1987 (10) TMI 118 - AT - Wealth-tax

Summary

Issues Involved:

1. Whether the assessee was an "executor" or "administrator" under the Will.
2. Applicability of Section 19A of the Wealth-Tax Act.
3. Inclusion of the life insurance amount in the wealth of the assessee.
4. Valuation of the right to receive the life insurance amount.

Detailed Analysis:

1. Whether the assessee was an "executor" or "administrator" under the Will:

The Will did not name the assessee as an "executor" explicitly. The Revenue argued that the assessee was not an "administrator" as per general law since there was no competent authority appointment. The Tribunal examined whether the assessee became an executor by implication. It was concluded that the assessee was managing the properties after the death of Shri Perianna Pillai and, by implication, could be considered the "executrix" under the Will. The Tribunal also noted that the deed of partition described the assessee as "executrix," which supported this interpretation.

2. Applicability of Section 19A of the Wealth-Tax Act:

Section 19A of the Wealth-Tax Act pertains to the net wealth of the estate of a deceased person being chargeable to tax in the hands of the executor or executors. The Tribunal found that the assessee, managing the estate per the Will's directions, fell within the extended definition of "executor" under the Explanation to Section 19A. Therefore, the value of the right to receive the life insurance amounts could not be included in the assessee's hands but would be separately taxable under Section 19A.

3. Inclusion of the life insurance amount in the wealth of the assessee:

The Tribunal noted that the Life Insurance Corporation (LIC) had initially denied liability to pay the policy amounts, leading to litigation. The AAC had previously concluded, based on a Tribunal decision in the assessee's income-tax proceedings, that the interest component was not assessable in the hands of the assessee as a legatee. The Tribunal agreed with this conclusion, stating that the right to receive the life insurance money was rightly included under Section 19A and not in the hands of the assessee as a legatee.

4. Valuation of the right to receive the life insurance amount:

The Tribunal considered the arguments regarding the valuation of the right to receive the life insurance amount, particularly given the litigation with the LIC. The Tribunal acknowledged that a willing buyer would significantly discount the value due to the litigation risks and the time required for a final decision. It was determined that the market value could be fixed at 30% of the figure of Rs. 3,95,870 for each year. However, since Section 19A applied, the Tribunal held that no portion of the amount of Rs. 3,95,870 was assessable in the hands of the assessee as a legatee.

Conclusion:

The Tribunal concluded that the value of the right to receive the life insurance amounts from the LIC could not be included in the assessee's wealth but would be separately taxable under Section 19A. The appeals by the Revenue were dismissed, and the amount of Rs. 3,95,870 was excluded from the assessments for the relevant years.