or sister).
18. It is thereforee, apparent that a children, s benefit is a retirement benefit whereas children, s allowances, etc are what may be payable to an employee during his service. Though it is only a full-time member of the staff of each member organization that can become a participant in the United Nations Joint Staff Pension Fund and only children of the participant are entitled to the child's benefit, yet the beneficiary is the child and not the participant. This is apparent as the payment continues, if the conditions are satisfied, irrespective of the life of the participant. In fact, if the participant's widow also dies or he does not have a wife at the time of his death then the child's benefit's increases. A disabled child is entitled to the benefit while the disability continues. thereforee, the amount allowable as the child's benefit though available only because of the filial link with the participant, is an amount recoverable by the child and not by the participant. It is, thereforee, not the income of the participant. further, since it does not appear to come within the provisions of s. 17, including s. 17(iv) in the absence of any statutory fiction by which it is to be treated as the assessed's remuneration, there does not seem nay reason to include in the assessed's income.
19. Before concluding, we would like to refer to a decision of the Karnataka High Court which was cited. The Question dealt therein was whether the pension paid to a erstwhile official of the United Nations was exempt from tax.
20. In CIT v. K. Ramaiah : 126ITR340(KAR) , it was held that the provision in s. 18 (b) of the 1974 Act providing for exemption from taxation with regard to salaries and emoluments paid to the officials of the United Nations also extended to pensionary benefits, in view of the definition of 'salary' in s. 17 of the 1961 Act. This question does not arise before us as the case has proceeded on the ground that the pension is taxable as there is no reference by the assessed from the Tribunal's conclusion in this regard. In view of our opinion that the child's benefits is the income of the child and not of the participant, we do not think that the above decision has any relevance. We may, once again clarify, that though for the reasons stated by us, the whole of the children's benefits should exempt from tax, we are concerned in this reference with the chargeability of it to the extent of 1/3rd only.
21. In the result, we answer the question in the affirmative and in favor of the assessed, who will be entitled to costs. Counsel's fee Rs. 350.