US Government Pension Received In India Not Taxable Under India–USA DTAA: ITAT Delhi
Pranav B Prem
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that pension received by a United States national from a US government retirement fund is not taxable in India merely because the amount was received here, as the India–USA Double Taxation Avoidance Agreement (DTAA) grants exclusive taxing rights to the United States in respect of such income.
The ruling was delivered by a Bench comprising Shri Satbeer Singh Godara, Judicial Member, while deciding an appeal filed by the assessee for the Assessment Year 2016–17. The Tribunal examined whether pension income received from a United States government retirement fund by an American citizen working in India could be subjected to tax in India, despite the specific treaty protection available under Article 19(2) of the India–USA DTAA.
The assessee, Jeanne Lee Cantrill, is an American national employed with the American Embassy School in New Delhi. During the relevant assessment year, she received a pension amounting to USD 43,042.20 from the Public Employees’ Retirement Association in the United States. The said amount, equivalent to ₹28,37,342, was received in India and was treated as taxable income by the Assessing Officer. The addition was subsequently upheld by the Commissioner of Income Tax (Appeals) under proceedings initiated under Section 143(3) of the Income Tax Act, 1961.
Before the Tribunal, the assessee contended that the pension was paid out of a US government retirement fund in respect of government service rendered in the United States and was therefore squarely covered by Article 19(2) of the India–USA DTAA. It was argued that under the said provision, any pension paid by a contracting state or out of funds created by that state in respect of government service “shall be taxable only in that State.” The assessee further relied on Section 90(2) of the Income Tax Act to submit that where the provisions of a DTAA are more beneficial, they would override the domestic tax law.
The Revenue opposed the appeal on the ground that since the pension amount was received in India, it was liable to tax here. It was contended that the receipt of income within Indian territory attracted tax liability under the Income Tax Act.
Rejecting the Revenue’s stand, the Tribunal noted that there was no dispute regarding the nature or source of the pension. It recorded that the assessee was a pensioner of the Public Employees’ Retirement Association in the United States and that the pension amount had been correctly converted into Indian currency. The Bench observed that Article 19(2) of the India–USA DTAA clearly exempts such government pensions from taxation in the other contracting state.
Referring to the treaty provision, the Tribunal reproduced Article 19(2) and noted that it unambiguously provides that pensions paid by, or out of funds created by, a contracting state in respect of government service “shall be taxable only in that State.” The Bench held that the mere fact that the pension amount was received in India would not make it taxable here when the DTAA specifically grants exclusive taxing rights to the United States.
The Tribunal further observed that in view of Section 90(2) of the Income Tax Act, the provisions of the DTAA, being more beneficial to the assessee, would prevail over the normal provisions of the Act. It therefore concluded that the action of the lower authorities in taxing the pension amount in India was unsustainable in law. In conclusion, the ITAT deleted the addition of ₹28,37,342 made towards pension income and allowed the appeal filed by the assessee, holding that the US government pension received in India was not taxable under the India–USA DTAA.
Appearance
Appearance for Assessee: Ms. Preeti Goel, AR
Appearance for Department: Sh. Manoj Kumar, Sr. DR
Cause Title: Jeanne Lee Cantrill v. DCIT, Circle-67(1)
Case No: ITA No. 6322/Del/2025 | AY 2016–17
Coram: Shri Satbeer Singh Godara, Judicial Member
