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Issues Involved:
1. Determination of the date of succession to the business under Section 25(4) of the Indian Income-tax Act. 2. Applicability of Section 41(1) of the Indian Income-tax Act to the annuity paid to the widow of the testator. Issue-Wise Detailed Analysis: 1. Determination of the Date of Succession to the Business under Section 25(4) of the Indian Income-tax Act: The primary issue was to ascertain the exact date when succession to the business of the deceased testator occurred. The executors argued that succession took place on January 1, 1943, when the business was sold to one of the nephews. Conversely, the Commissioner contended that succession occurred on April 9, 1942, the date of the testator's death. Section 25(4) of the Indian Income-tax Act provides concessions when a business is either discontinued or taken over by another person. The term "succeeded" in this context implies a transfer, which could occur either inter vivos or by inheritance. The judgment clarified that the executors, upon the testator's death, carried on the business with the same powers and authority as the testator, thus stepping into his shoes. Therefore, the executors succeeded to the business on April 9, 1942, the date of the testator's death, and not on January 1, 1943, when the business was sold. 2. Applicability of Section 41(1) of the Indian Income-tax Act to the Annuity Paid to the Widow: The second issue concerned whether the annuity paid to the widow of the testator fell under Section 41(1) of the Indian Income-tax Act. The testator's will directed the executors to pay an annuity of one thousand pounds to his widow, which was to be paid in four equal quarterly installments. The executors paid a sum of Rs. 20,811 to the widow during the accounting year. Section 41(1) applies when trustees receive income on behalf of another person under a declared trust. The judgment emphasized that an executor, by default, is not a trustee unless explicitly stated in the will. In this case, the initial payment to the widow was deemed a legacy and not a trust. The executors were merely fulfilling their obligation to administer the estate, not acting as trustees. Therefore, the payment did not fall under Section 41(1), and the Tribunal rightly concluded that the amount was not taxable in the hands of the executors as trustees. Conclusion: The High Court held that: 1. The succession to the business occurred on April 9, 1942, the date of the testator's death. 2. Section 41(1) did not apply to the annuity paid to the widow, as the executors were not acting as trustees in this context. The assessee was ordered to pay the costs, and the reference was answered accordingly.
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