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TMI Blog1973 (4) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 14(2) of the Wealth-tax Act, hereinafter referred to as the Act, was served on the assessees, calling for a return of wealth. A return was duly filed by them in respect of each of the said years declaring that there was no net wealth chargeable to tax under the Act as the executors constituted an association of persons, that an association of persons was not a " person " within the meaning of the Act and as such outside the scope of section 3 of the Act and that section 19 of the Act dealing with " liability of legal representatives " had no application to the facts of the case. The Wealth-tax Officer, however, held that according to the directions of the testator the properties had vested in the executors during the life-time of Pichai subject to the rights and obligations under the will that the status of the executors would not alter the tax liability of the estate, that even if the executors constituted an " association of persons " that would not confer any exemption on the estate from wealth-tax, and that the status of the executors had to be determined with reference to the status of the deceased at the time of his death. He, therefore, completed the assessments t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being readily ascertainable, the postponing of the distribution of the estate until after the death of Pichai cannot justify the continuance of the executors' function, and that even though they continued to function, they should be treated only as trustees. It was also contended by the revenue that the executors being the legal owners of the property, they were liable to be charged under section 3 without reference to section 19. The Tribunal accepted the stand taken by the revenue that the executors have become functus officio and they are only trustees or managers on behalf of the beneficiaries, that the administration of the estate has reached a stage when the beneficial interest is clear and precise and no further business is to be carried on, that it is not possible to accept the assessee's contention that till all the residuary legatees are known the executorial function would not come to an end. The Tribunal also held that if the executors have become trustees, all the trustees can be taken as a single unit in law and not as an association of persons, and that the trustees being a group of individuals holding the property are assessable under section 3 of the Act. In that v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the negative and in favour of the assessee. The Wealth-tax Officer proceeded on the basis that the administration of the estate has not come to an end and that, therefore, the assessees continued to be executors during the assessment years in question. It is only the Appellate Assistant Commissioner who held that the assessees have completed all the executorial functions long ago and they are holding the estate only as trustees for the ultimate beneficiaries. The Tribunal has also agreed with the Appellate Assistant Commissioner and held that the assessees have shed their character as executors and have become trustees. We are of the view that it is not possible to hold that in this case the assessees have shed their character as executors. It is true that the assessees have carried out substantially the directions contained in the will, but clause 20 of the will provides that : " after my lifetime my son, Pichai, alias Shanmugasundaram, my executors, shall divide and distribute equally all my properties, including the augmentations made by them out of income realised during the life-time of my son, among the aurasa sons living at that time. " This clause directs the executors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es with mutual consent and hold the legacies as a trustee even before all the debts are discharged. In that case the court held that the legacy had been ascertained and the executors have assented to vest the properties in the legatees. The difference between an executor and a trustee is that an executor is the representative of the testator for all purposes while a trustee is a representative of the legatees or beneficiaries. This is clear from section 211 of the Indian Succession Act. Having regard to the specific directions contained in the will as to the ultimate distribution of the estate, the assessees cannot be treated as trustees and it should be taken that the executorial functions have not been completely performed. The second question is, therefore, answered accordingly. As regards the first question, it is contended by the assessees that before the introduction of section 19A in the Wealth-tax Act, there was no provision by which the executor, even as individuals, could be assessed on the value of the estate vested in them for administration except under section 19. Section 19 provides for the liability of the executors, administrators or other legal representatives t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax for the subsequent years in respect of the estate which is administered by them under the terms of the will. The court said : " It appears to us that on a true construction of the provisions of section 3 read with the definitions of the various phrases which we have referred to above and also read with the provisions in sections 4 and 5 relating to ascertainment and computation of net wealth for the purposes of wealth-tax, it is clear that the assessee who is an individual is taxed in respect of wealth of his ownership. There is no direct provision in these sections for taxing a