COMMISSIONER OF INCOME TAX Vs. K A NARAYAN

JUDGEMENT

(1.) AT the instance of the Revenue, the Income-tax Appellate Tribunal has referred the following question of law, arising out of its order for the assessment year 1974-75, for our consideration :

(2.) THE assessee is a retired employee of Burma Shell Petroleum Company Ltd. having served that company in then Malaya. He retired from service on June 1, 1961, and was entitled to receive pension from Shell Malaya Staff Pension Fund. In the assessment made for 1974-75, for which the previous year ended on March 31, 1974, the Income-tax Officer included in the assessee's total income two sums, namely, (i) Rs. 6,502 representing pension, and (ii) Rs. 1,32,765 representing commutation of retirement benefits received from Burma Shell Oil Storage and Distribution Company of India Ltd., both of which were claimed by the assessee as not being chargeable to tax. THE appeal by the assessee before the Appellate Assistant Commissioner having failed, the assessee went up in further appeal before the Tribunal. THE Tribunal rejected the claim of the assessee with regard to pension of Rs. 6,502 and at the same time upheld the claim of the assessee for exclusion of the sum of Rs. 1,32,765 from the assessee's total income for the year. THE present reference has been brought before us at the instance of the Revenue.

(3.) THE Tribunal has concluded that a lumpsum received in commutation of pension cannot be described as pension but it is a capital receipt and it relied on the commentary on the Law of Income Tax by A.C. Sampath Iyengar, 1981 edition. THE Tribunal has failed to take note of the fact that to effect a change in the law, in the repealed 1922 Act Clause (v) of Section 4(3) was omitted and two new provisions Clause (6C) to Section 2 and Explanation 2 to Section 7(1) introduced to bring to tax commutation of pension as income. That position continued under the 1961 Act till Clause (10A) was introduced and Section 17(3)(ii) was suitably amended in 1965.