9911796707
TMI Blog1973 (1) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis of a return filed by Mundan for the assessment year 1955-56, an assessment had been made, that assessment was set aside, the matter having been reopened under section 34 of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act). Mundan in the meantime died and one K. P. Narayanan, another brother of the deceased, was appointed by the court to which Mundan had applied for a probate, as administrator. Notice was issued to the said Narayanan and since there was no response an assessment was made for the year 1955-56, under section 23(4) of the Act. The same procedure was followed for the year 1956-57. The assessee filed appeals and contended that a compromise had been entered into when the proceedings for probate was pending before the District Court, Colombo, and that thereafter the position of the executor, Mundan, was that of a trustee and hence it was urged that the legatees were to be assessed under section 41 of the Act. The other points raised in the appeals are not relevant for this reference. The appeals were rejected by the Appellate Assistant Commissioner by order, annexure "D". There were further appeals before the Tribunal and those appeals also hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) Ammaravathie, (4) Seelavathi, all daughters of P. K. Sangaram, (5) Ammu, (6) Karthiaini and (7) Meenachi, all daughters of P. K. Mundan in equal shares." The only other paragraph of the compromise which is relevant is paragraph 14 which is in these terms: "14. It is further ordered and decreed of consent that the petitioner P. K. Mundan or his attorney or duly authorised agent be forthwith placed in possession of the entire estate and properties of the deceased P. K. Raman save and except the premises No. 81, Hill Street, in Colombo and the forty (40) acres and the twenty (20) acres out of the Bandiruppuwa Estate." The contention urged by the assessee before the Appellate Assistant Commissioner has been negatived by him on the basis of the decision of the Income-tax Appellate Tribunal, Madras Bench, for the assessment year 1950-51, a copy of which order has been produced as annexure "E". The relevant part of the order of the Appellate Assistant Commissioner is in paragraph 5 of annexure "D" which we may read : "5. The question whether the beneficiaries could be directly assessed was the subject-matter of an appeal filed by the late P. K. Mundan before the Appellate T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Testator. This indicates that the Executors's function in regard to the administration of the estate in question has not yet come to an end nor can it be stated from the aforesaid facts that the residue of the estate which can be said to belong to the residuary legatees had become ascertained. The executor had thus yet to perform certain duties and, therefore, following quotation from his Lordship, Justice Viswanatha Sastri's judgment, we hold that the executor in the present case still remained as executor and had not become trustee of the residuary legatees in regard to the residuary estate. Hence, we hold against the assessee in this contention also." Though the Appellate Assistant Commissioner proceeded on the basis that "the Tribunal has held that as the residuary estate had not yet become ascertained the assessment on Mundan for 1950-51 was proper. For the same reasons as the residuary estate had not yet become ascertained the Income-tax Officer was justified in not making an assessment directly on the beneficiaries for the assessment years 1955-56 and 1956-57 also. Therefore, the plea that the assessment should have been made on the beneficiaries directly is rejected. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petition or whether all the properties of the deceased have been included in the compromise petition because these are pure questions of fact relating to which there had been no contention at any stage of the assessment proceedings and because those facts had not been adverted to or considered by any of the authorities and such questions do not arise from the order of the Tribunal. Regarding the third point mentioned we shall deal with it at the proper stage as to whether this was a case where there was a need to determine the residuary estate. The principles that are applicable in cases of this nature have been well-settled. The question is often, if not always, one of difficulty. Kekewich J. observed in Timmis, In re: Nixon v. Smith, at page 182: "There are few things more difficult than to determine when an executor ceases to have duties qua executor or virtue officii, or, as it is phrased in the Finance Act, 'as such'. There are few wills which come before the court which do not contain directions to persons as executors and as trustees, and it is a common case that the same persons are executors and trustees." Nevertheless if there are specific bequests and if there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... title from the executor to the legatees. It was further ruled that the income was therefore of the executor and that section 41 of the Act had no application. It is this ruling that has been relied on by the Income-tax Appellate Tribunal, Madras Bench, in annexure "E" and it is the reasoning in the order, annexure "E", that has been accepted by the Appellate Assistant Commissioner in annexure "D", and to some extent by the Tribunal in its order, annexure "G". Counsel for the revenue has relied on the decision in V. M. Raghavalu Naidu and Sons v. Commissioner of Income-tax and the principles laid down by the House of Lords and strenuously urged before us that this was a case where the principles laid down in those decisions must be applied. We find it difficult to accept this contention. We think that the principles of these decisions cannot apply to the facts of this case as put forward and on which the question of liability to tax has to be determined. We say so for the following reasons: This was not a case where the debt which had been relied on as the one outstanding and before the settlement of which the residuary estate could not be said to have been determined was a debt st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... picions. The only debt, if debt it be, which has been relied on before the Appellate Assistant Commissioner and the Tribunal was a sum of Rs. 3,40,000 payable to Achikannu and Devaunie. In this view of the matter we think that if a residue had to be settled as a result of the direction to pay Rs. 10,000 to the Bishop, it had been settled because there was no case that the debt had not been paid at the time of the compromise, annexure "B", dated March 21, 1951. So there was no impediment to the assent being given. The question then is whether there is such an assent. The Tribunal has accepted the contention of the departmental representative that what is stated in paragraph 9 is applicable only between the said Achikannu and Devaunie on the one hand and the legatees on the other. We have already read paragraph 9 of the compromise, annexure "B", and we feel no hesitation in holding that what is stated therein has been agreed to by the executor. This is sufficient to import assent of the executor. It was further argued that if the title to the estate vested by virtue of the compromise annexure "B", there was no need or there was no occation to issue a probate to the executor and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich Mundan and Narayanan had been clothed as a result of the orders of the court have to be inferred from the terms of the compromise petition and if we so understand the grant of the probate, we have to repeat the words of Lord Haldane in George Attenborough Son v. Solomon that "executors they remained, but they were executors who had become divested". This we think is the correct view to take on the facts of this case. In that light, the properties were not vested in the executor, Mundan, or in Narayanan and section 41 of the Evidence Act cannot be relied on for giving these persons a right in rem. Before we close the discussion, it is necessary to advert to two decisions of the English courts, Commissioners of Inland Revenue v. Smith and Carlish v. Commissioners of Inland Revenues, for the proposition that "there was no rule of law that the mere existence of an outstanding mortgage prevented the residue from being ascertained and the executor thereafter giving assent to the legacy in favour of the residuary legatee". Lawrence L.J. in Commissioners of Inland Revenue v. Smith said: " It has been mooted, but I do not think seriously contended, that the existence of a debt ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