deceased individual with wealth-tax. There is no direct provision in respect of assessing wealth-tax on the estate left by a deceased individual except to the extent as provided in section 19...... It is clear that the assessment, if it is not made and authorised by the provisions in section 19, would have to be found to be without any authority of law and jurisdiction. The net wealth that is mentioned in sections 4 and 5 has reference to the net wealth of an individual...... There is nothing in sections 3, 4 and 5, being sections relating to charging provisions and provisions for computation of assets, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essable to income-tax in the relevant assessment year ...... Any income received in the year subsequent to the previous or the account year cannot be called income received by the person deceased. The provisions of section 24B do not extend to tax liability of the estate of a deceased person beyond the previous or the account year in which that person dies ...... The correct position is that apart from section 24B no assessment can be made in respect of the income of a person after his death. " In Commissioner of Income-tax v. James Anderson the Supreme Court again considered the scope of section 24B of the Income-tax Act and said : " Section 24B in terms refers to the liability of the legal representative to pay tax assessed as payable by such deceased person, or any tax which would have been payable by him under the Act if he had not died, and if the expression 'tax which would have been payable under this Act, if he had not died' is intended to impose liability for tax on income received in the year of account in the course of which the taxpayer died, a different interpretation of the same expression in the context of notional income would be impermissible. The legislature not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax is payable only by an individual who owns wealth in respect of which tax is made payable. But it is said that as the entire property of the deceased had vested in the executors in this case, they as a group of individuals could be assessed under section 3 in respect of the property which had vested in them. Section 3 of the Act imposes a charge to wealth-tax in respect of the net wealth of every individual or Hindu undivided family and companies and the expression " net wealth " has been defined in section 2(m) as meaning the amount by which the aggregate value of all the assets belonging to the assessee on the valuation date is in excess of the aggregate value of all the debts owed by the assessee. This section 3 read along with the definition of " net wealth " in section 2(m) has to be taken to impose a charge of wealth-tax only on individuals to whom the wealth belongs. Therefore, the question is whether the properties of the deceased which have vested in the executors " belonged to " the executors. According to the revenue, in view of the legal vesting of the properties of the deceased on the executors, the properties can be said to belong to the executors, and the express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd Esher M. R. in In re Millar : Ex parte Official Receiver : " The phrase 'belonging to the society' in the Friendly Societies Act, 1875, section 15(7) (repealed) which gave protection to a registered society upon the bankruptcy of any of its officers having in his possession, by virtue of his office, any money or property, 'belonging to the society', is not a technical term of legal art. The words, 'belonging to the society' seem to me as large as could well be used. They point to any money or property which, in ordinary language, would be said to 'belong to' the society. It does not say which is 'the property' of the society but any property 'belonging to the society'. " But, however wide the words 'belonging to' are construed, it is not possible for us to say that the properties in the hands of the executors for administration belong to them. Normally, when we speak of certain physical objects as belonging to a person without any qualifying expression, the primary natural meaning is that they are his own absolute property. When a person by virtue of a contractual obligation takes up the management of the properties as per the directions of a testator, he cannot be said to own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssess wealth of another person or persons for specific purposes. The executors as such can never claim any beneficial interest in the property in their charge. Though in law an executor possesses almost all the rights of an owner, he cannot take the place of the owner, for the property or its income can never be enjoyed absolutely by him for his own individual benefit. The decision referred to above cannot be applied to the proceedings under the wealth-tax Act so as to bring the executors within the charge under section 3 on the basis that the properties belonged to them. Section 19A which has been introduced and which came into force from April 1, 1965, also throws some light as to what was assumed to be the legal position before by the legislature. Section 19A provides that the net wealth of the estate of the deceased person shall be chargeable to tax in the hands of the executor or executors and the executor or executors are, for the purpose of the Act, treated as an individual. This provision shows that the executor as such is not treated as a person owning the wealth and it is the net wealth of the estate of the deceased person that is subjected to charge in the hands of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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