9911796707
TMI Blog1995 (3) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... other (mother of their father), Smt. K. Meenakshi, and two other sisters. Periyaswamy owned a building at Karur along with his partner, Sri K. Ponnuswamy, in equal shares. He was also a partner in the firms Amarjothi Fabrics and Amarjothi Traders, which were carrying on business in textiles. Periyaswamy retired from the partnership and the money due to him was held by the firms as deposit. He received interest thereon. Thus the estate left by him on his death was the half-share in the property in Karur and the deposit with the firms. His widow, Balammal, filed a return disclosing Rs. 6,976 as income from house property and Rs. 27,426 as income by way of interest and claimed that she administered the estate of the deceased K. Periyaswamy. The Income-tax Officer considered that on the death of Periyaswamy, his heirs including the two daughters above-named succeeded to the property under section 8 of the Hindu Succession Act, that they took the property as tenants-in-common as provided under section 19(b) of the Hindu Succession Act and, consequently, were entitled to 1/6th of the income and each was liable to be assessed on such 1/6th portion of the income from the estate. He accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is unknown ; section 165 speaks of cases where part of the trust income is chargeable and section 168 stated as follows : " 168. Executors.--(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 respect of his own income. (3) Separate assessments shall be made under this section on the total income of each completed previous year or part thereof as is included 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. (4) In computing the total income of any previous year und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor in that sense nor were any letters of administration obtained, but the mother of Dinesh was in fact in management of the entire estate of Dinesh after his death. In view of the wide, definition of 'executor' made by the Explanation, she would be covered by, the definition and, as earlier pointed out, since there was no discretion left with the tax authorities, the income from the estate of Dinesh could be charged to tax only in the hands of his mother, Pushpavati. The necessary consequence must be that the income which was sought to be included as income of the assessee could not be brought to tax in her hands. " The Bombay High Court again, however, considered the liability to wealth-tax and the scope of section 19A in short the liability to be assessed on inherited assets in the case of CWT v. Keshub Mahindra [1983] 139 ITR 22 (Bom). The argument before the court was that though the deceased father had died intestate and he had not left any Will and, therefore, the assessee could not claim to be an executor or an administrator because he had not obtained any letters of administration, still he was a person who was administering the estate of the deceased person, as contempl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o wealth-tax arises only in respect of the net wealth held on a particular date, namely, the valuation date. Therefore, if a person is not alive on the valuation date and he dies before the valuation date, under the provisions of the Act, there is no question at all of that person being assessed to wealth-tax for any period prior to the valuation date, and, with respect, we may point out that the concept of assessment for the whole the financial year appears to be foreign to the provisions of the Act. " The court has observed that the Wealth-tax Act and the Income-tax Act are not in pari materia at all ; the nature of the charge in the two Acts has no similarity. Referring to the word " executor " as defined in the Explanation to section 168 of the Act while dealing with a case of liability to estate duty, a Bench of the Gujarat High Court, however, in CIT v. Navnitlal Sakarlal [1980] 125 ITR 67 said (headnote) : " The word 'executor' as defined in the Explanation to section 168 of the Income-tax Act, 1961, means an executor as known under the Indian Succession Act, 1925,as well as an administrator known under the Indian Succession Act and, what is more, any other person admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atutes, the word executor in section 168 means an executor as known under the Indian Succession Act as well as an administrator known under the Indian Succession Act, and, what is more, any other person administering the estate of a deceased person is also included in this special definition of the word 'executor' though, under the Indian Succession Act, such other person administering the estate of the deceased would never be referred to either as an 'executor' or as an 'administrator'. Under the scheme of the Indian Succession Act, an executor is the person who is named in the will by the testator himself for administering his estate whereas an administrator is a person appointed by a competent court to administer the estate of a deceased person. By the extended definition set out in the Explanation to section 168 of the Income-tax Act, 1961, an executor and an administrator appointed by the court and any other person administering the estate of a deceased person are all included in the extended meaning of the word 'executor' for purposes of section 168. Under section 159 of the Income-tax Act, 