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TMI Blog1999 (8) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... el and B. G. Amin held the properties as trustees from the time of the death of Bhikhubai Chandulal, or whether they held the estate in that capacity from April 5, 1963, when probate of the will was obtained ? 2. Whether, on the facts and in the circumstances of the case, K. R. Patel and B. G. Amin received income of certain part of the estate as executors and income of the remaining part of the estate as trustees ? 3. Whether, on the facts and in the circumstances of the case, K. R. Patel and B. G. Amin were liable to be assessed as trustees under section 161 of the Income-tax Act, 1961 ?" The questions arose from the order of the Appellate Tribunal in the following circumstances. One Mrs. Bhikubai Chandulal Jalundhwala, a resident of Bombay, executed a will on January 5, 1962. She died three days later on January 8, 1962. During her lifetime she was possessed of considerable properties both movable and immovable. K. R. Patel, the appellant, and B. G. Amin, solicitor, since dead, were appointed as executors and trustees under the will. The executors and trustees under the will were directed first to pay all the debts, funeral, death and other testamentary expenses, estate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same for providing educational and medical aid to the needy to their absolute discretion and in such manner as my said executors and trustees may deem fit. I direct that in furtherance of and for giving effect to the provisions of this clause my executors and trustees shall donate such amount or amounts to such educational institution, university or hospital authorities or maternity homes on such terms and conditions as may appear to be just and necessary and which in their absolute discretion they may think proper. My executors and trustees shall also be entitled to use such part or parts of the said moneys for the benefit of and for providing aid to such religious institution or institutions as they may in their absolute discretion think fit." The executors and trustees filed the estate duty return in July, 1962, disclosing the total value of the estate as Rs. 19 lakhs. Assessment was completed on March 17, 1963, on a total value of the estate of Rs. 24 lakhs. The estate duty amounting to a little over Rs. 4.57 lakhs was paid on March 28, 1963. Probate of the will was granted on April 5, 1963. The immovable properties mentioned in the will were transferred in October, 1963, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of legacy had vested in the executors and trustees as trustees and thus the income of the immovable properties specifically bequeathed and of assets sufficient to pay off the monetary legacies and the outstanding estate duty would be assessable in their hands in their capacity as executors while the income from the remaining assets would be assessable in their hands as trustees. The Appellate Tribunal accordingly directed to make fresh assessment in the capacity as trustees. At the instance of the Revenue the three questions set out in the beginning of this judgment were referred by the Appellate Tribunal under section 256(1) of the Act to the High Court for its decision. The High Court answered these questions in the following manner : "1. K. R. Patel and B. G. Amin did not hold the properties as trustees either from the time of the death of Bhikhubai or from the date on which probate of the will was obtained, 2. During the assessment year 1964-65, K. R. Patel and B. G. Amin received no income as trustees. 3. During the assessment year 1964-65, K. R. Patel and B. G. Amin were not liable to be assessed as trustees." During the assessment proceedings it appears that B. G. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and liabilities as if the income were income received by or accruing to or in favour of him beneficially, and shall be liable to assessment in his own name in respect of that income: but any such assessment shall be deemed to be made upon him in his representative capacity only, and the tax shall, subject to the other provisions contained in this Chapter, be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him. 168. (1) Subject as hereinafter provided, the income of the estate of a deceased person shall be chargeable to tax in the hands of the executor,--- (a) if there is only one executor, then, as if the executor were an individual ; or (b) if there are more executors than one, then, as if the executors were an association of persons ; and for the purposes of this Act, the executor shall be deemed to be resident or non-resident according as the deceased person was a resident or non-resident during the previous year in which his death took place. (2) The assessment of an executor under this section shall be made separately from any assessment that may be made on him in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erties of the trust both movable and immovable. These properties have to be registered with the Charity Commissioner under that Act and a proper register has to be maintained containing particulars of the properties of the trust. Under section 36 of the Bombay Public Trusts Act notwithstanding anything contained in the instrument of trust no sale of immovable property or lease for a period exceeding three years in the case of non-agricultural land or a building belonging to a public trust shall be valid without the previous sanction of the Charity Commissioner. Sanction may be accorded subject to such conditions as the Charity Commissioner may think fit to impose with regard to interest, benefit or protection of the trust. It would, therefore, appear that trustees are not free to deal with the properties of the trust even if the will empowers them to do so. The executors and trustees filed an application for registration of the trust under the provisions of the Bombay Public Trusts Act on the directions issued by the Assistant Charity Commissioner. They filed the application on June 19, 1963, under protest. The trust was registered on December 29, 1964. Non-registration of the trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nothing to show