1973 (1) TMI 25 - HC - Income Tax

Summary

Issues Involved:
1. Assessment of income under section 41 of the Indian Income-tax Act, 1922.
2. Executor's assent to the properties bequeathed under the will.
3. Determination of residuary estate and its implications.
4. Legal character and role of the executor and administrator.
5. Applicability of section 41 of the Evidence Act.

Issue-wise Detailed Analysis:

1. Assessment of Income under Section 41 of the Indian Income-tax Act, 1922
The primary issue was whether the income of the estate of the deceased should be assessed in the hands of the administrator under section 41 of the Indian Income-tax Act, 1922. The court examined the facts and circumstances, including the execution of a will by the deceased, the appointment of an executor, and subsequent assessments made on the executor. The court concluded that the assessment should indeed be made under section 41 of the Act, favoring the assessee.

2. Executor's Assent to the Properties Bequeathed under the Will
The assessee contended that the executor had assented to the properties bequeathed under the will being vested in the legatees, as evidenced by a compromise reached during probate proceedings. The court noted that the executor's assent could be verbal, express, or implied from conduct. The court held that the compromise agreement, which included specific provisions and declarations, indicated the executor's assent, thereby transferring the subject of the bequest to the legatees.

3. Determination of Residuary Estate and Its Implications
The court analyzed whether the residuary estate had been settled, which is crucial for determining the executor's role. The court referred to previous judgments and principles, stating that the residuary estate must be ascertained before the executor's assent can be valid. The court found that the only significant debt, a sum of Rs. 3,40,000 payable to certain claimants, was not stipulated in the will but was part of a compromise. Therefore, the court concluded that the residuary estate had been settled, allowing the executor's assent to be valid.

4. Legal Character and Role of the Executor and Administrator
The court examined the legal character of the executor and administrator, particularly after the executor's death and the appointment of an administrator. The court referred to authoritative pronouncements and concluded that the executor, despite remaining in title, had become divested of the property by virtue of the assent. The court emphasized that the grant of probate and appointment of an administrator should be understood in the context of the compromise agreement.

5. Applicability of Section 41 of the Evidence Act
The court addressed the argument that the grant of probate is a judgment in rem, which should conclusively vest the estate in the executor. The court disagreed, stating that the probate and subsequent appointment of an administrator must be viewed in light of the compromise agreement. The court held that the properties were not vested in the executor or administrator, and section 41 of the Evidence Act could not be relied upon to grant them a right in rem.

Conclusion:
The court answered the question in the affirmative, ruling in favor of the assessee, and directed that the assessment should be made under section 41 of the Indian Income-tax Act, 1922. The court ordered that a copy of the judgment be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.