1961, it has been provided that where a person dies, his legal representative shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actually administers the estate would be an executor for purposes of section 168 and under the provisions of section 168, sub-section (3), separate assessments have to be made under section 168 on the total income of each completed previous year or part thereof as is included in the period from the date of death to the date of complete distribution to the beneficiaries of the estate according to their several interests." The Gujarat High Court derived support for the above view from the judgment-of the Supreme Court in the case of Administrator General Of West Bengal for the Estate of Raja P. N. Tagore v. CIT [1965] 56 ITR 34 and the observations in Raghavalu Naidu (V. M.) and Sons v. CIT [1950] 18 ITR 787 (Mad) of a learned judge of this court. In Rani Jagadamba Kumari Devi v. CIT [1983] 143 ITR 527, the Calcutta High Court said as follows (at page 536) : This question was considered by the Madras High, Court in the case of V Ramanathan v. CIT [1963] 49 ITR 881, where it was held that the heirs who succeeded to the estate, an executor or administrator in whom the estate vests virtute officii and even an intermeddler in possession of the estate, effectively represented the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ols, outside the limits of the coparcenary, there is a fringe of persons, males and females who constitute an undivided or joint family ; there is no limit to the number of persons who can compose it nor to their remoteness from the common ancestor and to their relationship with one another ; a joint Hindu family consists of persons lineally descended from a common ancestor and includes their wives and unmarried daughters ; the daughter, on marriage, ceases to be a member of her father's family and becomes a member of her husband's family, the joint Hindu family is thus a larger body consisting of a group of persons who are united by the tie of sapindaship arising by birth, marriage or adoption, and the joint Hindu family, is a creature of law under which the absence of an antecedent history of jointness is-of no impediment for a sole Hindu male forming a joint family with his wife and unmarried daughters. In that case, the court has held (at page 482) : " It is only by analysing the nature of the rights of the members of the undivided family, both those in being and those yet to be born, that it can be determined whether the family property can properly be decided as joint famil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod up to February 17, 1947, was capital in nature and that referable to the period thereafter was income. The Revenue appealed to the Supreme Court. The Supreme Court held that (at page 470) : " after the death of A the property was held by the three widows as members of a Hindu undivided family. Payment of the estate duty was doubtless made out of joint family funds and the interest which accrued due also acquired the character of joint family property when received. The amount of interest accrued as income of the family but it was not the income of the individual members. When a share out of the estate which included the interest on estate duty was received by the respondent it had not the character of income. Once the income was received by the joint family, the amount lost its character of income ; it became merged in the joint family assets and became the capital of the family. The share received by the respondent was, therefore, a share in the capital of the family." The Supreme Court on that basis said (headnote) : So long as the property which was originally of the joint Hindu family remains in the hands of the widows of the members of the family and is not divided amon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hindu Succession Act, 1956, came into force and whatever property devolved on the heir, assumed the character of individual property. The Tribunal held that in cases of Hindus governed by the Mitakshara law, where a son inherited the self-acquired property of his father, the son took it as the joint family property of himself and his son and, therefore, the proper status of the assessee was that of a Hindu undivided family. The High Court held that the Tribunal was justified in holding that the property left by the assessee's father was the property of the Hindu undivided family consisting of the assessee, his son and wife. The Madhya Pradesh High court in this judgment has, besides other cases, taken notice of two judgments of the Supreme Court, one in the case of Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum [1981] 129 ITR 440 and another in the case of State of Maharashtra v. Narayan Rao Sham Rao Deshmukh, AIR 1985 SC 716. The Supreme Court in the former case, viz., Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum [1981] 129 ITR 440 considered the case of a plaintiff, who was the wife of one Khandappa Sangappa Magdum, who died on June 27, 1960, leaving behind him, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal was taken,up for hearing by the Supreme Court, another Division Bench of the Bombay High Court in Rangubai v. Laxman Lalji Patil, AIR 1966 Bom 169, had already reconsidered and dissented from the earlier Division Bench judgment in Shiramabai v. Kalgonda Bhimgonda's case, AIR 1964 Bom 263. One learned judge was common to the two Benches. In