9911796707
TMI Blog1978 (1) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... on December 31, 1957. Balabhai was possessed of considerable movable properties acquired by him personally and held by him in his individual capacity. Moreover, he had one-half share in the coparcenary properties and the remaining half share belonged to Sakarlal. Under the will of Balabhai it was provided that after discharging all debts, liabilities and obligations and after meeting the expenses of illness, obsequial ceremonies and disbursing charities out of his self-acquired properties, the said properties as also his right, title and interest in the coparcenary properties would on his death devolve upon the two grandsons of Balabhai, namely, the assessee and his brother, Nandkishore, and in accordance with the terms of the will the deceased and his brother were to become entitled to use and enjoy the same. No person was named in the will as the administrator or executor of the will and according to the provisions of the will the legatees themselves were to take possession of the properties of the testator on his death. For the four assessment years under consideration and even in the earlier years Sakarlal Balabhai describing himself as the legal representative of Balabhai Da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the properties of the HUF as tenants-in-common. The result was that each of the heirs on the one hand and the HUF on the other would have, until partition by metes and bounds took place, an undivided specific share in each and every one of the properties of the coparcenary. As regards the separate properties of Balabhai, it was held by the Division Bench that under the will, the assessee and his brother were to use and enjoy as owners the separate properties of their deceased grandfather after first paying the debts and meeting other expenses and making provision for charity. The assessee and his brother could, therefore, be called residuary legatees. The true character or status of the assessee was that of a legatee of an equal share in the clear residue. Though the residuary legatee was not entitled to immediate possession of the testator's estate or any part thereof, and had no right to claim any interest, whether legal or equitable, in any specific asset or each and every asset of which the estate consisted, the right to receive the clear residue, that is, what remained of the estate after satisfying the debts and legacies, became vested in the legatees on the testator's dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the actual distribution of the estate of Balabhai had not commenced before August 5, 1970, for the four assessment years under consideration in the instant case, in view of the provisions of the Explanation to s. 168 of the I.T. Act, the income of the estate could only be charged in the hands of Sakarlal Balabhai as the legal representative of Balabhai Damodardas. We may point out that in view of the distinction between the provisions of the W.T. Act and the I.T. Act and in view of the fact that for the relevant years under consideration before the Division Bench which considered the wealth-tax base, namely, assessment years 1963-64 and 1964-65 s. 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. We have to examine the case ourselves on the provisions of the law as it stood at the relevant time. In order to appreciate the contentions before us, it is necessary to go to s. 168 of the I.T. Act, 1961, as it stood at the relevant time. Under sub-s. (1) of s. 168, subject as provided in the section thereafter, the income of the estate of a deceased person shall be chargeable to tax in the hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Explanation to s. 168 of the I.T. 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 the purposes of s. 168. Under s. 159 of the I.T. Act, 1961, it has been provided that where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased. Under s. 2 (29) of the I.T. Act, 1961, a " legal representative " has the meaning assigned to it in cl. (11) of s. 2 of the CPC, 1908. When one turns to the CPC one finds that s. 2(11) of the CPC defines a " legal representative " to mean a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased and where a party sues or is sued in a representative character the person on whom the estate devolves on the death of the party so suing or sued. Therefore, reading the provisions of s. 2 (11) of the CPC in the light of the provisions of s. 2(29) of the I.T. Act, 1961, and the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or by virtue of the fact that he is an executor named by the testator in the will, a person who actually administers the estate would be an executor for the purposes of s. 168 and under the provisions of s. 168, sub-s. (3), separate assessments have to be made under s. 168 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. The decisions of the courts in England and India on this point are very clear. We need only refer to three authorities in this connection. They are : (1) Lord Sudeley v. Attorney-General [1897] AC 11 ; 1 EDC 73 (HL), (2) King v. Commissioners for the Special Purposes of the Income Tax Acts (Ex parte Dr. Barnardo's Homes National Incorporated Association) [1921] 7 TC 646 (HL) and (3) Administrator-General of West Bengal