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TMI Blog1979 (4) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... egation ? " One, Shri V. L. Ethiraj, hereinafter referred to as the deceased, who was a leading criminal lawyer in Madras, died on September 8, 1960. He had endowed a large sum of money for a women's college, known as " Ethiraj College for Women ". He had executed a settlement deed by which he settled the income from one of the properties belonging to him, namely, premises bearing door No. 26, Commander-in-Chief Road, Egmore, Madras, on his sister-in-law, Smt. Rathnavelu Govindaraju, and his niece, Smt. Lalitha Govindaraju, for a period of eight years. He had also executed a will on April 21, 1952, under which he created a trust in respect of all his properties and appointed the official trustee of Madras as the sole executor and trustee (hereinafter referred to as the assessee). Under the terms of the will, the properties covered thereby will vest in the assessee on his death, that the assessee has to sell all his properties by public auction after due publicity and invest the net realisations as well as the other cash left by the deceased in approved Government securities and that he should sell the property bearing door No. 26, Commander-in-Chief Road, Egmore, Madras, after a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove contention of the assessee but held that, since all the immovable properties of the deceased had not been sold during the assessment years, the assessee could not be said to have discharged the executorial functions, and that, therefore, the assessee having acted only as an executor under the will of the deceased during the years in question the income was liable to be taxed in his hands only, under s. 168 of the I.T. Act, 1961, and not as a trustee. In support of his view the ITO relied on the decision in Administrator-General of West Bengal v. CIT [1965] 56 ITR 34 (SC). On this basis he determined the taxable income as Rs. 25,004 for the assessment year 1962-63, Rs. 8,17,870 for the assessment year 1963-64, Rs. 36,354 for the assessment year 1964-65 and Rs. 26,107 for the assessment year 1966-67. Aggrieved against the said orders of assessment, the assessee preferred appeals before the AAC of Income-tax, reiterating the contentions that he was a trustee holding the properties in trust for the charitable purposes and hence the income arising from such properties relatable to such trust was not liable to be taxed. The AAC, however, rejected the appeals and observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of the will of the deceased on May 3, 1961, he has ceased to be an executor and had assumed the character of a trustee. The Tribunal also upheld the claim of the assessee that the income from the properties held by him in trust in so far as it related to religious and charitable purposes was exempt from tax under s. 11 of the I.T. Act, 1961. It also held that the official trustee was a representative assessee as contemplated in ss. 160(1)(iii) and 160(1)(iv) and as such he has to be assessed only in the manner indicated in s. 161(1) and that the amounts disbursed by him to the various relatives of the deceased as per the terms of the will could not be aggregated together for the purpose of ascertaining the tax and that tax on such amounts had to be levied separately and the aggregate tax has to be recovered from the assessee. The questions referred to above arise out of the said orders of the Tribunal. Before us the contention put forward by the revenue is that under the terms of the will the official trustee having been appointed both as a sole executor and as a sole trustee he has to first administer the properties of the deceased as an executor, that it is only after the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 24 contemplates the Administrator-General assuming the role of official trustee after the discharge of all the liabilities of an estate administered by him in relation to any of the assets then remaining in his hands. Section 7 of the Official Trustees Act, 1913, refers to the powers, duties and privileges of the official trustee which he has to exercise subject to the control and supervision of the court. Sub-section (6) of s. 7 of the Official Trustees Act prohibits the official trustee from administering the estate of a deceased person unless he is expressly appointed sole executor and sole trustee, under the will of such person. Section 9 provides that when an official trustee has been appointed trustee under any will the executor of the will of the testator or the administrator of his estate shall, after obtaining probate or letters of administration, notify the same to the official trustee and if such official trustee consents to accept the trust, the properties shall vest in the official trustee and shall be held by him upon trust expressed in the will. Before the enactment of s. 7(6) enabling the official trustee to function as executor in a certain contingency, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will of the testator, claimed that he should be assessed as a trustee. But the revenue assessed him only as an executor on the ground that the debts have not been fully discharged. The court held that there is no invariable rule that an executor cannot shed his character as an executor and assume the character of a trustee under the will before all the debts are discharged and legacies are paid, that the executor can vest the property in the legatees with mutual consent and hold the legacies as a trustee even before all the debts are discharged, and that the administration could not be held to be incomplete merely because no fund had been created for payment of the maintenance allowance to the relations of the deceased. On that basis, the assessment was directed to be made under s. 41 of the Indian I.T. Act, 1922. In Court Receiver v. CIT [1964] 54 ITR 189, the Bombay High Court had also taken the view that it cannot be laid down as a general rule that so long as the debts of the testator are not paid a trust cannot come into being, that there may be cases where the indebtedness of the testator is such as would come in the way of the creation of the trust in which case the trust w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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