the later judgment, the Bombay High Court observed that Shiramabai's case, AIR 1964 Bom 263, was not fully argued and was incorrectly decided and that on a true view of the law, the widow's share must be ascertained by adding the share to which she is entitled at a notional partition during her husband's lifetime and the share which she would get in her husband's interest upon his death. In this judgment, the Supreme Court extracted section 6 of the Hindu Succession Act, the Explanations thereto and referred to section 14(1) thereof. The Supreme Court has stated as follows (at page 444 of 129 ITR) : " The Hindu Succession Act came into force on June 17, 1956, Khandappa having died after the commencement of that Act, to wit in 1960, and since he had at the time of his death an interest in Mitakshara coparcenary property, the pre-conditions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument, if any, made by the deceased and since there is none in the instant case, by the application of the rules of intestate succession contained in sections 8, 9 and 10 of the Hindu Succession Act. The deceased, Khandappa, died leaving behind him two sons, three daughters and a widow. The son, daughters and widow are mentioned as heirs in class I of the Schedule and, therefore, by reason of the provisions of section 8(a) read with the 1st clause of section 9, they take simultaneously and to the exclusion of other heirs. As between them the two sons, the three daughters and the widow will take equally, each having one share in the deceased's property under section 10 read with rules 1 and 2 of that section. Thus, whatever be the share of the deceased in the coparcenary property, since there are six sharers in that property each having an equal share, the plaintiff's share therein will be 1/6th. The next step, equally important, though not equally easy to work out, is to find out the share which the deceased had in the coparcenary property because, after all, the plaintiff has a one-sixth interest in that share. Explanation 1 which contains the formula for determining the share o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iction that in fact 'a partition of the property had taken place', the point of time of the partition being the one immediately before the death of the person in whose property the heirs claim a share. The fiction created by Explanation 1 has to be given its due and full effect as the fiction created by section 18A(9)(b) of the Indian Income-tax Act, 1922, was given by this court in CIT v. S. Teja Singh [1959] 35 ITR 408 ; AIR 1959 SC 352 ; [1959] Suppl 1 SCR 394. It was held in that case that the fiction that the failure to send an estimate of tax on income under section 18A(3) is to be deemed to be a failure to send a return, necessarily involves the fiction that a notice had been issued to the assessee under section 22 and that he had failed to comply with it. In an important aspect, th e case before us is stronger in the matter of working out the fiction because in Teja Singh's case [1959] 35 ITR 408, a missing step had to be supplied which was not provided for by section 18A(9)(b), namely, the issuance of a notice under section 22 and the failure to comply with that notice. Section 18A(9)(b) stopped at creating the fiction that when a person fails to send an estimate of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ascertainment of the ultimate share of the heirs, through all its stages. To make the assumption at the initial stage for the limited purpose of ascertaining the share of the deceased and then to ignore it for calculating the quantum of the share of the heirs is truly to permit one's imagination to boggle. All the consequences which flow from a real partition have to be logically worked out, which means that the share of the heirs must be ascertained on the basis that they had separated from one another and had received a share in the partition which had taken place during the lifetime of the deceased. The allotment of this share is not a processual step devised merely for the purpose of working out some other conclusion. It has to be treated and accepted as a concrete reality, something that cannot be recalled just as a share allotted to a coparcener in an actual partition cannot generally be recalled. The inevitable corollary of this position is that the heir will get his or her share in the interest which the deceased had in the coparcenary property at the time of his death, in addition to the share which he or she received or must be deemed to have received in the notional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1985 SC 716, the Supreme Court considered the definition of "family" in the Maharashtra Agricultural Lands (Ceiling on Holdings) Act (27 of 1961) and the effect of the same upon a joint Hindu family under the Hindu Succession Act and answered the contention that on the death of the father, the family became disrupted or divided and the son, the mother and the grandmother, ceased to be members of a joint Hindu family. The Supreme Court observed (at page 719) : " In order to examine the validity of this submission, it is necessary to refer to some of the relevant features of a Hindu undivided family and to consider the effect of the provisions of section 6 of the Act on such family. As observed in Mayne's Hindu Law and Usage (1953 edition) the joint and undivided family is the normal condition of a Hindu society. An