that there was refusal or lack of assent by the executors to the vesting of the residuary legatee which was the trust. On the other hand, he said the assent could be inferred from the facts that the property was valued, there was no dispute as to the administration of the estate, and the executors-cum-trustees applied for and obtained probate from the High Court. In support of his submissions, he referred to three decisions of the High Courts, namely, CIT v. Estate of Late Sri T. P. Ramaswami Pillai [1962] 46 ITR 666 (Mad), Court Receiver v. CIT [1964] 54 ITR 189 (Bom) and CIT v. Estate of V. L. Ethiraj (By Official Trustee) [1979] 120 ITR 271 (Mad). Strong reliance has been placed by the appellant on the decision of the Madras High Court in CIT v. Estate of V. L. Ethiraj (By Official Trustee) [1979] 120 ITR 271 (Mad). In this case one Ethiraj executed his will under which he created a trust in respect of his properties and appointed the official trustee of Madras as the sole executor and trustee. Ethiraj died on September 8, 1960. The official trustee applied for the probate of the will of Ethiraj under section 222 of the Indian Succession Act read with section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, did not agree with the Appellate Tribunal that the properties vested in the official trustee on the death of the deceased as trustee. In CIT v. Estate of Late Sri T. P. Ramaswami Pillai [1962] 46 ITR 666 (Mad), the testator created a trust in respect of his properties. The trust was for various purposes some being for the benefit of the wife of the testator and others for certain religious and charitable purposes. The testator appointed his son and brother-in-law as trustees and almost imposed certain duties of executorial nature. These were like payment of Specific legacies and funeral expenses. The trustees under the will filed returns stating that they ceased to be executors and claimed that the trust was wholly for religious and charitable purposes and thus, the entire income from the properties was exempt from taxation. The Revenue contended that since the debts had not been fully discharged the trustees could be assessed only as executors under section 41 of the Indian Income-tax Act, 1922, and the income was not exempt from tax. The question which came up for consideration of the court was whether any part of the income of the estate of the testator was exempt und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the properties left by his deceased father and administered them. Income therefrom was assessed in the hands of Sakarlal uptil assessment year 1962-63. For assessment years 1963-64 to 1967-68, the Income-tax Officer sought to assess Navnit Lal, one of the beneficiaries under the will respecting his half share in the income from the properties left under the will by his deceased grandfather. Sakarlal for all intents and purposes was executor of the will. The estate was not distributed or applied for the benefit of the beneficiaries till August 5, 1970. Even the firm in which the deceased had a half-share was continuing and the executor had yet to make arrangements regarding the revaluation of the share of the deceased in the firm. This court said that in the absence of any steps taken by Sakarlal, the estate could not be deemed to have been vested in the beneficiaries and the administration of the estate could not be said to have come to an end. The court said that "the question in each case is : has the administration reached a point at which you can infer that the administration has been completed, the residuary estate has been ascertained, the bequest of the residue has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... testator. Both the questions were answered in the affirmative in favour of the Revenue. This court held that as the administration of the estate was not completed, the Administrator-General received the income of the estate on his behalf and not on behalf of the residuary beneficiaries being the sons of the testator. The court also observed that a share of the residue did not belong to the beneficiaries until it was ascertained either in whole or in part by transfer or assent to him or by appropriation. In CIT v. Estate of Late A. V. Viswanatha Sastri [1980] 121 ITR 270 (Mad), a testator, a senior advocate practising in the Supreme Court, died. He executed a will by which he appointed his son as an executor of the will. The son filed returns in his capacity as an executor for certain years. During that period, however, he received various amounts which were professonal fees payable to the deceased. He did not offer these amounts for assessment claiming that these professional fees were not liable to be taxed in his hands. His plea was negatived by the Revenue being of the view that section 176(4) of the Income-tax Act, 1961, specifically provided for taxability of the profession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which an inventory or account under this section is to be exhibited. (3) If an executor or administrator, on being required by the court to exhibit an inventory or account under this section, intentionally omits to comply with the requisition, he shall be deemed to have committed an offence under section 176 of the Indian Penal Code. (4) The exhibition of an intentionally false inventory or account under this section shall be deemed to be an offence under section 193 of that Code. 366. Residue after usual payments to be paid to residuary legatee. The surplus or residue of the deceased's property, after payment of debts and legacies, shall be paid to the residuary legatee when any has been appointed by the will." In the present case when we examine clause 20 of the will read with other clauses, it is apparent that the trust was to come into being only after funeral and other expenses were met, legatees paid and properties converted into cash by the executors and trustees that administration of the estate would come to an end and all the amount thus lying with the executors and trustees would form the corpus of the trust. The functions of the trustees and executors as imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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