1994 (11) TMI 34 - HC - Income Tax

Summary

Issues:
1. Interpretation of section 168 of the Income-tax Act, 1961 regarding the assessment of income of the estate of a deceased person in the hands of the executor.
2. Determination of whether section 168 or section 26 of the Act applies in the case of intestate succession.

Analysis:

The case involved the interpretation of section 168 of the Income-tax Act, 1961 concerning the assessment of income of the estate of a deceased person in the hands of the executor. The deceased individual, who passed away intestate, left behind his wife, mother, and four daughters as legal representatives. The wife filed a return claiming to be the administrator of the estate, arguing that the assessment should be made under section 168 as the estate had not been partitioned among the heirs. However, the Income-tax Officer and the Commissioner of Income-tax (Appeals) held that section 168 did not apply to intestate succession, and each heir should be individually assessed under section 26 of the Act based on their share of the income derived from the estate.

The Tribunal, considering the wife as the de facto administrator of the estate, ruled in favor of applying section 168 based on the Explanation to the Act. The court examined the meaning of "executor" under section 168, emphasizing that it includes an administrator or other person administering the estate, but not a de facto administrator. Referring to precedent cases, the court highlighted that section 168 applies to testamentary succession, and in cases of intestate succession, like the present one, section 168 cannot be invoked for assessment in a representative capacity.

The court further discussed the distinction between testamentary and intestate succession based on legal precedents. It noted that in cases of intestate succession, the estate devolves upon legal heirs, and each heir is individually liable for assessment under section 26. The absence of a will in the present case indicated intestate succession, precluding the application of section 168 for representative assessment. Consequently, the court ruled against the application of section 168 in the case of intestate succession, affirming that each individual heir should be assessed separately under section 26 based on their share of the estate income.

In conclusion, the court held that section 168 of the Income-tax Act applies to testamentary succession and does not extend to cases of intestate succession. Therefore, in the absence of a will and in situations of intestate succession, section 168 cannot be utilized for representative assessment, and individual heirs must be assessed under section 26 based on their respective shares of the estate income. The court answered the referred questions in the negative and in favor of the Department, emphasizing the inapplicability of section 168 in cases of intestate succession.