1984 (8) TMI 135 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the assessment framed against the Advocate Receiver for the assessment year 1980-81.
2. Applicability of Section 168 of the Income-tax Act, 1961.
3. Liability of the legal representatives versus the Receiver for capital gains tax.
4. Validity of the assessment notice issued to the previous Receiver.

Detailed Analysis:

1. Legality of the assessment framed against the Advocate Receiver for the assessment year 1980-81:
The central issue is whether the assessment framed against the Advocate Receiver appointed by the Court for the assessment year 1980-81 is proper and legal. The deceased, A. Radhakrishnamurthy, left behind properties and debts. After his death, his creditors filed suits and obtained decrees against his legal representatives, his two daughters. A Receiver was appointed by the Court to manage and sell the properties to satisfy these debts. The sale of properties resulted in capital gains, and the Court-appointed Receiver was assessed for these gains. The Commissioner (Appeals) held that the income from the estate belonged to the legal heirs and not to the Receiver, as the Receiver was appointed specifically to satisfy the creditors' claims. The title to the properties remained with the legal heirs, and thus, the assessment against the Receiver was deemed invalid and cancelled.

2. Applicability of Section 168 of the Income-tax Act, 1961:
The revenue contended that the Commissioner (Appeals) erred in holding that Section 168 was not applicable. Section 168 pertains to the income of the estate of a deceased person being chargeable to tax in the hands of the executor or administrator. The Tribunal noted that Section 168 presupposes the necessity of an executor to distribute the assets of the deceased according to a will. Since A. Radhakrishnamurthy died intestate, his daughters inherited the properties directly. The Receiver was not administering the estate as an executor but was merely managing the properties to satisfy the creditors' claims. Therefore, Section 168 was misapplied, and the assessment under this section was deemed ill-conceived and illegal.

3. Liability of the legal representatives versus the Receiver for capital gains tax:
The ITO argued that since the transfer of properties and the resultant capital gains occurred after the death of A. Radhakrishnamurthy, the assessment should be made on the executor or administrator, not the legal representatives. However, the Tribunal held that the daughters inherited the properties with the obligation to discharge the debts. The liability of the legal representatives extends only to the value of the assets inherited. The Receiver's role was limited to managing and selling the properties to satisfy the debts, not administering the estate as an executor. Therefore, any capital gains should be assessed in the hands of the legal heirs, not the Receiver.

4. Validity of the assessment notice issued to the previous Receiver:
The revenue contended that the assessment notice issued to the previous Receiver, Shri M. Narasimha Rao, should hold, as the Receiver is merely a holder of office. However, the Tribunal refrained from giving a verdict on this issue, as it was unnecessary given their conclusion that the assessment under Section 168 was invalid.

Conclusion:
The appeal filed by the revenue was dismissed. The Tribunal upheld the Commissioner (Appeals)'s decision that the assessment framed against the Receiver was invalid. The income from the estate belonged to the legal heirs, and the Receiver's role was limited to satisfying the creditors' claims. Section 168 was misapplied, and the assessment should be made in the hands of the legal heirs, not the Receiver.