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TMI Blog1979 (4) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; Arrears of legal fees received Rs. 1967-68 46,492 &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discontinuance of the profession. He also rejected the contention that there was no proper machinery to implement the provisions of s. 176 and that in any event it was discriminatory. In this view, the ITO included the legal fees due to the deceased and received by the executor under the head, " Professional income " and brought it to charge. On appeal by the executor before the AAC all the contentions which were urged before the ITO were reiterated. The AAC also held that the I.T. Act, 1961, has brought about a change from the 1922 Act by introducing a special provision, viz., s. 176(4) to bring to charge any sum received after the discontinuance of the profession due to the death or otherwise of the person who earned the income, thus superseding the Supreme Court's decision in CIT v. Amarchand N. Shroff [1963] 48 ITR 59 (SC)and CIT v. James Anderson [1964] 51 ITR 345. He also held that under s. 168 of the I.T. Act, the income of the estate of the deceased person should be charged to tax in the hands of the executor in this case and that the executor having collected all fees due to the deceased, the ITO was justified in clubbing the arrears of professional receipt with the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e recipient in the year of receipt, Sri Ratnam who was the recipient of the professional income which was due to the deceased was assessable thereon and that, therefore, the arrears of professional fees are liable to income-tax under s. 176(4) in the hands of Sri V. Ratnam as recipient and not as executor. In this view, the Tribunal held that the inclusion of arrears of professional fees received in the income of the estate and bringing it to tax under s. 168 was not justified and that the said receipt of arrears of professional fees should, however, be taxed as deemed income in the hands of Sri V. Ratnam as a recipient and not as the executor in the year of receipt. Aggrieved by the order of the Tribunal, the revenue sought a reference under s. 256(1) of the I.T. Act and the following question has been referred for the opinion of this court : " Whether, on the facts and in the circumstances of the case, it has been rightly held by the Appellate Tribunal that the arrears of professional fees received by Sri V. Ratnam in the capacity of the executor cannot be included in the income of the estate of late Sri A. V. Viswanatha Sastri under section 168 of the Act ? " It is common gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards the application of s. 176(4), the Tribunal is of the view that it should have operation independent of s. 168 and that under s. 176(4) it is only the recipient who can be taxed in respect of the receipt of professional fees due to the deceased if such receipt would have been included in the total income of the deceased had it been received before his death. The question is whether the Tribunal's view that the receipt of professional income of the deceased should not be included in the income of the estate of the deceased under s. 168 could be sustained. In CIT v. Amarchand N. Shroff [1963] 48 ITR 59 (SC), the question arose as to whether the legal representative in receipt of the remuneration payable to the deceased as partner of a firm of solicitors for the work done before his death was assessable in his hands under s.24B of the Indian I.T. Act, 1922. The Supreme Court took the view that s. 24B did not authorise the levy of tax on receipts by the legal representative of a deceased person in the year of assessment subsequent to the year of accounting being the previous year in which the deceased partner died, that the assessee under the Act had ordinarily to be a living pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee's personal income. In that case, the Supreme Court observed that s. 24B of the Indian I.T. Act, 1922, extends fictionally the legal personality of a deceased person only for the duration of the previous year in the course of which he died and the income received either by him before his death or by his heirs and representatives after death in that previous year alone becomes assessable to tax in the relevant assessment year but not the income received in any year subsequent to that previous or accounting year, and that the legislature not having made any provision generally for the assessment of income receivable on behalf of the estate of the deceased person the expression " any tax which would have been payable by him under this Act if he had not died " in s. 24B cannot have the effect of supplying the machinery for taxation of income received by a legal representative on behalf of the estate after the expiry of the year in the course of which such person died. In Nalinikant Ambalal Mody v. S. A. L. Narayan Row, CIT [1966] 61 ITR 428 (SC), an advocate had been elevated to the Bench of the Bombay High Court on first of March, 1957. During the years 1958 and 1959, during n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax in the hands of the executor, and not the estate of the deceased. The legal fees due to the deceased on the date of his death will be part of his estate and that will probably be taken into account for the purpose of assessment of estate duty. We are, therefore, of the view that on the language of s. 168, the arrears of fees, which cannot be taken to be the income of the estate, cannot be brought to charge under s. 168. The learned counsel for the revenue, however, points out that all the debts which were outstanding on the date of the death of the deceased should be taken to be income from the estate of the deceased, that the expression " the estate of the deceased " should be taken to denote a fictional person and that the estate continues in the person of the deceased so long as the executor continues to function. In Stroud's Judicial Dictionary, 3rd edn., Vol. 2, the word " estate " has been taken to refer to continue the legal person of the deceased. It is also pointed out by the revenue that the preposition " of " occurring in the phrase "income of the estate " should be read as " from " as it is intended merely to refer to the origin of the income and that it does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 176(4), we are of the view that even if s. 176(4) treats the recipient as a taxable entity irrespective of the question whether there is a will or whether the recipient is an executor or not, the amount of arrears of fees due to the deceased has to be treated as the income of the recipient and cannot be taken to be an income of the estate of the deceased, and that, therefore, it has been rightly held by the Tribunal that s. 168 may not apply to a situation as in this case. As per s. 176(4) where any profession is discontinued in any year on account of the cessation of the profession by, or the retirement or death of, the person carrying on the profession, any sum received after the discontinuance shall be deemed to be the income of the recipient and charged to tax accordingly in the year of receipt, if such sum would have been included in the total income of the aforesaid person had it been received before such discontinuance. As per the aforesaid provision, where any profession is discontinued as a result of the cessation of the profession by, or the retirement or death of, the person carrying on the profession, any sum received after the discontinuance shall be, though in fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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