v. CIT [1965] 56 ITR 34 (SC). In Lord Sudeley's case [1897] AC II, the question was of probate duty regarding foreign mortgages, that is, mortgages over property situated in New Zealand. The facts were that the testator, who died domiciled in England, by his will af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manage the estate for a period of I 5 years before the end of which numerous specific legacies were to be paid out of the savings from the income of the estate. They were not competent to sell any portion of the corpus of the estate for this purpose. On August 24, 1938, the sons obtained probate of the will but on May 10, 1948, the Administrator-General of West Bengal was appointed administrator and letters of administration de bonis non of the estate were granted to him. In the relevant accounting periods, the administration of the estate was not complete, and the question was whether the income from the estate was specifically receivable on behalf of the sons, who were the residuary beneficiaries and it was held that as the administration of the estate was not completed, the Administrator-General received the income of the estate on his own behalf and not on behalf of the sons who were residuary beneficiaries, and following the English decisions which we have referred to above, it was held by the Supreme Court that a share of the residue does not belong to the beneficiary until it is ascertained either in whole or in part by transfer or assent to him or by appropriation. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scertained, the bequest of the residue has been assented to and the residuary estate therefore became vested in trustees, be they the executors themselves or strangers ? In other words, can it be said that the residuary estate had taken concrete shape and could and should have been handed over by the executors to the persons beneficially entitled but for the fact that the estate is settled in trust and vested in the executors as trustees ? " We respectfully agree with this test evolved by Viswanatha Sastri J. in V. M. Raghavalu Naidu and Sons' case [1950] 18 ITR 787 (Mad), because, in our opinion, it is only in the light of this test that one has to consider whether at least as regards the residuary estate the income in the hands of Sakarlal Balabhai could be said to be the income of the assessee himself so far as the years under assessment are concerned. The Division Bench in Navnitlal Sakarlal's case [1977] 106 ITR 512 (Guj) (the wealth-tax case) has pointed out that the assessee and his brother could be properly called residuary legatees because so far as the self-acquired property was concerned, it was to come to them after the earlier expenses referred to in the clause of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty and for that payment the liability was not that of the estate of the deceased which was likely to be taken into consideration under the administration of the estate but was the personal liability of the assessee and his brother and, secondly, that liability was limited to the estate of the deceased actually or constructively received by them. Under these circumstances, the only conclusion that could be drawn is that by the commencement of the period that is under consideration before us, the residuary estate must be deemed to have been ascertained and the residuary estate must be said to have taken concrete shape and should have been handed over by Sakarlal, the father of the assessee, and that the administration had reached such a point that one can infer that the administration had been completed and the residuary estate had been ascertained or was capable or easily capable of being ascertained. The learned Advocate-General has drawn our attention to the frame of the question which implies that the actual administration of the estate of Balabhai Damodardas was going on during the period under consideration because the wording of the question is, " when the estate was being a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residuary estate must be dealt with separately and by itself, that is, apart from the provisions of s. 168(3) of the I.T. Act. Under these circumstances, we hold that by the time the assessment years under consideration started, the residuary estate had been ascertained and was capable of being handed over to the assessee. Since that is the conclusion, it must be held that in spite of the provisions of s. 168(3) of the I.T. Act which provides for the liability of the administrator, it was open to the I.T. authorities to proceed against the assessee before us as regards his share of the income from the estate of Balabhai Damodardas, the deceased testator. No other conclusion is possible on the facts of this case and it is not merely an inference of fact as to whether the estate was completely administered or not or should be deemed to have been completely administered in the eye of law ; it is an inference in law based on facts and under these circumstances we are accepting the facts as found by the Tribunal but come to our own conclusion as to whether in the eye of law the estate could be said to have been fully administered. Under these circumstances, we answer the question r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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