undivided Hindu family is ordinarily joint not only in estate but in food and worship, but it is not necessary that a joint family should own joint family property. There can be a joint family without a joint family property. At paragraph 264 of the above treatise, it is observed thus : ' 264. It is evident that there can be no limit to the number of persons of whom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there should be two male members to constitute a joint family. (See N. V. Narendranath v. CWIT [1969] 74 ITR 190 ; [1969] 3 SCR 882 ; AIR 1970 SC 14.) While under the Mitakshara Hindu law there is community of ownership and unity of possession of joint family property with all the members of the coparcenary, in a coparcenary governed by the Dayabhaga law, there is no unity of ownership of coparcenary property with the members thereof. Every coparcener takes a defined share in the property and he is the owner of that share. But there is, however, unity of possession. The share does not fluctuate by bir ths and deaths. Thus it is seen that the recognition of the right to a definite share does not militate against the owners of the property being treated as belonging to a family in the Dayabhaga law. We have earlier seen that females can be the members of a Hindu joint family. The question now is whether a female who inherits a share in a joint family property by reason of the death of a male member of the family ceases to be a member of the family. It was very forcefully pressed upon us by the learned counsel for the respondents relying upon the decision of this court in Gurupad K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible interest in a specific share of the family property which would remain undiminished whatever may be the subsequent changes in the composition of the membership of the family. As already observed the ownership of a definite share in the family property by a person need not be treated as a factor which would militate against his being a member of a family. We have already noticed that in the case of a Dayabhaga family, which recognises unity of possession but not community of interest in the family properties amongst its members, the members thereof do constitute a family. That might also be the case of families of persons who are not Hindus. In the instant case, the theory that there was a family settlement is not pressed before us. There was no action taken by either of the two females concerned in the case to become divided from the remaining members of the family. It should, therefore, be held that notwithstanding the death of Sham Rao, the remaining members of the family continued to hold the family properties together though the individual interest of the female members thereof in the family properties had become fixed (at page 721)." The Supreme Court has thus clarified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty is referable to section, 171 of the Act and to a Hindu undivided family and if it is not covered by section 171 of the Act for the reason of the nature of the property inherited together by more than one person in the same class of heirs to section 168 of the Act. Before, however, we do so, we may refer to the judgment in Tax Cases Nos. 338 to 340 of 1982, dated November 24, 1994, by a division Bench of this court (CIT v. Smt. P. Dhanalakshmi [1995] 215 ITR 662) in which the court has observed (at page 666) : " It remains to be seen that the Explanation under section 168 of the Act states that it would be applicable only in the case of a specific legatee. Legatees are entitled to succeed to the estate in accordance with the terms of the will. In the present case, the deceased has not executed any will in favour of the legatees. In the absence of the fact that the succession is a testamentary succession, section 168 of the Act cannot be made applicable. The Explanation to section 168 states that in this section 'executor' includes an administrator or other person administering the estate of a deceased person. This does not mean that the administrator includes the de facto admin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him the benefit of section 19A, the operation of which, we have found, is attracted only in a case where the deceased has left a will'. No argument can, therefore,be advanced in favour of the contention raised by the assessee on-the basis of a decision in Mrs. Usha D. Shah's case [1981] 127 ITR 850 (Bom)." And concluded (at page 667) : " In the present case, the deceased has not left a will bequeathing the property to any of the legatees. In such circumstances, since the succession in the present case happens to be an intestate succession, section 168 of the Act cannot be made applicable to make an assessment in a representative capacity. In that view of the matter, we answer the questions referred to us in the negative and in favour of the Department." A Bench decision of this court in Dhanasekaran v. Manoranjithammal, AIR 1992 Mad 214 ; [1991] 2 LW 635 is also cited at the Bar. However, that case, in our view, needs no discussion, for, what it has decided relates to title or the interest of a minor in the property, which he shared with his mother. It is indeed, in our view, necessary to correct the law and tell all concerned that the observations in the judgment in Tax C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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