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TMI Blog1991 (10) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax, super tax, estate duty, municipal tax, etc., and any other outstandings as also medical expenses and expenses for obsequial ceremonies and charity and also my right, title and interest in our joint family movable and immovable properties, in that way all my property when I am not alive shall be taken possession of by my two grandsons Navnitlal Sakarlal and Nandkishore alias Shamubhai Sakarlal and they shall use and enjoy the same as they desire." There was no executor named in the will. Balabhai Damodardas died on December 31, 1957. Thereafter, his son, Sakarlal Balabhai, describing himself as the legal representative of the deceased, furnished returns of income as well as returns of net wealth in respect of the estate of the deceased, Balabhai Damodardas, and he was assessed on the basis of those returns for the assessment years following the death and up to the assessment year 1967-68. We are concerned in these appeals with the income-tax assessments of Navnitlal Sakarlal (herein referred to as the "assessee"), one of the two grandsons of Balabhai Damodardas to whom the latter had bequeathed his properties, for the assessment years 1963-64 to 1967-68. The Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 67 (Guj) in the negative and in favour of the Revenue. The present appeals have been preferred by the assessee from the High Court's judgment. At the outset, two aspects which had been raised before the High Court may be cleared up. In the first place, the contention of the assessee before the High Court was that the decision in the wealth-tax case would not govern the income-tax assessments in view of the provisions contained in section 168 of the Income-tax Act, 1961, a provision corresponding to which (viz., section 19A) has been introduced in the Wealth-tax Act only on April 1, 1965. The High Court pointed out and it is common ground before us that, "in view of the distinction between the provisions of the Wealth-tax Act and the Income-tax Act and in view of the fact that for the relevant years under consideration before the Division Bench which considered the wealth-tax case, namely, assessment years 1963-64 and 1964-65, section 19A was not on the statute book, the decision in the wealth-tax case will not affect the decision in this case except in an indirect manner." The second issue on which a certain amount of debate took place before the High Court was as to whether S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that, where a person dies, the income from the estate of the deceased person is chargeable to tax in the hands of the executor, separate assessments being made on the total income of each completed previous year or part thereof comprised in the period from the "date of the death to the date of complete distribution to the beneficiaries of the estate according to their several interests" He points out that it is now common ground that Sakarlal Balabhai was an " executor" within the meaning of section 168 in respect of the estate of the deceased. The Tribunal has also given a categorical finding of fact in the following terms "Balabhai Damodardas died on December 31, 1957, leaving behind as his next-of-kin a son, named Sakarlal Balabhai, three daughters and number of grand-children including the appellant assessee and his brother. On the death of Balabhai Damodardas, Shri Sakarlal Balabhai took charge of the properties left behind by the deceased and started administering them. By an order made on December 30, 1961, an amount of Rs. 1,04,619 was determined as the estate duty payable on the properties passing on the death of Balabhai Damodardas. It is not in dispute that up to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es immediately in equal shares. According to his submission, the mere fact that Sakarlal Balabhai purported to take charge of the estate and administer it and was prolonging the so-called administration by delaying the payment of estate duty and the handing over of the properties to the only two legatees, cannot postpone the vesting of the estate in the two beneficiaries. It is submitted that there was no complicated process of administration called for in the present case. He submits that the intervention of Sakarlal Balabhai was part of a device to postpone a direct and immediate vesting of the income and the properties in the hands of the legatees in view of the high rates of tax applicable to their individual assessments and to cordon off the income of the estate into a separate assessment, purportedly on a so-called executor. He submits that the court should not encourage attempts of this type to avoid the legitimate incidence of taxation and that, in the circumstances, the answer given by the High Court to the reference should be upheld. There are a number of difficulties in accepting the contention put forward by Sri Manchanda. In the first place, the contention, in its pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly provided for, vide CIT v. A. Ghosh [1986] 159 ITR 124 (Cal). We are of opinion that there is force in the appellant's contention. It seems that, under the English law, estate duty is regarded as part of the "testamentary expenses" in respect of certain kinds of property: [ Williams on Executors and Administrators, 14th Edn., Vol. 1, pp. 452-54 ]. The Estate Duty Act makes the executor one of the accountable persons. Under section 55, he has to deliver an account of the estate passing on the death. He is accountable, under section 53, for the whole of the estate duty on the property passing on the death though he will not be liable for duty in excess of assets of the deceased which he had actually received or which, but for his own neglect or default, he might have received. He is jointly and severally liable for the whole of the duty along with other accountable persons. It is true that this does not necessarily mean that the ultimate incidence of the duty will fall on him always. But he has to consider ways and means of paying the duty and, though he may or may not be able to pay off the entire estate duty before distributing the estate, he will be exposing himself to a great ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the estate duty out of account, it is difficult to see how the High Court could have reached this conclusion. Having regard to the nature of the properties left by Balabhai Damodardas, it is clear that the executor had certain steps to take before he could wash his hands off the administration of the estate. The movable properties and the immovable properties belonging to Damodardas in his individual capacity had to be divided into two equal shares and handed over to the two beneficiaries. A perusal of the assessment order also indicates that Balabhai Damodardas had a half share in a firm known as Mangaldas Balabhai and Co. It appears that Sakarlal Balabhai, as executor, continued to derive a half share from the firm. There is no information on record as to how this share in the firm held by Balabhai Damodardas was disposed of. It was part of the duties of the executor to make arrangements regarding the devolution of the share of Balabhai Damodardas in the firm, say, for example, by having the two legatees taken in as partners in respect of a one-fourth share each in the firm. In the absence of any such steps, the asset in question cannot be deemed to have vested in the beneficiari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecuniary or upon the residue brought out by the executor at the end of the administration, if it is residuary bequest. There is the same necessity for the executor's assent to a bequest of the residue as to a bequest of a specific or pecuniary legacy. So soon as he assents to the dispositions of the will and the assent may be express or implied from his conduct they become fully operative and the title of the legatees becomes absolute. If there are trusts declared or created by the will in respect of the subject-matter of the bequest, the trusts take effect on such assent, the estate vested in the executor as such is divested and vests in the trustees of the will. The fact that the executors are themselves the trustees does not make any difference. Nor does the fact that the bequest is of the residue affect the point, once the residue has been ascertained in due course of administration. See Attenborough v. Solomon [1913] AC 76 ... The decision in Lord Sudeley v. Attorney-General [1897] AC 11 is authority for the position that even if the trustees and executors happen to be the same persons, until the claims of the testator's estate for his debts and testamentary expenses and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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