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TMI Blog1982 (3) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... drabhai Patel, aged 3 years. At the time of the execution of the said will, the testator was having movable and immovable properties worth Rs. 5,83,771. Inter alia clause 6 of the will provides that on his death, all the properties mentioned in the will shall be handed over to Shri Bharatkumar Upendrabhai Patel, grandson of the testator. It was further stated that if another son of Upendrabhai was in existence on his death, or thereafter, then, the said properties shall be distributed equally, between Shri Bharatkumar Upendrabhai Patel, grandson of the testator, and another grandson who may be born. The said clause further provides that on the birth of the second grandson both the grandsons shall share equally. The will further provides that if at the time of the death of the testator both his grandsons were minor, in that case, the testator appointed Shri Upendrabhai Maganbhai Patel (son of the testator) as executor and he will manage the entire estate as guardian of both the grandsons. The will further states that on attaining majority, Shri Upendrabhai Maganbhai Patel shall hand over the properties equally between the two grandsons. The said will further provides that, on his de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are as the estate is still managed by the executor. It was also contended that the income of the estate of the deceased shall be assessed separately, as per the provisions of section 168 of the Income-tax Act, 1961 ('the Act') till the income and wealth of the estates are distributed to, or applied to, the benefit of any specific legatee. Thus, he contended that the estate of the deceased for the years under consideration should be assessed under section 168, as a separate taxable entity, and the assessee's share in that property should not be included in his net wealth during the years under consideration. 5. The learned AAC was not satisfied with the said contentions. According to him the intention of the deceased, at the time of execution of the will, was to give his property immediately after his death to the legatees. He was also of the view that the will comes into operation immediately after the death of the deceased. According to him the manner in which the property should be divided has also been incorporated in the said will. He placed reliance on the ratio of decisions in the case of Navnitlal Sakarlal v. CWT [1977] 106 ITR 512 (Guj.) and CIT v. Navnitlal Sakarlal [198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the WTO (protective basis), there will be no effect on the final out come of the net wealth. Thus, he held that the order of the WTO was correct. 8. In respect of the assessment years 1974-75, 1975-76, 1976-77 and 1977-78, the ITO had reason to believe that in the case of Shri Nimish Upendrabhai Patel, for the years under consideration, income escaped the assessment in his hands. Accordingly, he initiated the proceedings under section 147(a)/148 of the Act. Pursuant to the service of notice under section 148, it was contended on behalf of the appellant that the initiation of proceedings under section 147(a) was bad in law. It was contended that part of the income from the estate of late Shri Maganbhai Bhikhabhai Patel was not to be included in his hands. As a matter of fact, the estate was under the administration of the executor and the income from such estate was to be added in the hands of the executor under section 168. The ITO was not satisfied with the said explanation. According to him, in view of para 3 of the will dated 14-7-1965, the will shall come into force immediately after the death of the testator. According to the ITO, in view of such specific directions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imilarly Shri Upendrabhai Maganbhai Patel, executor of the estate of late Shri Maganbhai Bhikhabhai Patel, is also in appeal before the Tribunal. Similarly, in wealth-tax matters for the assessment years 1973-74, 1974-75 and 1975-76, the executor Shri Upendrabhai Maganbhai Patel has filed appeals before the Tribunal. On behalf of the appellants, it was mainly contended that after the death of Shri Maganbhai Bhikhabhai Patel, in income-tax matters the assessments will have to be made on the executor under section 168. Similarly, in wealth-tax matters the assessments in the years under consideration will have to be made on the executor under section 19A of the Wealth-tax Act. In para 11 of the will, it was clearly stated that on the death of the testator, Shri Upendrabhai Maganbhai Patel shall immediately take charge of all the properties of the deceased and he shall distribute the same, as mentioned in para 6 of the will. Thus, it was contended that the testator himself has appointed the executor during his lifetime. In para 6 of the will it was clearly stated that after his death all the properties contained in the will shall be handed over to Shri Bharatkumar Upendrabhai Patel, hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of section 168(1) are not attracted. According to the learned counsel for the assessee, in the present cases the facts are quite different. So it was submitted that the decision in the case of Navnitlal Sakarlal may also not be applied in the present cases. 11. The learned departmental representative supported the order of the learned AAC. He only relied on the two decisions referred to above. 12. We have considered the rival submissions and perused the entire material on record. Before discussing the submissions of the parties, we would like to consider the scope of section 168, and also the scope of section 19A of the Wealth-tax Act. Under sub-section (1) of section 168, subject as provided in the section thereafter, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scope of section 19A of the Wealth-tax Act also. This section came into force with effect from 1-4-1965. The scope of section 19A is more or less the same, as is in respect of section 168. Since there was lacuna in the Wealth-tax Act, section 19A was brought on the statute book. Under section 19A, besides section 21 of the Wealth-tax Act, an executor acts as such, only as long as the administration is incomplete. After the administration is over, he would hold residue as a trustee for the various beneficiaries till distribution. So the scope of section 19A of the Wealth-tax Act is more or less the same, which is of section 168. 14. Now, we would like to discuss the relevant clauses of the will. It is common ground that Shri Upendrabhai Maganbhai Patel was the son of the testator. At the time of execution of the will Shri Bharatkumar Upendrabhai Patel, grandson of the testator was aged about 12 years. At that time Shri Nimishbhai Upendrabhai Patel was not born. He was born subsequently. The learned counsel for the assessees contended that Shri Nimishkumar Upendrabhai Patel will attain majority somewhere in 1983. This statement of fact was not disputed by the learned departmental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in the two decisions in the case of Navnitlal Sakarlal referred to above, in the will no executor or administrator was nominated by the testator. In those cases the legatees were not minors. In that case, there was clear provision in the will that the legatees themselves should take possession of the properties of the testator on his death. In the present cases there is no such direction given by the testator in the will. On the other hand, the directions given by the testator in the present cases were that on his death his son shall take charge of all the properties as executor or administrator. In the present cases, one of the legatees, viz., Shri Bharatkumar Upendrabhai Patel was minor, aged 12 years at the time when the will was executed. The other grandson of the testator who was to born later on, was not in existence at the time when the will was executed. Under the circumstances, in the present cases, the present legatees could not take charge of the properties immediately after the death of the testator. 16. The main contention of the learned counsel for the assessees has been, before the authorities below and also before the Tribunal, that unless and until, all the deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the residuary estate has been ascertained, the request of the residue has been assented to and 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 ? 19. In view of the aforesaid position, we are of the view that the aforesaid test, as laid down, has not been fulfilled so far. So the assessments in all the years under consideration in wealth-tax and income-tax matters will have to be made on the executor in his individual capacity. 20. In view of the aforesaid finding, WT Appeals Nos. 251, 252 and 253 shall be disposed of as under: "The assessments in these years were completed by the WTO on protective basis. The learned AAC also agreed with the said finding. In our opinion the learned AAC was not correct in sustaining the finding of the WTO. The assessments should not have been made on protective basis. In view of the aforesaid discussion the three assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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